Different Examples Of The Fiscal Policy

Name: Institution Affiliation: Instructor: Course: Date: Fiscal Policy Introduction Fiscal policy refers to the measures that are implemented by the government to stabilize the economy of a country. It is based on the theories of John Maynard Keynes who stipulated that a government may influence macroeconomic productivity levels through increasing or decreasing tax levels and public spending. The impacts of fiscal policy help in curbing inflation which is regarded to be healthy when it is between two to three percent. Additionally, it aids in increasing employment and maintaining a health value for money. This paper examined different examples of the fiscal policy and how they function to give the intended results. First, the expansionary fiscal policy is a strategy used by the government to encourage and promote economic growth or battle inflationary price increases through expanding the monetary supply, reducing the interest rates and also by increasing government spending. This policy aids in stimulating an economy by ensuring that more money is available to consumers and businesses for spending. Expansionary policy impacts the output and productivity of an economy. According to the Keynesian Theory, this strategy increases production because it helps in raising demand. When the taxes are reduced, the theory assumes that people and businesses will buy goods and services using their tax savings. The increase in buying makes the economy to produce more products and services which are on high demand. Thus, high demand in an economy boost producti...