Question

When the government attempts to influence the amount of savings and expenditures by altering the tax structure it is using _______ to offset the effects of a recession or depression.

Answer 1

The answer to this question is fiscal policy

Step-by-step explanation:

Fiscal policy is the use of income and expenditure instruments or policies to control or regulate the economic activities of a country. It is a plan action by the government regarding to the raising of revenue through taxation and the pattern of expenditure to be applied.

A good fiscal policy can help in Economic growth and development, control of inflation and also help in income redistribution.

Expansionary fiscal policy is where government spending is increased and tax is cut to increase aggregate demand. More government spending means more economic activity and usage of public and merit goods and less taxation means more money for consumers to buy products and less prices for products.

Contractionary fiscal policy is where government spending is cut and tax is increased to reduce aggregate demand. Less government spending will reduce economic activity and high taxes will result in higher prices and less disposable incomes for consumers. This will make a reduction in aggregate demand