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Cellular Network

In: Business and Management

Submitted By navedshahid
Words 1000
Pages 4
Business Economics II
(Macroeconomics)

Objective of Macroeconomic:
Following are the basic objective of macroeconomics which deals on national basis 1. Output Growth Production 2. Employment stability 3. Price level stability 4. Foreign debts

Definition of Fiscal Policy:
Fiscal policy refers to government policy that attempts to influence direction of the economic through changes in government taxes and some government spending.

e.g. High rate of inflation:
High rate of inflation is occurred by too much aggregate demand in the economic. Government will use deflation fiscal policy. Government will try to influence aggregate demand by reducing its public spending. The Government will spend less on construction of roads, bridges and other public spending thus aggregate demand will fall.
On the other hand, Government may increase in tax rate. An increase in tax rate will take away the extra disposable income out people’s pocket resulting in lower demand.

e.g. Low rate of inflation:
In an economic recession, aggregate demand, output and employment all tend to fall, now the Government wants to increase in the economy. It can attempt to do so by increasing aggregate demand. The Government will increase the public spending resulting in rise in aggregate demand. Government may reduce tax rates so that people have more disposable income to spend and instigate demand in the country.

The three main stances of fiscal policy are: * Neutral fiscal policy is usually undertaken when an economy is in equilibrium. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity. * Expansionary fiscal policy involves government spending exceeding tax revenue, and is usually undertaken during recessions. * Contractionary fiscal policy occurs when government…...

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