Abstract
This chapter examines the effect of fiscal expansion on the price level. The short answer to the question ‘Is fiscal expansion inflationary?’ is this. There is a variety of reasons for thinking that it could be initially disinflationary. President Reagan’s fiscal policies in the United States — the only large economy in the world to have reduced both inflation and unemployment since the early 1980s, and the only one to have witnessed major fiscal expansion — appear to furnish an important contemporary instance of this. But in the United Kingdom, at least, it seems that increased government expenditure exerts upward pressure on prices. This confirms what one would expect the longer run consequences of fiscal expansion to include.
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© 1988 National Economic Development Office
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Sinclair, P. (1988). Is Fiscal Expansion Inflationary?. In: Eltis, W., Sinclair, P. (eds) Keynes and Economic Policy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-10338-6_8
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DOI: https://doi.org/10.1007/978-1-349-10338-6_8
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