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Managing the Economy 1. Outline how fiscal policy can be used to raise the level of aggregate demand. 2. Using aggregate demand and/or supply analysis outline the effect of each of the following on the level of real GDP and the price level in the UK: (1) a fall in GDP in the rest of Europe, (2) a rise in UK consumer confidence. 3. Using Aggregate demand and supply analysis, assess monetary policy's and fiscal policy's role in correcting an economy experiencing rapid inflation Fiscal policy involves the government using taxation and expenditure to manipulate aggregate demand and influence the overall level of economic activity. Aggregate demand is the total nominal demand or expenditure on products by consumers, governments, foreigners, and producers within an economy over a specified period of time. Before Keynes, governments had budgets but they did not use fiscal policy. After Keynes's ideas were adopted, governments felt empowered to act against...

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