Policy constraints on UK/SW growth in the 2010s. Professor John Hudson University of Bath [email protected] Fiscal Policy and the Multiplier. Fiscal Policy involves the use of government spending and tax rates to control the economy at a macro level.
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Both will increase GDP. What is more there is a multiplier effect at work.
Thus if the Government increases road building by £1 billion this will add to the economy and road builders wages who in turn will spend that money on consumer goods, e.g. eating out.
This will then add to the income of the waiters and cooks who in turn will spend some of that income.
This has led to:
2007 2010 2014
Keynesian policy in reverse.