Social Studies - 2017-18
GOVT.15d - Congress Fiscal Policy
The student will apply social science skills to understand the role of government in the Virginia and United States economies by
d) analyzing how Congress can use fiscal policy to stabilize the economy;
UNDERSTANDING THE STANDARD
Congress has a variety of fiscal tools for
its use in influencing the economy.
Fiscal policy refers to how government taxing and spending policy can be used to influence the economy. In the short term, fiscal policy can be used to reduce the extremes of recession and inflation.
Fiscal policies are decisions by the federal government to change spending and taxation levels in order to influence national levels of output, employment, and prices.
Under conditions of slow growth or high unemployment, Congress can stimulate the economy by increasing federal spending and/or reducing taxes to promote more employment and output.
When inflation is growing too rapidly, Congress may slow the economy by decreasing federal spending and/or increasing
taxes, which tends to lower price levels and interest rates.