As noted in previous lessons, the economy doesn't always operate at its potential. Markets sometimes fail to realize a full employment level of production. We witnessed this in the recession of 2007/2008. It is possible that you or someone you know - a family member, a friend, co-worker, or a neighbor is affected by the crises caused by the housing, automobile, and financial industries. When markets fail, governments take measures. Fiscal policy is the use of government budget to stir the economy to a desired direction.The two elements of government budget are government spending and tax. To start, what are the elements of fiscal policy? According to the economic theory discussed in your text, how is GOVERNMENT SPENDING used to correct, for example, recession?

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