Again, it helps in overcoming the inefficiencies of the market system in the allocation of economic resources. It also helps in smoothing out cyclical fluctuations in the economy and ensures a high level of employment and price stability. In 19th Century governments follow laissez faire economic policies & limit their role only to defending aggression and maintaining law and order. The size of government expenditure was very small during those days. It was in the early 20th Century that John Maynard Keynes came with the idea of advocating the role of government expenditure in determining the level and distribution of income.
The two main instruments of fiscal policy are government taxation and government expenditure. It can also be seen as government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Impact of Fiscal Policy on Manufacturing Sector Output in recent time, various authors have suggested in the literature that fiscal policy has an important role in the growth of Nigerian economy through manufacturing sector output and that high growth rates are found in the economy where the manufacturing sector share in GDP is increasing.
The data used spanned 115 market economies. He found out that government expenditure to have a positive externality to growth particularly on least developed countries but total government spending to have a negative effect on growth. Cooray (2009) found out that both the size and quality of government are associated with economic
That's because legislators knew they must stop the worst recession since the Great Depression. Fiscal Policy vs. Monetary Policy Monetary policy is when a nation's central bank changes the money supply. It increases it with expansionary monetary policy and decreases it with contractionary monetary policy. It has many tools it can use, but it primarily relies on raising or lowering the fed funds rate. This benchmark rates then guides all other interest rates.
A nation 's economic performance depends on many factors, such as capital accumulation (physical and human capital), technological progress, institutions and population growth (Ben eta al, 2001 and P.Todaro & C.Smith, 2012). Another extremely important factor affecting economic growth is the set of macroeconomic policies of the economy. The three major types of macroeconomic policies are fiscal, foreign exchange and monetary policies. Fiscal policy concerned on government spending and taxation which is linked to government expenditure plan and taxation structure of an economy (Black, Calitz, Steenekamp, 2013 and Ben, and Andrew, 2001).Studying the impact of fiscal policy on one country’s macro economy is very decisive to have a sound macroeconomic
Numerous economists question the classical form of monetarism and instead give an alternative to what they presume would serve countries well. Keynesianism Keynesianism theory of economy, on the other hand, emphasizes that fiscal policy can play a significant role in stabilizing the economy (Kindleberger, 2013:14). Unlike in monetarism, Keynesianism advocates for higher government spending; especially during a recession, as this can help recover the economy quicker. Keynesians argue that it is ill advised for governments to wait for markets to clear, as classical economic theory suggests. Principles of Keynesianism and its Links to the
Whether monetary policy influences the stock market performance has become an issue of continuous debate and controversy in financial literature. Though, monetary policies are implemented through financial institutions of which the stock market is one. The high liquidity generated on daily basis at the stock exchange market has poised the central bank and monetary policy managers to believe that the capital market is an appropriate avenue for monetary policy implementation in order to bring stability in the economy. Whether this believe is correct, has also become a financial assets by adjusting too, to many economic conditions and government and matter of importance to financial researchers can only be supported by an empirical research finding to possibly establish how equity prices, market capitalization, and other determinants of stock market performance react to changes in interest rate , exchange rate and money supply. Similarly, it is arguable that monetary policy should exert significant influence on stock market.
Macroeconomics Internal Assessment Keigo Tanaka This article is about China implementing an expansionary fiscal policy, decreasing the tax but mainly increasing government spendings to improve livelihoods and attempt economic growth. Fiscal policy refers to increasing or decreasing tax and government spending according to it being expansionary or contractionary, affecting aggregate demand. In this case it is expansionary, as China is attempting to open up the economy. Unemployment refers to the situation where individuals are actively seeking but unable to find work. Lastly, although there are various aspects in the term, economic growth refers to an increase in real GDP over the previous year.
Found the new raw materials, for example use the natural gas to instead oil. 5. Innovative new technological, like the internet change can help economic growth. The government has some policies to control the economic growth: supply side policy, monetary policy and fiscal policy. The supply side policy is a range of measure to rise aggregate supply, use this way to increase productivity of the economy, it means use increase the production’s quality or quantity like land, labour, capital and so on to increase the economic growth.
This choice is a fundamental challenge for economic policy because these taxes have a major economic and social impact. Tax policy is indeed a powerful policy lever through the establishment of incentive mechanisms and income redistribution. One of the main tools of fiscal policy is taxation. Lymer and Oats, (2007) defined the tax as a monetary payment imposed on natural or legal persons by authority, to final and binding, without any counterpart. This perception of unrequited tax constitutes the essential feature of the tax.