What is fiscal policy? What are the tools of fiscal policy? Discuss the impact of expansionary fiscal policy and specifically the fiscal policies used during the Great Recession of 2008-2009 on operation of business operation. Have we seen other significant fiscal policies enacted even more recently than 2008-9
What is fiscal policy? What are the tools of fiscal policy? Discuss the impact of expansionary fiscal policy and specifically the fiscal policies used during the Great Recession of 2008-2009 on operation of business operation. Have we seen other significant fiscal policies enacted even more recently than 2008-9
Fiscal policy:
A government's use of taxation and expenditure to affect the economy is known as fiscal policy. Its main objectives are to reduce inflation, foster economic growth, and establish economic stability. Depending on the goals of the government and the condition of the economy, fiscal policy may be either expansionary or contractionary.
Fiscal Policy Tools:
Government expenditure: Governments can boost economic activity by boosting expenditure in sectors like infrastructure, education, and healthcare. Increased public expenditure stimulates the economy and adds jobs.
Taxation: By changing tax rates, governments may have an impact on the economy. Raising taxes can inhibit economic activity while lowering taxes can promote consumer spending and company investment.
Transfer Payments: Examples of transfer payments include social security, unemployment compensation, and welfare programs. Making changes to these payments may have an effect on consumer spending and disposable income.
Deficit or Surplus: Budget deficits (where expenditure exceeds revenue) or surpluses (where revenue exceeds spending) are both possible for the government. As they raise demand, deficits are expansionary, whereas surpluses are contractionary.
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