Objective of fiscal policy, Managerial Economics

Objective of Fiscal Policy

As an instrument of macroeconomic policy, the goals of fiscal policy are likely to be different in different countries and in the same country in different situations. For example, while in a developed economy operating at full and near full employment level the goal of fiscal policy should be the maintenance of full employment in a developing economy the main concern of fiscal policy has to economic growth with stability and reduction in the economic inequalities.

Economists now generally agree that fiscal policy should be employed to achieve full employment and stability in the economy. Before the great depression of the thirties, by economic stability was largely understood the stability of the general price level. The severity of the depression focused attention on the need to remove unemployment and to employ fiscal policy for this purpose. The employment Act of 1946 in the USA stated that it was the responsibility of the federal Government to use all possible means including fiscal policy, to promote maximum employment, production and purchasing power in the economy.

After the second world war inflation has become a worldwide problem. Consequently, economic stabilisation has come to be widely defined so as to include the elimination of inflationary pressures in the economy. This means that the achievement of full employment and price stability should be simultaneously attempted through the instrument of fiscal policy. At times however, both these goals may be difficult to achieve as these might be mutually inconsistent. An economy which wants to achieve full employment must accept moderate price rise unless it resorts to price control, rationing and wage freeze policies.

Posted Date: 12/1/2012 5:32:32 AM | Location : United States







Related Discussions:- Objective of fiscal policy, Assignment Help, Ask Question on Objective of fiscal policy, Get Answer, Expert's Help, Objective of fiscal policy Discussions

Write discussion on Objective of fiscal policy
Your posts are moderated
Related Questions
Keynes Theory Keynes views about trade cycle entitled notes on the trade cycle of his classic the general theory of employment interest and money published in 1936. Although K

Gains From International Trade The gains from International trade are to make the participating countries better of than they would have otherwise been.   This will be the res

I was given a few spreadsheets and asked to do an income, balance and cash flow statement. It''s a lot of info and I have no idea what I''m doing

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Open Market Operations The Central Bank holds government securities.  It can sell some of these, or buy more, on the open market, buying or selling through a stock exchange or

Suppose a firm's budget were large enough to employ 100 units of either labor or capital, the cost of a unit of labor being the same as a unit of capital. The production function i

POPULATION SIZE AND DEMOGRAPHIC TRENDS a.      Changes in Population The people of a country are its consumers.  They provide the labour force for production.  A study of

Q. Characteristics of perfect competition market? Following are the characteristics of perfect competition market:  • Large Number of Sellers andBuyers: As there are a lar

The  fez is the typical Arabic hat in the shape of a short red cylinder. Historians believe it was manufactured in the city of Fes, in Morocco, during the 17 th century. It has be