Question

Name one governmental action or policy you agree with. Subject: Government

Answer 1

A fiscal policy means when government adjust spending to stimulate production or taxing used to influence and monitor the economy. Fiscal policy can be used to close the (a) recessionary gap and (b) inflationary gap.

1. Recessionary Gap:

Expansionary fiscal policy eliminates the recessionary Gap. In the Keynesian theory, an increase in government purchases, decrease in taxes, or both results to rightward shift in the aggregate demand curve, thus restoring the economy to its natural level to real gross domestic product (GDP)

2. Inflationary Gap:

Contractionary fiscal policy eliminates the inflationary gap. It behaves opposite of expansionary fiscal policy, decrease government purchases, increasing taxes, or both results to leftward shift in the aggregate demand curve, thus restoring the economy to its natural level to real gross domestic product (GDP)

　

I agree with the policy because of the following advantages:

--Unemployment Reduction – When there is a high unemployment, the government can use an expansionary fiscal policy. This involves increasing spending or purchases and lowering taxes. To meet an increasing demand, the private sector will raise the production thus creating more employment opportunities in the process.

-- Budget Deficit Reduction - A nation has a budget deficit when the expenditures are more than its revenue. Because economic effects of this deficit is inclusive of increased public debt, the country can use contraction in the fiscal policy and consequently decrease the public spending raise the rates of tax rates to increase more revenue and ultimately reduce the budget deficit.

-- Economic Growth Increase - The numerous measures of fiscal policy facilitate expansion of the national economy.

--Limit negative community behaviors: It is used to limit negative behaviors on the community such as tax on cigarettes