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Fiscal Policy

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Fiscal Policy 1. Meaning of Fiscal policy
Fiscal policy refers to the way government utilizes taxation and spending with the aim of influencing the overall economy. Usually, the government use fiscal policy to ensure strong and sustainable economic growth and reduce poverty (Horton & El-Ganainy, 2009). The function and objectives of fiscal policy have increasingly gained popularity in the current financial crisis as most governments have stepped in to promote financial systems, jump-start growth, and solve the implications of the crisis on vulnerable groups. The main goals of fiscal policy include * Maintain low rate of inflation * Stimulate economic growth especially during economic recession * Typically, fiscal policy works to stabilize economic growth, bust economic cycle and avoid a boom 1. Responsibility for fiscal policy
The executive (the president) and the Congress are responsible for fiscal policy 2. Difference between fiscal policy and monetary policy
Fiscal policy is concerned with changes in taxation and changes in federal government purchases while monetary tool is involve shifts in supply of money and in the interest rates. Both the monetary and fiscal instruments are aimed to achieve favorable macroeconomic policy goals. When policymakers aim to affect the economy, they manipulate the fiscal policy and the monetary policy. The central of bank any country indirectly influences activity by changing the quantity of money under circulation through adjusting the interest rates, sale of government bonds and securities, foreign exchanges and the bank reserve requirements (McQuain, 2012). The government also influences the economy by changing the types and the rates of taxes, the composition and extends of government expenditure, and the level and form of borrowing. 3. Difference between federal purchases and federal

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