![]() ![]() ![]() The total change in GDP is depending on two opposite macroeconomic effects: the multiplier and the crowding-out effect. A higher public expenditure leads to an increasing of the aggregate demand. The principle of the fiscal policy is an adjustment of public expenditure and public revenue (taxes) in according to the economic situation. ![]() These both policies affect the aggregate demand and contribute to stabilize short-run economic fluctuations. To counteract the economic fluctuations government can apply two stability tools: the fiscal and the monetary policy. The condition for a steady economic development is achievement of stability targets like full employment of production factors, monetary stability, balancing of payment as well as equilibrium of foreign trade. Moreover, the functional principle of automatic stabilizers and the impact of fiscal stabilizers on businesses are studied. The object of this study is to analyze the influence of fiscal policy, in particular of the public expenditure, on the stabilization of business cycle. Illustration not visible in this excerpt List of Figuresįigure 1 – The multiplier as a function of the marginal propensity to consume.įigure 2 – The influence of public expenditure on the money market.įigure 3 – The influence of public expenditure on the aggregate demand.įigure 4 – The lags in implementation of fiscal policy.įigure 5 – The multiplier by different tax rates.įigure 6 – Reduction of GDP fluctuations by means of automatic stabilizers. 2.1 Government’s policies for stabilization of economic cycleĢ.2 The influence of public expenditure on GDPĢ.4 Impact of the fiscal stabilizers on businesses ![]()
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