Fiscal Policy Overview:
In an attempt to counter fluctuations in aggregate expenditures the government may counter with changes in purchases, transfer payments, or taxes.
Expansionary Policy:
Using any one or combination of; increasing government purchases, increasing transfers, or decreasing taxes in order to shift AD right and boost Real GDP. Raising interest rates can attract foreign investment, cause domestic currency to increase in value so therefore increase imports and decrease exports. If AD is intersecting the recessionary part of AS(the horizontal range), the expansionary policy could be used to bring the economy closer to full employment. -> Here we see real money supply increasing causing lower interest rates but also decrease investment. Though the decrease in investment is a negative effect, however, it is likely the change in interest will reap strong enough benefits to make the action beneficial by counteracting the leftward shift.  -> Lower interest rates from the above cause an increase in the quantity of investment demanded.  -> The change in I ultimately shifts both AE and AD right interpreting to an increase in Real GDP.  -> The change in I ultimately shifts both AE and AD right interpreting to an increase in Real GDP.
Contractionary Policy:
Using any one or combination of; decreasing government purchases, decreasing transfers, or increasing taxes which lowers price level and decreases GDP.  -> Here we can see that AD was past the physical limit(exaggerated for purpose of example). What the contractionary policy would do is try to push it to the intermediate level.   
Multiplier:
Because government purchases are reconverted into expenditures within the same system the government spending multiplier is the same as the autonomous spending multiplier. The tax multiplier indicates the combined change in GDP. Totaling the tax and gov. spending multiplier form the balanced budget multiplier meaning government spending and taxes can be changed to some equilibrium level to where the same amount of Real GDP is changed as if there no change in G and T had occurred.
Crowding Out:
Higher interest rates cause real investment to go down causing a "crowding out" effect. If it is a partial crowding out then the Real GDP still increased even though the decrease in real investment caused a leftward shift. In the case of complete crowding out the intended attempt to boost real GDP is only temporary as it is negated by the decrease in investment thereby forcing it back to its original value. -> This is an example of a partial crowding out effect on AE. To be complete AD2 would have to be where AD0 is.(this graph is offset in AS but for the purpose of the example it works.)  -> This is an example of a partial crowding out effect on AD. To be complete AD2 would have to be where AD0 is.
Benefits of Fiscal Policy:
Fiscal Policy offers a faster rate of possible influence into the economy. Whether it increases in Government spending or makes a change in taxes, the amount of impact is enormous. With the speed of action and the tremendous power of the multiplier effect the Fiscal Policy has very strong advantages.
Problems with Fiscal Policy:
Politics. The actions taken may be for political reasons(what will make the people happy) rather than what is best for the economy. The crowding out effect is also harder to anticipate as it has more impact in the fiscal policy. If Investment were to be more insensitive to interest rates then there wouldn't be as much of a problem.
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