Fiscal policy is used to influence the economy by adjusting government spending and taxation to achieve economic goals such as stable prices, full employment, and sustainable economic growth.

Expansionary fiscal policy involves increasing government spending or decreasing taxes to stimulate economic activity and boost aggregate demand.

The multiplier effect refers to the amplified impact of government spending on aggregate demand, where each dollar of government spending leads to a greater increase in total spending in the economy.

Contractionary fiscal policy involves decreasing government spending or increasing taxes to reduce aggregate demand and combat inflation.

Fiscal policy is primarily used for economic stabilization to address short-term economic fluctuations, such as recessions or periods of high inflation, by adjusting government spending and taxation.

Monetary policy is a tool of central banks, not fiscal policy.

Fiscal policy affects aggregate demand by changing both the level of government spending and the level of taxes.

Fiscal policy and monetary policy are complementary to each other, as they can be used together to achieve economic goals.

All of the above are challenges in using fiscal policy for economic stabilization.

Unemployment insurance is an example of an automatic stabilizer, as it provides income support to unemployed individuals, helping to stabilize aggregate demand during economic downturns.

Fiscal policy has a shorter time lag than monetary policy, as it can be implemented more quickly.

Fiscal policy is more politically difficult to implement than monetary policy, as it requires legislative approval.

Government spending on infrastructure is an example of a discretionary fiscal policy, as it is not an automatic response to economic conditions.

Fiscal policy can be used for long-term economic growth by promoting investment, increasing productivity, and reducing inequality.

All of the above are examples of fiscal policies that promote investment.