Fiscal Policy responses of European countries in fighting the great recession in the aftermath of the financial
Question:
Fiscal Policy responses of European countries in fighting the great recession in the aftermath of the financial crisis and the European sovereign debt crisis in the years after 2009 differed across European countries. Some countries such as Germany called for fiscal austerity measures, especially with a view to Greece and other Southern European countries, in order to reduce the high levels of public debt. Other countries in contrast favored fiscal stimulus to stabilize the economy even if that meant to increase the Government’s budget deficit.
a) What is fiscal austerity? Explain on the basis of your knowledge of aggregate demand how fiscal austerity can reinforce a recession.
b) Use the multiplier model to explain how fiscal stimulus. i.e. cutting taxes and increase public spending, can stabilize the economy.
Management
ISBN: 9780730329534
6th Asia Pacific Edition
Authors: Schermerhorn, John, Davidson, Paul, Factor, Aharon, Woods, Peter, Simon, Alan, McBarron, Ellen