We develop a general theory of state-dependent scal multipliers in a framework featuring interaction between two empirically relevant goods market frictions: idle productive capacity and unsatis ed demand. Our key novel nding is that the source of economic uctuations determines the cyclicality of scal multipliers. Policies that stimulate aggregate demand, such as government spending and consumption tax cuts, have multipliers that are large in demanddriven recessions, but small and possibly negative in supply-driven downturns. On the other hand, policies that boost aggregate supply, such as cuts in taxes on labor income and rms' payroll and sales, are ine ective in demanddriven recessions, but powerful if the downturn is driven by supply factors. Spending austerity, implemented by a reduction in government consumption, can be the policy with the largest multiplier in severe supply-side recessions and demand-driven booms, provided elasticities of labor demand and supply are su ciently low. We obtain modelfree empirical support for our theoretical predictions by using a novel econometric speci cation that allows us to estimate spending and tax cut multipliers in recessionary and expansionary episodes, conditional on those being either demand-or supply-driven.