Expenditures are always made with clear policy to guide them. Politics never enters the equation? True or False
Expenditures by the government for the economic growth involves the fiscal policy implementation, in which two things are to be considered that is:
- Taxation policy of the government
- Subsidies & grants provided by the government.
The decisions for the expenditure are done looking at the needs of the economy. If the economy is in need of the money supply, the government decreases the taxation rates & increases the subsidies to the people so that easy credit can be availed by the people and they can have more money with them so as to come out of the low level equilibrium trap which can only be broken by increasing the aggregate demand of the economy.
On the other hand, so as to absorb the money from the hands of the people, the government raises the rate of tariff with providing less subsidies & grants to the people so that the inflationary gap can be reduced in the economy.
All these decisions are based on fiscal policy for the guidance and no personal motive exists of the government's politics in the working of the economy.
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