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Government increase rates or sell bonds to the public, it decrease the money supply This will then lead to a fall in investments and aggregate demand, creating an overall drop in output growth.
For example, expansionary fiscal policy was implemented by the United States government during 2001 as the country's economy was showing signs of slowing down and possibility of a recession...
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(Anon, 2001) The September 11th terrorist attacks in New York amplified the importance of fiscal policy to achieve economy recovery and stabilization. (Sullivan and Sheffrin, 2006)
In 2001, the US economy was experiencing a low in consumer's confidence. Consumer spending reduced tremendously, which caused a sudden decrease in national output level...
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Aggregate Demand And Supply
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