|
See All Dates |
| |||
|---|---|---|---|---|
|
The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page. This article does not cite any references or sources. Please help improve this article by adding citations to reliable sources. This article is part of the series: Finance and Taxation Taxation Income tax · Payroll tax CGT · Stamp duty · LVT Sales tax · VAT · Flat tax Tax, tariff and trade Tax haven Tax incidence Tax rate · Proportional tax Progressive tax · Regressive tax Tax advantage · Fixed tax Taxation by country[show] Australia • British Virgin Islands Canada • China • Colombia France • Germany • Hong Kong India • Indonesia • Ireland Netherlands • New Zealand Peru • Russia Singapore • Switzerland Tanzania • United Kingdom United States • European Union v • d • e Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank • Money supply Gold standard Fiscal policy Spending • Deficit • Debt Policy-mix Trade policy Tariff • Trade agreement Finance Financial market Financial market participants Corporate · Personal Public · Regulation Banking Fractional-reserve · Full-reserve Free banking · Islamic banking Deposit insurance view • talk • edit • project Fiscal policy refers to government attempts to influence the direction of the economy through changes in government taxes, or through some spending Fiscal policy can be contrasted with the other main type of economic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money. The two main instruments of fiscal policy are government spending and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy: Aggregate demand and the level of economic activity; The pattern of resource allocation; The distribution of income.
Fiscal policy refers to the overall effect of the budget outcome on economic activity. The three possible stances of fiscal policy are neutral, expansionary and contractionary: A neutral stance of fiscal policy implies a balanced budget where G = T (Government spending = Tax revenue). Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity. An expansionary stance of fiscal policy involves a net increase in government spending (G > T) through rises in government spending or a fall in taxation revenue or a combination of the two. This will lead to a larger budget deficit or a smaller budget surplus than the government previously had, or a deficit if the government previously had a balanced budget. Expansionary fiscal policy is usually associated with a budget deficit. | ||||
|