Fiscal Policy Assignment Answers

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Fiscal policy is an implementation of government to monitor and boost up national economy through enhancement of money formation. It is used by Government through   an adjustment of tax level and expenditure level. Hence these are the main instrument for applying this. On the basis the economic condition that prevail in the society government enhance the rate of taxes to curb down the overall spending on the other hand taxes are reduced too to enhance the spending.

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 Several types and features

It is of two types

  • Expansionary

At the time of recession on business cycle, when unemployment is prevailed at its peak, when people do not have sufficient cash in their hand to spend, when whole economy goes downwards, then government reduces the tax level for supplying enough money in the hand of people so that they can spend as require. Thus, whole economy is stimulated too.

  • Contractionary

When inflation exists in the economy and growing very fast then it is implemented by increasing the tax level. It controls the spending thus inflation is also controlled and reduced.

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The main objectives

In underdevelopment country its main focus is to enhance the level of investment and amount of capital. But in developing country it is implemented for more other purposes. Those are discussed below –

  • Total employment

For an overall growth of society and economy cent percent employment is required so to looking after this issue is the most important objective of this strategy.

  • Stable market price

It also focuses on market price stability to establish an enhancing growth rate in economy.

  • Developing economic growth

Overall economic growth is one of the main objectives of this policy.

  • Proper allotment of resources

Equal resource allotment is required for overall growth and by several measurements of this process like taxation and expenditure helps to apply this.

  • Unbiased distribution of earnings and assets

To support the backward class, it focuses on equal distribution of wages and assets. It brings an overall development in whole economy of a country.

  • Stable economic condition

It helps to establish a stable economic condition through adjustment of tax and spending.

  • Proper growth and formation of capital

Capital is the most important resource for any kind of business and economic activity hence, formation of capital is necessary in all economic condition. And this strategy enhances this possibility at its highest level.

  • Enhancement of courage to invest

To create a huge interest among the general people of a country for investment.

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