Fiscal policy refers to changes in government expenditure and or Taxes to achieve particular economic goal such as low employment, price stability and economic growth. This article focus on meaning fiscal policy and objectives of fiscal policy
Fiscal policy deals with taxation and government spending and is often administered by an executive under laws of a legislature
To generate revenue and incur expenditure government frames a budgetary policy or fiscal policy through increase and decrease government expenditure and Taxes to achieve microeconomic goal.
Fiscal policy relates to decisions that determine whether a government will spend more or less than it receives.
It is often used to stabilize the economy over the course of the business cycle and regulate economic output by adjusting spending and tax policies.
Fiscal policy divides into two types first one is expansionary fiscal policy and second one is the contractionary fiscal policy.
The success of fiscal policy will depends on:-
I] State of the economy
II] Size of the multiplier
III] Other factors in the economy
IV] Bond Yield
The goal of fiscal policy is to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages.
Fiscal policy referred as ‘Keynesian’ (Keynes says that the budget should be in deficit when the economy was experiencing low levels of activity and in surplus when boom conditions (often accompanied by high inflation) were in force.)
Objectives of Fiscal Policy-:
Fiscal policy is designed to attend following objectives
1. Mobilization of development resources to taxation, public and private savings
2. Efficient allocation of financial resources
3. Price stability and control of inflation
4. Employment generation
5. Balance regional development
6. Reducing deficit of balance of payments
7. Increasing national income and capital formation
8. Development of infrastructure
9. Foreign exchange earnings