Transcription of BASICS BACK TO What Is Fiscal Policy?
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BASICS BACK TO What Is Fiscal Policy?
BACK TOBASICSWhat Is Fiscal policy ? Fiscal policy is the use of government spending and taxation to infl uence the economy. Governments typi-cally use fi scal policy to promote strong and sustain-able growth and reduce poverty. The role and objec-tives of fi scal policy have gained prominence in the current crisis as governments have stepped in to support fi nancial sys-tems, jump-start growth, and mitigate the impact of the crisis on vulnerable groups. In the communiqu following their Lon-don summit in April, leaders of the Group of Twenty industrial and emerging market countries stated that they are undertak-ing unprecedented and concerted fi scal expansion.
Fiscal policy that in-creases aggregate demand directly through an increase in gov-ernment spending is typically called expansionary or “loose.” By contrast, fi scal policy is often considered contractionary or “tight” if it reduces demand via lower spending. Besides providing goods and services, fiscal policy objec-tives vary.
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