Editing Fiscal Policy and Government Debt (section)

== <span style="color: #FFFFFF;">Understanding</span> ==
Fiscal policy is understood through '''Incentives''' and '''Timing'''.

'''1. The Keynesian Engine (Stimulus)''':
During the Great Depression, John Maynard Keynes argued that when people are afraid and stop spending, the government must become the "Spender of Last Resort."
* Even if the government "Digs a hole and fills it back in," paying workers creates a "Multiplier Effect."
* Those workers spend their wages at the grocery store, the grocer pays their staff, and the whole economy begins to move again.

'''2. Supply-Side Economics (Tax Cuts)''':
The opposite view is that the best way to help the economy is to cut taxes for businesses and the wealthy.
* The idea is that this "Extra Cash" will be used to build factories and hire workers, "Trickling Down" to everyone else.

'''3. The Debt Ceiling''':
Most governments borrow money by selling "Bonds" (IOUs).
* As long as the economy grows faster than the interest on the debt, a country can stay in debt forever.
* However, if investors lose "Trust" that the government will pay them back, the system can collapse.

'''Expansionary vs. Contractionary''': Expansionary policy (Spend more / Tax less) grows the economy but increases debt. Contractionary policy (Spend less / Tax more) shrinks the economy but pays off the debt.
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