Right guys,
two of you have made this mistake in last two days so please read...
An increasing fiscal deficit like the ones in Greece, Spain and even the UK is not, REPEAT NOT, exapanionary fiscal policy.
The reason behinbd the increased deficits is the fact that the econies are shrinking (Less tax revenue) and rising unemployment (More benefits spending).
Remember G is only one part of AD.
Just because G is rising, it does not mean AD is rising.
It will slow down the fall in AD (Fiscal Drag), but not enough to stop AD shifting to the left and causing recessions.
Exoansionary Fiscal policy is when govts operate fiscal stimulus packages...ie increase spending on projects they were not going to spoen money on beforehand.
Any questions...mail me!!!!
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