What is fiscal policy? How do you get rid of recessionary gaps through fiscal policy?
Fiscal Policy is government policy to improve the economy to get it to equilibrium. Through fiscal policy you can get rid of recessionary gaps but lowering taxes or increasing government spending. Though when lowering taxes, you do have to consider MPC (marginal propensity to consume) to determine how much you would have to lower the taxes to get a necessary increase in real GDP.
