Managerial Economics - Fiscal Policy
Introduction and Objectives of Fiscal Policy
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Fiscal policy is defined as the conscious attempt of the government to achieve certain macro economic goals of policy by altering the volume and pattern of its revenue and expenditures and the balance between them.
Introduction Objectives of Fiscal
Policy
Fiscal policy is defined as the conscious attempt of the government to achieve certain macro economic goals of policy by altering the volume and pattern of its revenue and expenditures and the balance between them. The major economic goals of fiscal policy are to maintain a high average level of employment and business activity, to minimize fluctuations in employment activity, prevent inflation and to produce and promote economic growth.
The fiscal policy is used to control inflation through making deliberate changes in government revenue and expenditure to influence the level of output and prices. It is a budgetary policy. Fiscal policy is the use of government taxes and spending to alter macroeconomic outcomes of the country. During the great depression of the 1930s people were out of work, they were unable to buy goods and services therefore government had to increase, to regulate macroeconomic values and money supply.
The use of government spending and taxes to adjust aggregate demand is the essence of fiscal policy. The simplest solution to the demand shortfall would be to increase government spending. The government increases it’s spending through construction of tanks, schools, highways. This increased spending is a fiscal stimulus. Economic stability is a macro goal of the fiscal policy of a country whether developed or developing. By economic stabilization it means; controlling recession or depression and price stability.
1. To maintain economic stability in the country
2. To bring Price stability
3. To achieve full employment
4. To provide social justice
5. To promote export and introduce import substitution
6. To mobilize more public revenue
7. To reallocate available resources
8. To achieve balanced regional growth.
The major instruments to be used to control inflation and to achieve the above said objectives are (i) Taxation (ii) Public borrowings (iii) Deficit financing.
Fiscal policy deals with the government expenditure and its composition. Government expenditures are classified into two categories as capital expenditure and consumption expenditure. The spending on construction of road, dams and others are called as capital expenditure. Government expenditure on consumption of goods and services are called as consumption expenditure. The interest paid by the government against the borrowings or national debt is called as interest payment. Governments’ transfer of money from one sector to other is called Transfer of payments.
Introduction:
Fiscal policy is defined as the conscious attempt of the government to achieve certain macro economic goals of policy by altering the volume and pattern of its revenue and expenditures and the balance between them. The major economic goals of fiscal policy are to maintain a high average level of employment and business activity, to minimize fluctuations in employment activity, prevent inflation and to produce and promote economic growth.
The fiscal policy is used to control inflation through making deliberate changes in government revenue and expenditure to influence the level of output and prices. It is a budgetary policy. Fiscal policy is the use of government taxes and spending to alter macroeconomic outcomes of the country. During the great depression of the 1930s people were out of work, they were unable to buy goods and services therefore government had to increase, to regulate macroeconomic values and money supply.
The use of government spending and taxes to adjust aggregate demand is the essence of fiscal policy. The simplest solution to the demand shortfall would be to increase government spending. The government increases it’s spending through construction of tanks, schools, highways. This increased spending is a fiscal stimulus. Economic stability is a macro goal of the fiscal policy of a country whether developed or developing. By economic stabilization it means; controlling recession or depression and price stability.
Objectives Of Fiscal Policy:
1. To maintain economic stability in the country
2. To bring Price stability
3. To achieve full employment
4. To provide social justice
5. To promote export and introduce import substitution
6. To mobilize more public revenue
7. To reallocate available resources
8. To achieve balanced regional growth.
Instruments:
The major instruments to be used to control inflation and to achieve the above said objectives are (i) Taxation (ii) Public borrowings (iii) Deficit financing.
Fiscal policy deals with the government expenditure and its composition. Government expenditures are classified into two categories as capital expenditure and consumption expenditure. The spending on construction of road, dams and others are called as capital expenditure. Government expenditure on consumption of goods and services are called as consumption expenditure. The interest paid by the government against the borrowings or national debt is called as interest payment. Governments’ transfer of money from one sector to other is called Transfer of payments.
Tags : Managerial Economics - Fiscal Policy
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