3.8 Fiscal Policy

Part of National Income and Price Determination in AP® Macroeconomics. Read the opening section, then create a free account for the full interactive lesson, practice, and progress tracking.

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Fiscal Policy

Fiscal policy is any policy by the government meant to affect the economy in some way. This is primarily done through spending and taxation.

Recall the formula for GDP:

G D P = C + I + G + X

Gross Domestic Product (GDP) is the sum of consumer spending, investment spending, government spending, and net exports.

Changing ${G}$ , representing government spending, can have a significant impact on the economy.

MCQ Reading Checkpoint

In country X, recently imports have increased by 50 million and government spending has decreased by 70 million. The GDP used to be 900 million. What is it now?

Choose the best option:

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