TERM OF THE DAY fiscal policy Governments revenue (taxation) and spending policy designed to (1) counter economic cycles in order to achieve lower unemployment, (2) achieve low or no inflation, and (3) achieve sustained but controllable economic growth. In a recession, governments stimulate the economy with deficit spending (expenditure exceeds revenue). During period of expansion, they restrain a fast growing economy with higher taxes and aim for a surplus (revenue exceeds expenditure). Fiscal policies are based on the concepts of the UK economist John Maynard Keynes (1883-1946), and work independent of monetary policy which tries to achieve the same objectives by controlling the money supply. Usage Example Fiscal policy is used by governments to influence activity within an economy and can change depending on whether the economy is experiencing recession, expansion or something in between.
Posted on: Tue, 18 Mar 2014 19:16:05 +0000
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