Fiscal Policy Essay

272 WordsOct 2, 20122 Pages
Fiscal policy refers to the government revenue collection and expenditure that impacts the economy. The two uppermost important objectives of fiscal policies are government taxation and disbursement. Adjustment in the level and configuration of government and taxation expenditure can influence the succeeding topics in the economy, the disbursement of revenue, aggregated demand and the stage of economic activity, and the structure of resource distribution. Fiscal policy also denotes to the usage of government financial planning to power economic activity. “The U.S. economy found itself entering a severe recession in 2008. In response to the significant decreases in private aggregate demand, governments throughout the world cut taxes and increased spending, running large deficits—that is, using expansionary fiscal policy.” (Colander, 2010, Chapter 18 Fiscal Policy in 2009 and Beyond). An expansionary fiscal policy is considered as a macroeconomic policy that requests to increase the money supply to boost economic growth or fight inflation. Expansionary policy comes in the form of tax cuts, rebates and added government expenditure. Expansionary policies can also come from central banks, which emphasis on aggregate the money supply in the economy. The United States government usage of expansionary fiscal policies can allow them to attempt to offset the leftward shift of the aggregated demand curve. Very large amounts of economist agree on this type of policy, which is not fine-tuned, with deficits crowding out private investments. As much as the expansionary fiscal policy was in need, in 2008 there were already thoughtful worries about the level of the deficits. Reference Colander, D. C. (2010). Macroeconomics (8th ed.). Retrieved from The University of Phoenix eBook Collection

More about Fiscal Policy Essay

Open Document