Evaluate the effectiveness of Fiscal Policy in promoting economic activity during a recession.

Fiscal policy is the manipulation of government spending and taxation levels by the governing body of a nation to influence aggregate demand. Expansionary fiscal policy refers to the increase in government spending and reduction in taxation to promote consumption and stimulate aggregate demand to produce economic growth. A recession is defined as two consecutive quarters of negative economic growth. The effectiveness of an expansionary fiscal policy is often difficult to measure, while Neo-classical economists would argue it only results in inflation in the long run, it is a commonly utilised method to combat economic downturns. In a recession an economy is plagued by high unemployment rates and low demand; expansionary fiscal policy aims to reduce taxes in order to increase disposable income and push workers to consume as well as increase government spending such as in unemployment benefits to allow the unemployed to consume as well. This increase in consumption would in turn result in an increase in demand that stimulates economic growth. This mechanism happens automatically in many modern economies and is known as automatic stabilisers.
However, there are certain limitations and problems that should be looked at before implementing fiscal policy, for instance, undergoing a large expansionary fiscal policy would entail running a budget deficit, depleting government reserves or increasing the nations debt which could have negative impacts on trade and on the livelihood of future generations that will need to repay the debt. Moreover, one may say that due to the recession consumer and corporate confidence is very low meaning that despite an increase in disposable income many households may choose to save and forego on immediate consumption. Nevertheless, fiscal policy has several upsides and its impact on the economy may be greater than expected thanks to the Keynesian multiplier effect, causing a small investment into the economy to produce a greater impact on economic growth. Fiscal policy has been used greatly in the US under President Trump, lowering corporate and household taxes while increasing government spending. While this seems to have worked wonders in the short run, many investors are weary of the long run implications as such measures could result in large inflation and huge debts for governments which they may never be able to repay.