the word fiscal means relating gov revenue ,taxes and the word policy means plans

the word "fiscal policy" means gov spending and tax polices to influence eco
condition
it is an macroeconomic concept

the idea of fiscal policy was brought in to lime light by John Keynes in 1930s
after great derpraction
acc to him gov can stabilize the business cycle and regulate eco output rather than
leaving it on themselvess
there are two types of fiscal policy
1)expansionary - in expansiory fiscal policy gov lowers tax rates or increase
spending to increase demand
2)contractionary-in contractionary fidsacl policy gov raises tax rates or cut
spendings

gov uses two tools to control eco condition

1}tax - it includes taxes on income ,property ,sales ,and investment
2)gov spending- it includes subsides ,transfer payments ,welfare,and piblic works
project

objectives of fiscal policy

1)for increasing employment level and eco development
2) for maintaning economic growth rate
3)raising the standard of living
4)help to maintain equality in price level and BOP(balance of payment)
5)development of infrastructure
6)controling inflation and deflation

there are various benefit of fiscal policy such as

1)it can be focused on particular region ex paticular state ,states ,etc
2)it has a relative direct impact on spending

but there are also some disadvantages of fiscal policy

1)time lags
2)budget deficit
3)poor information
4)disintesive of tax cuts
5)side effect on public spending
6)other components of AD
7)crowding out
8)monetarist critique
9)depends on multiple factors
10)real business cylce critique

lets dicuss some of them

1) time lags
2)side effects on public spending
3)crowding out
4)real business cycle critique

1) Time Lags - if gov things to increase spending it may take a long time in
implementation of it and it wil;It also take time to
filter in eco. some times plans may get delayed .spendind plans are only set for a
teram of a year.

2)side effects on public spending- to decrease inflamatory mesaure gov may reduce
its public spending which in result could adversely
affect the public services and education which in result may adverse effect because
in india there are various schools which totaly run on gov spendings.
being india a mixed economy there are varrious sectors which are totlay run with
the help of gov spenings if gov spendings are reduced this sector may
get affected wwhich in result may hamper development of economy.gov also funds
variou welfare programe ,if the funding is reduced then it may adversely effect
various people
some example of side effects on public spending
1)public transport may get affected
2)less money supply to gov funded welfare funds
3) less money supply to development projects,etc