How Might Fiscal Restraint Generate Economic Growth?
Recent experiences in fiscal policy in Europe and the United States have highlighted the debate over the effect of fiscal policy on aggregate demand in a traditional model of the macroeconomy. The predominant view, at least prior to recent experiences, was that increased federal spending and/or lower taxes would tend to raise gross domestic product (GDP) in the economy. Yet, this view has fallen on hard times as fiscal stimulus in the United States has produced very poor results compared to
