The Expansionary Fiscal Contraction Hypothesis

Read this essay (http://www.econ.aueb.gr/en/uploadfiles/AllRP092012.pdf) about the theory of expansionary fiscal contraction. In a nutshell the theory proposes that austerity (fiscal contraction) can lead to economic growth as consumers might anticipate smaller taxes tomorrow, and hence increase their spending today, thus boosting the economy. It also proposes that austerity would reduce the effects of crowding out, Read more about The Expansionary Fiscal Contraction Hypothesis[…]