The expansion of the fiscal policy in the country increased the GDP growth by 2% in 2009 and by 1% in 2010. Extension in unemployment benefits increases cash into the hands of the un-working class, who have high propensity to consume thus increasing the GDP as consumption is one of the major determinants of economic growth.
Extension in temporary tax breaks for middle and low income households increases spending. Increases in spending imply increase in consumption and thus an increase in GDP, also known as the economic growth of the country. Monetary policy is usually done through increase in money supply. This should be done in a manner that the interest rate is increased while the inflation rates are reduced. This is done to increase investment rates in the country thus increasing economic growth through increased disposable income to consume.
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