Definition of Fiscal policy:
Governments revenue (taxation) and spending policy designed to (1) counter economic cycles in order to achieve lower unemployment, (2) achieve low or no inflation, and (3) achieve sustained but controllable economic growth. In a recession, governments stimulate the economy with deficit spending (expenditure exceeds revenue). During period of expansion, they restrain a fast growing economy with higher taxes and aim for a surplus (revenue exceeds expenditure). Fiscal policies are based on the concepts of the UK economist John Maynard Keynes (1883-1946), and work independent of monetary policy which tries to achieve the same objectives by controlling the money supply.
Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883-1946), who argued that economic recessions are due to a deficiency in the consumption spending and business investment components of aggregate demand. Keynes believed that governments could stabilize the business cycle and regulate economic output by adjusting spending and tax policies to make up for the shortfalls of the private sector. His theories were developed in response to the Great Depression, which defied classical economics' assumptions that economic swings were self-correcting. Keynes' ideas were highly influential and led to the New Deal in the U.S., which involved massive spending on public works projects and social welfare programs.
Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth.
How to use Fiscal policy in a sentence?
- Fiscal policy is largely based on ideas from John Maynard Keynes, who argued governments could stabilize the business cycle and regulate economic output.
- Some constituents in our country disagree with our presidents fiscal policy , and they say that he spends too much of their money.
- If the funding goals for the upcoming budget are to be reached, this fiscal policy will need a serious overhaul.
- The company instituted a new fiscal policy which required all employees to provide receipts for their travel-related expenses so the company could monitor spending.
- Fiscal policy refers to the use of government spending and tax policies to influence economic conditions.
- In the face of mounting inflation and other expansionary symptoms, a government may pursue contractionary fiscal policy.
- During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth.
Meaning of Fiscal policy & Fiscal policy Definition