What is fiscal policy? what is the relationship between fiscal policy and taxes?
Dear Student,
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the tool in which government spending and tax policies are used to influence economic conditions especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth.
There is a relation between fiscal policy nd taxes. In fiscal policy, the government increases its spending, cuts taxes, or a combination of both. The increase in spending and tax cuts will increase aggregate demand, but the extent of the increase depends on the spending and tax multipliers. With the help of taxes government increases the taxes so that the household spending can be reduced. While when the government reduces taxes, there is increase in disposable income of people dur to which people start to spend more and the prices in the market start to rise.
Regards,
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the tool in which government spending and tax policies are used to influence economic conditions especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth.
There is a relation between fiscal policy nd taxes. In fiscal policy, the government increases its spending, cuts taxes, or a combination of both. The increase in spending and tax cuts will increase aggregate demand, but the extent of the increase depends on the spending and tax multipliers. With the help of taxes government increases the taxes so that the household spending can be reduced. While when the government reduces taxes, there is increase in disposable income of people dur to which people start to spend more and the prices in the market start to rise.
Regards,