Published Article Details

5 smart things to know about the government's fiscal policy

Posted by: Labdhi Mehta on Jan 07, 2019, 06.30 AM IST

1. Fiscal  policy  refers to the policies of the  government  regarding its expenditure, investment  spending  and taxation. 

2. The objective is to find a balance between tax rates and public spending to ensure a healthy economic growth without causing inflation to rise. 

3. A  fiscal  expansion aims to stimulate aggregate demand and growth through reducing  taxes  and/or increasing government spending. 

4. A contraction in fiscal policy decreases government spending and/or increases taxation to reduce aggregate demand and output. 

5. Fiscal policies tend to impact demand directly and quickly as compared to monetary policies which have a lagged and uncertain impact. 


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