Fiscal Policy
Fiscal policy refers to the changes in government’s choices regarding the overall level of government spending and taxes to influence the behavior of the economy. Fiscal policy can expand or contract aggregate demand. The government sometimes uses the fiscal policy instruments in an attempt to stabilize the economy. Under a recession, an expansionary fiscal policy is adopted, which involves lowering taxes and/or increasing government spending. In an overheated expansion with an inflationary pressure, a contractionary fiscal policy is utilized, which requires higher taxes and/or reduced government spending. Economists and policymakers disagree about how active the government should be in these fiscal policy efforts.
Based on the above summary and the detailed descriptions of the fiscal policy issues in the textbook (Chapter 31) discuss the following questions:
What are the expansionary and contractionary fiscal policies? What are their policy instruments? How are they used to deal with the inflationary gap and recessionary gap? Which do you think is more appropriate today?
Should the government balance its budget? If you think it should, what steps do you suggest that it take to balance its budget?
What is the relationship between budget deficits and national (public) debt? Why has the U.S. national debt been increasing for decades?
Should the tax laws be reformed to encourage saving? Do you think consumption tax is better than income tax
please to be 300 words .
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Fiscal PolicyFiscal policy refers to the changes in government’s
1. Fiscal Policy
Fiscal policy refers to the changes in government’s choices
regarding the overall level of government spending and taxes to
influence the behavior of the economy. Fiscal policy can expand
or contract aggregate demand. The government sometimes uses
the fiscal policy instruments in an attempt to stabilize the
economy. Under a recession, an expansionary fiscal policy is
adopted, which involves lowering taxes and/or increasing
government spending. In an overheated expansion with an
inflationary pressure, a contractionary fiscal policy is utilized,
which requires higher taxes and/or reduced government
spending. Economists and policymakers disagree about how
active the government should be in these fiscal policy efforts.
Based on the above summary and the detailed descriptions of
the fiscal policy issues in the textbook (Chapter 31) discuss the
following questions:
What are the expansionary and contractionary fiscal policies?
What are their policy instruments? How are they used to deal
with the inflationary gap and recessionary gap? Which do you
think is more appropriate today?
Should the government balance its budget? If you think it
should, what steps do you suggest that it take to balance its
budget?
What is the relationship between budget deficits and national
(public) debt? Why has the U.S. national debt been increasing
for decades?
Should the tax laws be reformed to encourage saving? Do you
think consumption tax is better than income tax
