Fiscal Policy Essay

1253 Words6 Pages
------------------------------------------------- Fiscal policy From Wikipedia, the free encyclopedia | This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (April 2009) | Part of a series on Government | Public finance | | Policies[show] | Fiscal policy[show] | Monetary policy[show] | Trade policy[show] | Revenue and Spending[show] | Optimum[show] | Reform[show] | * v * t * e | In economics and political science, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.[1] The two main instruments of fiscal policy are government taxation and changes in the level and composition of taxation and government spending can affect the following variables in the economy: * Aggregate demand and the level of economic activity; * The pattern of resource allocation; * The distribution of income. Fiscal policy refers to the use of the government budget to influence economic activity. Contents [hide] * 1 Stances of fiscal policy * 1.1 Methods of funding * 1.2 Borrowing * 1.3 Consuming prior surpluses * 2 Economic effects of fiscal policy * 3 Fiscal straitjacket * 4 See also * 5 References * 6 Bibliography * 7 External links | ------------------------------------------------- [edit]Stances of fiscal policy The three main stances of fiscal policy are: * Neutral fiscal policy is usually undertaken when an economy is in equilibrium. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity. * Expansionary fiscal policy involves government spending exceeding tax revenue, and is usually undertaken during recessions. *

More about Fiscal Policy Essay

Open Document