Fiscal Policy can be explained in many ways, for example. Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups-a tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy-on such macroeconomic variables as GNP and unemployment and inflation. Fiscal Policy also can be explained as the economic term which describes the behavior of governments in raising money to fund current spending and investment for collective social purposes and for transfer payments to citizens and residents of the territory for which the government is responsible.
The money may be raised by taxation, by borrowing, by user charges on social assets or services, or by fiat. Fiscal policy can include deficit spending to stimulate demand for domestic goods and services to help unemployment or make efforts to cut deficits or raise the budget surplus to fight inflation. There are many different types of Fiscal Policy. It all depends on the given situations the government is in. A government may adopt certain policies that can either increase or decrease output in the short run. For instance, if the government faces a threat of recession, it may adopt an expansionary fiscal policy.
This policy involves increasing government spending and cutting taxes, in order to spur economic output. But if the government decides they need to do the opposite the government may adopt concretionary fiscal policy. This involves a reduction in government spending and an increase in taxes when faced with an overheating economy. But these actions, may have other effects in the economy. For instance, and expansionary fiscal policy may lead to the crowding out of investment.
Like every other government controlled organization there is a group of people who are control of Fiscal Policy. There is a Council of Economics. These men are called Council of Economic Advisors. In the Council of Advisors there are three people. There is a Chairmen and two members. Even though there are not a lot of people in this council it is a very important council.
These three men are very influential to the President. The Council of Economic Advisors haves five main jobs to do. First off the Council must assist and advise the President in the preparation of the Economic Report. Secondly they must gather timely and authoritative information concerning economic developments and economic trends, both current and prospective and must analyze and interpret such information. Thirdly they must appraise the various programs and activities of the Federal Government in the light of the policy declared for the purpose of determining the extent to which such programs and activities are contributing, and the extent to which they are not contributing, to the achievement of such policy, and to make recommendations to the President. The fourth thing the Council also must do is develop and recommend to the President national economic policies to foster and promote free competitive enterprise to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment, production, and purchasing power.
And finally the Chairmen and members must make and furnish such studies, reports thereon, and recommendations with respect to matters of Federal economic policy and legislation as the President may request. In conclusion to my paper I find that Fiscal Policy is a great way for our Nation to keep us from going into inflation and recession. The two built in stabilizers expansionary and contraction ary fiscal policy help the Nation out in many ways. These two types of fiscal policy keep the economy balanced.
But remember that Fiscal Policy consist of deliberate changes in a government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth. REFERENCES Fiscal Policy Institute, (March 2005), Tax & Budget Analysis. Retreived March 15, 2005 from web Wikipedia, (February 2005), Fiscal Policy, Retrieved Mach 10, 2005 from web Fiscal Policy, (March 2005), No Title, Retrieved March 3, 2005 from web McConnell, Campbell R. , & Stately L. Blue, (2005). Economics: Principles, Problems, Policies: sixteenth edition.
Boston, MA: McGraw-Hill.