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Two Types Of Fiscal Policy

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Fiscal policy is the means by which a government adjusts its spending levels and tax rates to check and influence economy of a nation. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. These two policies are used in various combinations to direct economic goals of a country. Here we look at how fiscal policy works, how it must be monitored and how its implementation may affect different people in an economy. There are two types of fiscal policy. The first, and most widely-used, is expansionary. It stimulates economic growth. It's most critical at the contraction phase of the business cycle. The second type, contractionary fiscal policy, is rarely used. That's because its goal is to …show more content…

Empirical evidence from the developed and developing economies has shown that fiscal and monetary policies have the capacity to influence the entire economy if it is well managed. The implication of this finding is that if government did not increase public expenditure and its implementation, X’s manufacturing sector output will not generate a corresponding increase in the growth of country’s economy. It is the recommendation of researcher that the expansionary fiscal policies should be encouraged as they play vital role for the growth of the manufacturing sector output in X; that fiscal policy should be given more priority attention towards the manufacturing sector by increasing the level of budget implementation, which will enhance aggregate spending in the economy; and consistent government implementation will contribute to the increase performance of manufacturing …show more content…

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.

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