Fiscal Policy

Extracted Attributes

• Purpose

  Stabilize the economy over the course of the business cycle, promote strong and sustainable growth, reduce poverty

• Definition

  Use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy

• Primary Tools

  Government revenue collection (taxes/tax cuts), Government expenditure

• Administered By

  Government department

• Types of Policy

  Expansionary (lower taxes, increase spending), Contractionary (raise taxes, cut spending), Countercyclical, Procyclical

• Theoretical Basis

  Keynesian economics, theories of John Maynard Keynes

• Economic Objectives (Inflation)

  Target 2%-3% range

• Economic Objectives (GDP Growth)

  Target 2%-3% range

• Macroeconomic Variables Affected

  Aggregate demand, level of economic activity, saving and investment, income distribution, allocation of resources

• Economic Objectives (Unemployment)

  Target near natural rate (4%-5%)

Timeline

• Emergence and development of fiscal policy in reaction to the Great Depression, as the previous laissez-faire approach to economic management proved unworkable. (Source: Wikipedia, Provided Summary)

  1930s

• Governments used fiscal policy to support financial systems, jump-start growth, and mitigate the impact of the global economic crisis, as noted in the G20 London summit communiqué. (Source: IMF (Web Search Results))

  2009-04

Fiscal policy

In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s, when the previous laissez-faire approach to economic management became unworkable. Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics theorised that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target inflation and to increase employment. In modern economies, inflation is conventionally considered "healthy" in the range of 2%–3%. Additionally, it is designed to try to keep GDP growth at 2%–3% and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilise the economy over the course of the business cycle. Changes in the level and composition of taxation and government spending can affect macroeconomic variables, including: aggregate demand and the level of economic activity saving and investment income distribution allocation of resources. Fiscal policy can be distinguished from monetary policy, in that fiscal policy deals with taxation and government spending and is often administered by a government department; while monetary policy deals with the money supply, interest rates and is often administered by a country's central bank. Both fiscal and monetary policies influence a country's economic performance.

Web Search Results

• Fiscal policy - Wikipedia

  In economics and political science, Fiscal Policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s, when the previous laissez-faire approach to economic management became unworkable. Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics [...] theorised that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target inflation and to increase employment. In modern economies, inflation is conventionally considered "healthy" in the range of 2%–3%. Additionally, it [...] Fiscal policy can be distinguished from monetary policy, in that fiscal policy deals with taxation and government spending and is often administered by a government department; while monetary policy deals with the money supply, interest rates and is often administered by a country's central bank. Both fiscal and monetary policies influence a country's economic performance. ## Monetary or fiscal policy? [edit] Main article: Monetary/fiscal debate

• All About Fiscal Policy: What It Is, Why It Matters, and Examples

  Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions. These include aggregate demand for goods and services, employment, inflation, and economic growth. During a recession, the government may lower tax rates or increase spending to encourage demand and spur economic activity. Conversely, to combat inflation, it may raise rates or cut spending to cool down the economy. [...] Fiscal policy refers to the use of government spending and tax policies to influence economic conditions. Fiscal policy is largely based on ideas from British economist John Maynard Keynes. Keynes argued that governments could stabilize the business cycle and regulate economic output rather than let markets right themselves alone. An expansionary fiscal policy lowers tax rates or increases spending to increase aggregate demand and fuel economic growth. [...] Fiscal policy is the responsibility of the government. It involves spurring or slowing economic activity using taxes and government spending.

• Fiscal Policy - (AP US Government) - Vocab, Definition, Explanations

  Fiscal policy refers to the government's use of spending and taxation to influence the economy. It plays a crucial role in managing economic growth, inflation, and unemployment by adjusting public expenditure and revenue collection. Through fiscal policy, the government can either stimulate the economy during a recession or cool it down during periods of rapid growth, which connects closely with ideological perspectives on economic management, how presidents communicate their economic [...] 1. Fiscal policy can be classified as either expansionary or contractionary, with expansionary policies aimed at increasing aggregate demand through higher spending or lower taxes. 2. During economic downturns, governments often implement fiscal stimulus packages to boost growth by increasing public spending on infrastructure and social programs. [...] Taxation is the process through which a government collects revenue from individuals and businesses to fund public services and government obligations. ## "Fiscal Policy" also found in: ### Subjects (2) Education Policy and Reform Intro to Humanities ### Guided Practice Practice AP US Government questions

• Fiscal Policy: Taking and Giving Away

  Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty. The role and objectives of fiscal policy gained prominence during the recent global economic crisis, when governments stepped in to support financial systems, jump-start growth, and mitigate the impact of the crisis on vulnerable groups. In the communiqué following their London summit in April 2009, leaders of [...] Besides providing goods and services like public safety, highways, or primary education, fiscal policy objectives vary. In the short term, governments may focus on macroeconomic _stabilization_—for example, expanding spending or cutting taxes to stimulate an ailing economy, or slashing spending or raising taxes to combat rising inflation or to help reduce external vulnerabilities. In the longer term, the aim may be to foster sustainable growth or reduce poverty with actions on the _supply side_

• Introduction to U.S. Economy: Fiscal Policy | Congress.gov

  Fiscal policy is the means by which the government adjusts its budget balance through spending and revenue changes to influence broader economic conditions. According to mainstream economics, the government can affect the level of economic activity—generally measured by gross domestic product (GDP)—in the short term by changing its levels of spending and tax revenue. This In Focus presents an introduction to fiscal policy. For a more in-depth look at fiscal policy, its effect on the economy, [...] Fiscal policy is often characterized by its countercyclical or procyclical nature. Countercyclical policy attempts to counteract the business cycle by promoting growth through expansionary policy during a recession and preventing "overheating" through contractionary policy during an expansion. Procyclical policy does the opposite and is generally seen to be counterproductive, potentially overheating the economy during expansions and further dampening growth during recessions.