The Pros And Cons Of Fiscal Policy
What is the Fiscal policy?
Fiscal policy is the use of presidential and governmental spending and taxation to change or even repair what is or might be wrong in the economy. The basic idea behind many of the fiscal policy ideas were introduced by British economist John Maynard Keynes during the Great Depression (Heakal, n.d.). When the government decides on the goods and services it will be purchasing, the payments it distributes, or even the taxes it collects, it is participating in fiscal policy. The economic influence of any change in the government budget can and in theory will benefit people such as a tax cut for families with children, can help raise their disposable income (Weil, n.d.).
The term fiscal policy is a word to describe the changes in the aggregate economy of the overall …show more content…
• It can use increased taxation to discourage undesirable business practices: This is done through taxing polluters or for those that overuse a limited resource, it can help remove the undesirable effects they cause. All of this while generating more government funding (Hayes, n.d.).
• It has a short lag time: By this it means that fiscal policy changes can be evaluated much quicker than the results of monetary policy modifications. (Hayes, n.d.).
Cons:
• It can create budget deficit: A budget deficit is when the government spends more money than they annually take in. (Hayes, n.d.).
• Tax incentives and spending maybe spent on imports: The effect of fiscal stimulus can go unnoticed when the money that is to be put into the economy, whether through tax savings or government spending is instead spent on imports or by sending that money abroad instead of utilizing it in the local economy (Hayes,
Fiscal policy is the use of presidential and governmental spending and taxation to change or even repair what is or might be wrong in the economy. The basic idea behind many of the fiscal policy ideas were introduced by British economist John Maynard Keynes during the Great Depression (Heakal, n.d.). When the government decides on the goods and services it will be purchasing, the payments it distributes, or even the taxes it collects, it is participating in fiscal policy. The economic influence of any change in the government budget can and in theory will benefit people such as a tax cut for families with children, can help raise their disposable income (Weil, n.d.).
The term fiscal policy is a word to describe the changes in the aggregate economy of the overall …show more content…
• It can use increased taxation to discourage undesirable business practices: This is done through taxing polluters or for those that overuse a limited resource, it can help remove the undesirable effects they cause. All of this while generating more government funding (Hayes, n.d.).
• It has a short lag time: By this it means that fiscal policy changes can be evaluated much quicker than the results of monetary policy modifications. (Hayes, n.d.).
Cons:
• It can create budget deficit: A budget deficit is when the government spends more money than they annually take in. (Hayes, n.d.).
• Tax incentives and spending maybe spent on imports: The effect of fiscal stimulus can go unnoticed when the money that is to be put into the economy, whether through tax savings or government spending is instead spent on imports or by sending that money abroad instead of utilizing it in the local economy (Hayes,