Fiscal Policy Topic Index

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Civilian Unemployment Rate

When the unemployment rate is above full-employment level, policy makers will consider expansionary fiscal policy (increasing government spending and/or decreasing taxes). Conversely if the unemployment rate is below the full-employment level, policy makers will consider contractionary fiscal policy (decreasing government spending and/or increasing taxes).

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Consumer Price Index (CPI)

A key goal of fiscal policy is to maintain low rates of inflation. Policy makers conclude that economic conditions are favorable for accelerating inflation, such as when wage growth is outpacing productivity, then they will move toward contractionary fiscal policy (reduced government spending and higher taxes). In contrast, expansionary fiscal policy is far more likely when inflation pressures are light, but economic growth has slowed and unemployment rates have increased.

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