"The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s, when the previous laissez-faire approach to economic management became unworkable."
Fiscal policy is often used to achieve macroeconomic goals such as full employment, price stability and economic growth. This topic explores how fiscal policy can be used to achieve these goals.
Gross Domestic Product (GDP): GDP is the total value of goods and services produced within a country's borders. It is an important macroeconomic indicator used to measure economic growth.
Inflation: Inflation is the rate at which prices of goods and services increase over time. It is an important macroeconomic objective to keep inflation under control.
Fiscal Policy: Fiscal policy is the use of government spending and taxation to influence the economy. It is used to achieve macroeconomic objectives such as stabilization of the economy, low inflation, and high employment.
Monetary Policy: Monetary policy is the use of interest rates and other tools by a country's central bank to control the money supply and influence economic activity. It is another important tool used to influence macroeconomic objectives.
Balance of Payments: Balance of payments is the record of all international financial transactions made by a country, including exports, imports, and investment flows. It is an important indicator of a country's economic health.
Exchange Rates: Exchange rates are the values at which one currency can be exchanged for another. They have a significant impact on the international trade and hence, also on macroeconomic objectives.
Unemployment: Unemployment is the number of people who are willing and able to work but unable to find employment. It is a major macroeconomic problem, which needs to be addressed at a policy level.
Interest rates: Interest rates are the cost of borrowing or the return earned on savings. They affect spending, investments, and inflation, making them an important tool in achieving macroeconomic objectives.
National Debt: National debt is the total amount of money owed by a country's government. It is an important concern for policymakers who must balance debt repayment with other macroeconomic objectives.
Government Spending: Government spending refers to the money government uses to buy goods and services, which can stimulate economic growth or slow it down, affecting macroeconomic objectives.
Tax Policy: The government can use tax policy to influence macroeconomic objectives through the tax codes' provisions.
Business Cycle: Business cycle refers to the up and down swings in economic activity that an economy experiences over time. Understanding business cycles can help policymakers make better decisions regarding macroeconomic objectives.
Government Budget: The government budget is an important tool in achieving macroeconomic objectives. It outlines government spending priorities, revenue-raising strategies, and overall economic goals.
Economic Growth: Economic growth is an increase in the value of goods and services produced by a country's economy over time. Achieving consistent economic growth is a priority for most policymakers.
Economic Indicators: Economic indicators are statistics that measure economic performance, such as GDP, inflation, and unemployment. They are important sources of information when making policy decisions regarding macroeconomic objectives.
Economic growth: This refers to an increase in the economy's production of goods and services over time. It is measured by changes in gross domestic product (GDP).
Low unemployment: This refers to the percentage of people in the labor force who are not working but actively seeking employment. It is measured by the unemployment rate.
Price stability: This refers to keeping inflation at a low and stable level over time. It is measured by the consumer price index (CPI).
External stability: This refers to maintaining a balance of payments with other countries, ensuring that exports and imports are balanced and the country's currency remains stable in relation to other countries.
Income redistribution: This refers to the government's efforts to reduce inequality by redistributing income and wealth from richer people to poorer people.
Environmental sustainability: This refers to the goal of promoting economic growth while minimizing environmental damage and protecting the planet's natural resources.
Social welfare: This refers to policy measures aimed at improving the welfare of a society's citizens, including education, health care, housing, and other public services.
Reduction of poverty: This refers to reducing the number of people living in poverty through policies such as social welfare programs, anti-discrimination measures, and job creation.
Fiscal balance: This refers to the government's efforts to maintain a balanced budget over time by ensuring that government revenues match or exceed expenditures.
Investment promotion: This refers to promoting investment in the economy through policies that make it easier and more attractive for businesses to invest capital.
Exchange rate stability: This refers to the government's efforts to maintain the value of its currency relative to other currencies, ensuring a stable exchange rate environment for trade and investment.
"Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics theorized that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity."
"Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives."
"Changes in the level and composition of taxation and government spending can affect macroeconomic variables, including: - Aggregate demand and the level of economic activity - Saving and investment - Income distribution - Allocation of resources."
"Fiscal policy deals with taxation and government spending and is often administered by a government department; while monetary policy deals with the money supply, interest rates and is often administered by a country's central bank."
"It is designed to try to keep GDP growth at 2%–3% and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilize the economy over the course of the business cycle."
"The previous laissez-faire approach to economic management became unworkable during the Great Depression of the 1930s."
"Fiscal policy is used to stabilize the economy over the course of the business cycle."
"Fiscal policy is based on the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy."
"Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics theorized that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity."
"Inflation is considered 'healthy' at the level in the range 2%–3%."
"Fiscal policy is designed to increase employment."
"The unemployment rate near the natural unemployment rate of 4%-5% is targeted by fiscal policy."
"Both fiscal and monetary policies influence a country's economic performance."
"The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s."
"The previous laissez-faire approach to economic management became unworkable during the Great Depression of the 1930s."
"Fiscal policy can affect macroeconomic variables, including aggregate demand and the level of economic activity, saving and investment, income distribution, and allocation of resources."
"Government revenue collection (taxes or tax cuts) and expenditure are the primary tools of fiscal policy."
"Fiscal policy is often administered by a government department."
"Fiscal policy deals with taxation and government spending, while monetary policy deals with the money supply and interest rates."