FISCAL POLICY and EMI IN ECONOMY
Fiscal Policy When governments decide upon their spending and taxation policies for an upcoming period, it has a significant impact on the country’s economic performance and on us as individuals. It affects our aggregate demands for goods and services, employment, inflation and long-term economic growth. The term ‘fiscal policy’ refers to this use of government spending and taxation, and its impacts on the economy. In economic terms, there are two main types: Expansionary fiscal policy : Designed to boost the economy, it is commonly used in times of high unemployment and recession. Governments tend to lower taxes and increase spending, with the aim to stimulate the economy and ensure consumers' purchasing power does not weaken. Contractionary fiscal policy : As the name suggests, this type of policy is designed to shrink economic growth in case of high inflation. To achieve this, governments tend to increase taxes and reduce their spending. What i...