Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.There are two kinds of fiscal policy , expansionary fiscal policy and contractionary fiscal policy.Expansionary fiscal policy include decreasing taxes, increasing goverment expenditure etc ..to fight recessionary pressures.Whereas contractionary fiscal policy is a form of fiscal policy that includes increasing taxes ,decreasing government expenditure to fight the inflationary pressures.
One way the government uses fiscal policy is to stimulate the economy that is to spend more to stir up the economy and it is called "stimulus" spending. If the government doesn't have enough cash to fund its own spending, it will often borrow money in the form of issuing government bonds or other debt securities and spend the funds under this debt. This is often referred to as "deficit" spending, and is one of the major ways the government uses fiscal policy. And also government can increase public spending in education , health and provision of other infrastructure to further raise the productivity of the economy.
Fiscal policy can be effectively used in reducing unemployment. In a recession, expansionary fiscal policy is adopted wherein government will either increase its spending or reduce the taxes or conduct both together.And this will increase Aggregate Demand (AD), causing higher output, leading to the creation of more jobs.
Government can also use fiscal policy to stabilize the fluctuations in the economy and maintain equality in the economy which will help in achieving increased economic growth.
what is fiscal policy? discuss how government may use fiscal policy t o promote productivity high...