The state of fiscal policy is usually summarized by looking at the difference between what the government pays out and what it takes in that is, the government deficit. Fiscal policy is said to be tight or contractionary when revenue is higher than spending (the government budget is in surplus) and loose or expansionary when spending is higher than revenue (the budget is in deficit). Often the focus is not on the level of the deficit, but on the change in the deficit. The most immediate impact of fiscal policy is to change the aggregate demand for goods and service. A fiscal expansion, for example, raises aggregate demand through one of two channels. First, if the government increases purchases but keeps taxes the same, it increases demand directly. Second, if the government cuts taxes or increases transfer payments, people’s disposable income rises, and they will spend more on consumption. This rise in consumption will, in turn, raise aggregate demand.