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29 Oct 2021
Introduction
Expansionary and contractionary fiscal policy are the main tools of a government to control various economic variables when needed through required changes in government spending and tax rates. Expansionary fiscal policy aims at expanding the magnitude of economic variables like investments, consumption, income, aggregate demand, etc. On the other hand, contractionary fiscal policy aims at squeezing the magnitude of economic variables like investments, consumption, income, aggregate demand, etc.
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