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Feb 8, 2024 · Learn about the definition, objectives, tools and types of fiscal policy in India, a macroeconomic strategy of the government to influence the economy. Find out the difference between fiscal policy and monetary policy, and the related concepts of fiscal deficit, consolidation, drag and neutrality.
- Full Employment: The first and foremost objective of fiscal policy in a developing economy is to achieve and maintain full employment in an economy. In such countries, even if full employment is not achieved, the main motto is to avoid unemployment and to achieve a state of near full employment.
- Price Stability: There is a general agreement that economic growth and stability are joint objectives for underdeveloped countries. In a developing country, economic instability is manifested in the form of inflation.
- To Accelerate the Rate of Economic Growth: Primarily, fiscal policy in a developing economy, should aim at achieving an accelerated rate of economic growth.
- Optimum Allocation of Resources: Fiscal measures like taxation and public expenditure programmes, can greatly affect the allocation of resources in various occupations and sectors.
- Fiscal Policy Definition
- Fiscal Policy Purpose and Objectives
- Components of Fiscal Policy
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Fiscal policy refers to the governmental use of taxation and spending to influence the conditions of the economy. Typically, fiscal policy comes into play during a recession or a period of inflation, where conditions are escalating quickly enough to warrant government intervention. A good application of fiscal policy, in theory, should be able to s...
The purpose of fiscal policy is to implement artificial measures to prevent an economic collapse and to promote healthy and steady economic growth. Fiscal policies can be either expansionary or contractionary.
Government Spending
It's not just about how much a government spends but where it allocates its resources. Infrastructure, healthcare, defense, education—the choices are vast, each with its ramifications on the economy. Government spending can be a catalyst, igniting growth in sectors, creating jobs, and fostering innovation. Conversely, cutbacks in areas can signal a shift in priorities, often with ripple effects throughout the economy.
Taxation
Taxes—they're inevitable. But they're also a potent tool in a government's fiscal arsenal. By tweaking tax rates, governments can influence both individual and corporate behavior. Reduced taxes can spur spending and investment, acting as a boost to economic activity. Conversely, increased taxes can cool down an overheating economy or be used to fund crucial government programs.
Debt Management
Borrowing is a double-edged sword. On one hand, it allows governments to fund large projects and stimulate growth. On the other, excessive debt can hamper economic activity, leading to long-term fiscal strain. Effective debt management ensures that borrowing serves its purpose without endangering future financial stability. It's a balancing act of weighing immediate needs against long-term sustainability.
Learn what fiscal policy is, how it works, and why it matters for the economy. Explore the components, types, advantages, and challenges of fiscal policy with examples and sources.
Learn what fiscal policy is, how it relates to government spending and revenue, and what are its main objectives. Find out the difference between fiscal and monetary policy, and the types of fiscal measures and policies.
Learn about the objectives of fiscal policy, such as higher economic growth, price stability, and reduction in inequality, and the components of fiscal policy, such as government receipts and expenditure. Also, read about the fiscal policy acts, such as FRBM Act, Direct Tax Code Bill, and Fiscal Responsibility and Budget Management Act.
Apr 28, 2022 · Learn what fiscal policy is, how it works, and what are its objectives and types. Find out how fiscal policy affects employment, growth, inflation, and balance of payments.
May 25, 2024 · Learn about fiscal policy, the use of government spending and taxation to influence economy. Find out the objectives, types, instruments, components and examples of fiscal policy in India.
