Fiscal policy refers to the changes in governments choices regarding the overall
ID: 1210599 • Letter: F
Question
Fiscal policy refers to the changes in governments choices regarding the overall level of government spending and taxes to affect the behavior of the economy. Fiscal policy can expand or contract aggregate demand. The government sometimes uses the fiscal policy instruments in an attempt to stabilize the economy. Under a recession, an expansionary fiscal policy is adopted, which involves lowering taxes and increasing government spending. In an overheated expansion with an inflationary pressure, a contractionary fiscal policy is utilized, which requires higher taxes and reduced spending. Economists and policymakers disagree about how active the government should be in these efforts.What are the expansionary and contractionary fiscal policies? What are their policy instruments? How are they used to deal with the inflationary gap and recessionary gap? Which do you think is more appropriate today?
Should the government balance its budget? If you think it should, what steps do you suggest that it take to balance its budget?
What is the relationship between budget deficits and national (public) debt? Why has the U.S. national debt been increasing for decades?
Should the tax laws be reformed to encourage saving? Do you think consumption tax is better than income tax?
Explanation / Answer
The expansionary fiscal policy works upon the development of the society by the rise in expenditure by the government on such work. The contractionary fiscal policy shows that decrease in teh expenditure or increase in the tax in order to uplift the society. These are used to deal with inflationary and recessionary gap by increasing expenditure on the establishment of a smooth economy of the nation. The most appropriate today is expenditure fiscal policy.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.