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    Fiscal Policy

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    Dirgha Shertukde
    Fiscal policy is the means by which governments adjust spending and tax rates to influence their nation's economy. It works alongside monetary policy to steer the money supply. Fiscal policy is enacted through government budgets and can be either tight/contractionary if revenues exceed spending, or loose/expansionary if spending exceeds revenues. The objectives of fiscal policy include mobilizing resources, accelerating growth, balanced development, providing infrastructure, increasing employment, social justice, price stability, and economic stabilization. Contra-cyclical fiscal policy cuts spending and raises taxes during booms, and spends more while cutting taxes during recessions through automatic stabilizers like unemployment insurance. Discretionary fiscal policy entails active changes to tax rates and spending

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    Fiscal Policy

    Uploaded by

    Dirgha Shertukde
    14 views9 pages
    Fiscal policy is the means by which governments adjust spending and tax rates to influence their nation's economy. It works alongside monetary policy to steer the money supply. Fiscal policy is enacted through government budgets and can be either tight/contractionary if revenues exceed spending, or loose/expansionary if spending exceeds revenues. The objectives of fiscal policy include mobilizing resources, accelerating growth, balanced development, providing infrastructure, increasing employment, social justice, price stability, and economic stabilization. Contra-cyclical fiscal policy cuts spending and raises taxes during booms, and spends more while cutting taxes during recessions through automatic stabilizers like unemployment insurance. Discretionary fiscal policy entails active changes to tax rates and spending

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    Fiscal policy is the means by which governments adjust spending and tax rates to influence their nation's economy. It works alongside monetary policy to steer the money supply. Fiscal policy is enacted through government budgets and can be either tight/contractionary if revenues exceed spending, or loose/expansionary if spending exceeds revenues. The objectives of fiscal policy include mobilizing resources, accelerating growth, balanced development, providing infrastructure, increasing employment, social justice, price stability, and economic stabilization. Contra-cyclical fiscal policy cuts spending and raises taxes during booms, and spends more while cutting taxes during recessions through automatic stabilizers like unemployment insurance. Discretionary fiscal policy entails active changes to tax rates and spending

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    14 views9 pages

    Fiscal Policy

    Uploaded by

    Dirgha Shertukde
    Fiscal policy is the means by which governments adjust spending and tax rates to influence their nation's economy. It works alongside monetary policy to steer the money supply. Fiscal policy is enacted through government budgets and can be either tight/contractionary if revenues exceed spending, or loose/expansionary if spending exceeds revenues. The objectives of fiscal policy include mobilizing resources, accelerating growth, balanced development, providing infrastructure, increasing employment, social justice, price stability, and economic stabilization. Contra-cyclical fiscal policy cuts spending and raises taxes during booms, and spends more while cutting taxes during recessions through automatic stabilizers like unemployment insurance. Discretionary fiscal policy entails active changes to tax rates and spending

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    of 9

    ECONOMICS

    FISCAL POLICY
    MEANING OF FISCAL POLICY

    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 central bank influences a nation's money supply. Fiscal policy is enacted by a
    government.

    601
    MEANING OF FISCAL POLICY

    Fiscal policy is said to be tight or contractionary when revenue is higher than spending.

    Fiscal policy is said to be loose or expansionary when spending is higher than revenue.

    601
    OBJECTIVES OF FISCAL POLICY

    1 Mobilisation of resources to increase the rate of capital formation

    2 Acceleration of economic growth

    3 Balanced growth and development

    4 Provision of economic and social overheads

    602
    OBJECTIVES OF FISCAL POLICY

    5 Increasing employment opportunities

    6 Social Justice - reduction of inequality of income and Wealth

    7 Price stability

    8 Economics stabilisation

    603
    CONTRA-CYCLICAL
    FISCAL POLICY

    Contra cyclical fiscal policy would cut


    government spending and increase taxes
    during economic prosperity; and income
    sending while cutting taxation during
    recession.

    Automatic stabilisers are form of contra


    cyclical fiscal policy.

    604
    EXAMPLE OF CONTRA CYCLICAL FISCAL POLICY

    Unemployment
    Unemployment
    Corporate
    Corporate Personal
    Personal Insurance
    Insurance
    Income
    Income Tax
    Tax Income
    Income Tax
    Tax Program
    Program

    604
    DISCRETIONARY FISCAL POLICY

    Discretionary fiscal policy means the government make changes to tax rates and or levels of
    government spending. For example, cutting VAT in 2009 to provide boost to spending. Expansionary
    fiscal policy is cutting taxes and/or increasing government spending.

    • Discretionary Fiscal Policy in Response to a Recession


    • Discretionary Fiscal Policy in Response to Inflation
    • Limitations

    605
    Tha
    You
    nk

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