Effectiveness of Fiscal Policy: Recall that the IS curve describes equilibrium in the goods market. Expansionary fiscal policy may be either in the form of increase in government expenditure or cut in taxes. In both these forms of fiscal stimulus, the IS curve shifts to the right. When used correctly, they can have similar results in both stimulating our economy and slowing it down when it heats up. The ongoing debate is which one is more effective in the long and short run. Fiscal policy is when our government uses its spending and taxing powers to have an impact on the economy. Fiscal policy is the use of taxation and government spending to achieve macroeconomic objectives. Expansionary fiscal policies such as cuts in inco.
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