Why would a government decision to increase spending be a matter of macroeconomic policy?

1 answer:

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<u>Increasing or decreasing government spending is one of the instruments of the fiscal policy</u>, which is performed by goverments and economic authorities in order to influence the macroeconomic conditions such as the aggregate demand, employment, inflation or economic growth figures.

For example, economic policies based on Keynesian principles and theories, <u>use goverment spending increases to boost employment figures in recession times and, as a consequence, to enhance aggregate demand levels.</u> If demand is sucessfully stimulated more job positions will be created and income levels will increase, generating economic growth.

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