Evaluate the benefits of using fiscal policy to stimulate economic growth
Intro - define key terms, outline points and conclusion
main points - benefits of increasing government spending and reductions taxation. Increasing government spending eg on education will increase productivity of the work force, increase potential output, AD increase = economic growth (draw AD shift to the RHS) same can be said for reducing tax, more disposable income, can consume more, demand for output increases, output increase = growth caused
counter - other policies that could be used eg monetary policy
evaluation - weakness of fiscal policy: depends what the objective the govt have, myopic decision making, size of policy, duration lasts, information failure
conclusion - fiscal policy is likely to work in the short run but in the long run monetary policy is likely to be more effective Keynesian would support this type of intervention but monetarists would argue against it
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