Fiscal Policy 2 Writing Assignment

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Fiscal policy 2
Fiscal policy is a set of measures and instruments used by the State to influence the economy mainly taxation and public expenditure in order to obtain growth in production, reduce unemployment and achieve price stability. The main objective of fiscal policy is to stimulate the growth of the economy and protect it from possible fluctuations in economic cycles. The fiscal policy instruments are used to be balance in the economy of a country where it is necessary that its aggregate supply (production) matches your aggregate demand. The state uses public expenditure and taxes to try to accelerate or slow down economic activity of the country in case there is risk of the economy heating up.
Depending on the problem that the economy of a country faces (unemployment or inflation), the state will take different measures within its fiscal policy. When there is high unemployment, the state will respond with a tax cut, an increase in public spending, or both measures simultaneously. To deal with inflation, the state will apply measures such as increase in taxes and / or decrease in public spending.
The expansionary fiscal policy is applied when the aggregate demand is insufficient and, therefore, there is unused productive capacity generating unemployment, especially, in times of recession or crisis. The objective of the expansionary fiscal policy is to stimulate the economy to increase aggregate demand, by increasing public spending and lowering taxes. Increasing public spending can be through public works, such as roads and hosp...