Evaluate the Following Statement: 'Fiscal Policy Is a Very Precise

question 13

Essay

Evaluate the following statement: 'Fiscal policy is a very precise tool for controlling aggregate demand.If the government wants to increase aggregate demand by $5 billion, all it has to do is to carry out exactly $5 billion worth of government spending.'

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Definitions:

Hybrid Cars

Vehicles powered by a combination of an internal combustion engine and one or more electric motors, using less fuel than conventional cars.

Normal Good

A type of good for which demand increases as the income of the consumer increases, showing a direct relationship between income and demand.

Income Elasticity

A measure of how much the demand for a good responds to a change in consumers' income.

Total Revenue

The total income generated by a firm from the sale of goods or services before any costs or expenses are subtracted.