Fiscal Policy

Fiscal Policy Stances

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Christian Bien

Learning Objectives

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Expansionary
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The government is running a deficit budget or a lower surplus budget to encourage aggregate demand and hence economic growth. Notable Expansionary Budgets: 

  • GFC Budget: Deficit of $54.5 billion (2009/10) - -4.2% of GDP

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Neutral
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The government's budget is balanced. Revenue equals expenditure and has no effect on economic growth.

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Contractionary
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The government is running a surplus budget or a lower deficit budget to discourage the level of aggregate demand and hence, economic growth.

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Expansionary The government is running a deficit budget or a lower surplus budget to encourage aggregate demand and hence economic growth. Notable Expansionary Budgets: