Fiscal Policy Essay

1025 WordsMar 8, 20145 Pages
The purpose of this paper is gather and present economic information on fiscal policy. This important policy is a topical issue today as our government as struggled to reach an an agreement with the nations budget and how funds should be spent. Why is this policy important to everyone? Fiscal policy is essential to everyone because it affects our income from a tax perspective because of changes government may implement, and spending that will affect the level of Gross Domestic Product (GDP) (O’Sullivan, Sheffrin, Perez, 2012). Fiscal policy is a toll used by the government to stabilize the economy. Government spending is a main component to drive and increase aggregate demand. The most recent government shutdown, October 1, 2013 to October 16, 2013 was a result of failure to agree on a fiscal budget. Approximately 800,000 government workers were forced to stay home because the government could not agree on budget settlement. This project aims to provide data on how the fiscal policy works and what it means to the society in terms of sending, GDP, investments, and the impact it has on stabilizing the economy. This project will also explain the policies used by the government to control demand aggregate: expansionary polices - increase in government spending and cutting taxes which leads to an increase in aggregate demand, contractionary policies - unlike expansionary, this is a reduction in government spending that leads to decreases in aggregate demand (O’Sullivan, Sheffrin, Perez, 2012). The figure above highlights the surplus for the federal budget from 1962-2003. Corrected to display the real condition of the business cycle, the deficit for 2003 was $375 billion; however, the clinical adjustment reduced the deficit by $68 billion as a result of lingering effects of a recession - therefore the new deficit

More about Fiscal Policy Essay

Open Document