Explain the Aspects of Expansionary and Contractionary Fiscal Policy

question 19

Essay

Explain the aspects of expansionary and contractionary fiscal policy.During which phases of the business cycle would each be appropriate?

---

Definitions:

TC/q

Total cost divided by quantity; a formula to calculate the average total cost.

Average Total Cost

The sum of all production expenses divided by the quantity of products made, indicating the per-unit cost.

Average Fixed Cost

The fixed costs of production (e.g., rent, salaries) divided by the quantity of output produced; these costs decline as production increases.

Average Variable Cost

Total variable costs divided by the quantity of output, showing the variable cost per unit of output.