Aggregate supply curve

Using various policies and tools, a government attempts to steer the macroeconomy toward three main goals: full employment, price stability, and economic growth. Here you will begin to explore conflicts and complexities in relation to those policies and tools. Here we will focus on fiscal policy, which consists of taxing and spending, usually done through acts involving Congress (in the U.S.) or comparable legislative bodies.



Upon successful completion, you will be able to:

  • explain the effect of government spending, taxation, and budget deficits and surpluses on GDP;
  • explain how the various kinds of lags influence the effectiveness of discretionary fiscal policy;
  • explain how discretionary fiscal policy works and influences aggregate demand;
  • identify the major components of US government spending and their sources;
  • define the terms budget surplus, budget deficit, and balanced budget; and
  • explain the difference between a budget deficit and the national debt.