The fiscal policy

Share Loading the player Here we look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy. Before the Great Depressionwhich lasted from Oct.

The fiscal policy

Both of these policies work well for the overall growth of the economy. But the government use one of The fiscal policy at times when one is required more than the other. This policy is quite popular among the people of the country because through this, consumers get more money in their hands and as a result their purchasing power increases drastically.

The government uses this by two ways. You may think which one is more prudent! People who favour the government spending prefer it over cutting taxes because they believe that if the government spends more, the unfinished projects would be completed.

As it becomes impossible at local levels, expansionary fiscal policy should be mandated from the central government. Login details for this Free course will be emailed to you 2 — Contractionary Fiscal Policy: As you can expect, a contractionary fiscal policy is just the opposite of the expansionary fiscal policy.

The fiscal policy

That means the objective of the contractionary policy is to slow down the economic growth. But why a government of a country would like to do that?

The only reason for which contractionary fiscal policy can be used is to flush out the inflation. The nature of this sort of policy is just the opposite. In this case, the government spending is cut as much as possible and the rate of taxes is increased so that the purchasing power of the consumer gets reduced.

Taking away money from the hands of the consumers can be dangerous because that means businesses will not be able to sell off goods and services and as a result, the economy will take a sure-shot hit which only can be reversed by taking the expansionary fiscal policy.

Fiscal surplus and fiscal deficit Fiscal surplus and fiscal deficit are two important concepts of this policy. The idea behind these two concepts is simple. Fiscal surplus When the government spends less than it earns, then the government creates a fiscal surplus.

Fiscal deficit When the government spends more money than it earns, then it is called a fiscal deficit. This concept is very much known to the public because the media and newspapers talk a lot about it.

When a government creates a fiscal deficit, it needs to take the debt from external sources and then bear the cost if any.


Fiscal deficit, as you can expect, is much more common phenomenon than fiscal surplus. Two Primary Tools of fiscal policy The main tools of fiscal policy of any government are two. The government collects money from the public through income taxes, sales taxes, and other indirect taxes. Without taxes, a government would have very little room to collect money from the public.

Fiscal boost

The projects can be creating a subsidiary, paying the unemployed, pursuing projects that are halted in between etc. Recommended Articles This has been a guide to Fiscal Policy, types of fiscal policies, its objectives, a fiscal surplus and fiscal deficit, and tools of fiscal policies.

You may also look at the following economics articles to learn more —.Fiscal policy is considered any changes the government makes to the national budget in order to influence a nation's economy. The approach to economic policy in the United States was rather laissez-faire until the Great Depression.

Department of Budget and Fiscal Services Nelson H. Koyanagi, Jr., Director Manuel T. Valbuena, Deputy Director. South King Street, Room Honolulu, Hawaii Fiscal Policy versus Monetary Policy Monetary policy is the process by which a nation changes the money supply. The country’s monetary authority increases it with expansionary monetary policy and decreases it with contractionary monetary policy. Fiscal policy is considered any changes the government makes to the national budget in order to influence a nation's economy. The approach to economic policy in the United States was rather laissez-faire until the Great Depression.

The government tried to stay away from economic matters as much as possible and hoped that a balanced budget would be maintained. Fiscal policy is how Congress and other elected officials influence the economy using spending and taxation. It is used in conjunction with the monetary policy implemented by central influences the economy using the money supply and interest rates.

What is fiscal policy? definition and meaning -

Fiscal policy refers to the use of government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, inflation and economic growth. Rather than. Fiscal policy Government spending and taxing for the specific purpose of stabilizing the economy.

Fiscal Policy Government policies related to taxes, spending, and interest rates. Fiscal policy is intended positively influence macroeconomic conditions.

The primary debate within this field is how active a government should be. Proponents of a tight. Romanian Journal of Fiscal Policy (RJFP) will publish theoretical and empirical articles that span the range of fiscal policy and other related issues.

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

It is the sister strategy to monetary policy through which a.

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