Counter-cyclical fiscal policy works.  If consumers and businesses lose confidence because of the changing world, the government can fix this economic problem - that is what the Biden $1.9 trillion stimulus was all about.  Sure, there might be some issues with the deficit, but given a recovery, the government can pay that deficit off. Also, since we are in a very inflationary period again we might expect counter-cyclical fiscal policy to resolve some of the debt issues."  Please explain this comment.  (Hint: don't forget to use an AS AD diagram and possibly a business cycle diagram).

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Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.