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Fiscal policy is the use of government spending and taxation to influence the economy A reassessment of fiscal policy is taking place, stressing its greater role in fostering sustainable and inclusive growth and smoothing the economic cycle Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty

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Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation. A greater role for fiscal policy fiscal policy has recently gained prominence, both in public debate and in governments’ policy agendas (figure 1.1) Fiscal policy aims to control inflation, encourage investments, reduce disparities, and stabilize prices through government spending and taxation.

Role of fiscal policy in economic development of under developed countries

The various tools of fiscal policy such as budget, taxation, public expenditure, public works and public debt can go a long way for maintaining full employment without inflationary and deflationary forces in underdeveloped economies. These models find that active fiscal policy can contribute to macroeconomic stability and welfare by reducing the frequency of hitting the zlb Fiscal policy can also share the stabilisation role with monetary policy, whose effectiveness under the zlb is much reduced. Find out its definition, purpose, objectives, types, advantages, and challenges

Explore the key aspects of economic management.