Macro Policy · Core
Fiscal Policy
Fiscal policy is government spending and taxes — the demand impulse that is not the policy rate.
Definition
Discretionary stimulus or austerity plus automatic stabilizers. The deficit is the flow; the debt is the stock. Monetary-fiscal mix (who dominates) decides inflation more than either tool alone.
Why it matters
2020–21 showed fiscal can swamp the Fed’s near-term inflation path. Crowding-out and Ricardian stories are the other side.
Case
US 2021 stimulus checks plus still-easy money. Demand hit a constrained supply. The fiscal impulse was in the CPI, not just in the debt/GDP slide.
How to read it
Impulse (change in deficit vs potential) not the level. Then who finances it (banks, foreigners, the Fed).
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