Fiscal Policy Role and Development in Bulgaria and Eu

An indication of the overall impact of fiscal policy (FP) on the state of the economy is the fiscal outcome. The three possible outcomes include a fiscal surplus (positive balance where government expenditure exceeds revenue), fiscal deficit (a negative balance where government revenue exceeds expenditure), and fiscal balance (a zero balance where total government revenue equals expenditure). The main aim of fiscal policy is to achieve fiscal balance, on average, over the course of the economic cycle. The Howard Government targeted a fiscal surplus of 1% of GDP, whereas the current Rudd Government has raised this target to 1.5% of GDP,

Taxation, the amount of money we pay every year and of course the government is a big spender has a lot of assets at its disposal to influence the economy. The government is a very large entity and controls a lot of money. Fiscal policy is more effective when trying to stimulate the economic growth rather than trying to slow down an economy that is overheating. The goal of fiscal policy is too accomplished by decreasing aggregate expenditures and aggregate demand through a decrease in government spending. Fiscal policy pros are; it can build up the operation electronic stabilizers. Well-timed fiscal stabilization together with automatic stabilizers can have an impact on the level of aggregate expenditure and activity in the economy. Fiscal policy can be picky by attempting specific category of the economy. For example, the government can be focused to concentrate education, housing, health or any specific industry area. Fiscal policy controls a spending tap. Fiscal policy can have a forceful effect if used in bankruptcy, because the government can open a spending tap to increase the level of aggregate

Fiscal policies, if used efficiently, can be extremely effective and helpful to the economy. However, many pros and cons are tied to this method. Firstly, fiscal policies can be effective because they can focus spending to precise purposes.1 Therefore, the money that the government spends can be used on the things that would benefit the economy the most. Additionally, the government can reduce negative externalities with the use of taxes.1 An example of this would be taxing things that have a negative impact on the environment, such as companies producing an immense amount of pollution.1 Additionally, the government can also tax companies that are using too much of a limited resource.1 By doing this, the government not only can use the money gained from taxing to help the economy, but they would be reducing externalities such as these in order to help the country. Lastly, the effects of a fiscal period are much more immediate and quicker in comparison to a monetary policy,1 This means that the recessionary

The fiscal policies refer to the way in which the government affects those activities in the economy of a country. The major common fiscal policies that occur in the economy are the government expenditure and the level of taxation and they are usually advocated by the Central Bank of the country. The fiscal policies are a strategy that relates to the monetary policies that are used by the central bank of a country to control level of money supply in the country. The fiscal policies have a lot of influence on the money supply in the economy.

First of all, expansionary fiscal policy is passed to expand the money supply of an economy to encourage economic prosperity, growth, and combat inflation. Inflation is described as the overall increase of prices in an economy or country. There are several ways an

Fiscal policy is used by the federal government to direct the economy. Fiscal policy can affect borrowing and the size of an organization’s tax bill. The amount of spending that the government makes directly affects the economy. The spending can also enhance growth within the economy by increasing funds available for organizations to fund capital expenditures.

A form of expansionary policy is fiscal policy, which portrays itself in tax cuts, transfer payments, rebates, and increased government spending. Macroeconomists were more against fiscal policy than monetary expansion. Keynesian economists gave fiscal policy a pivotal role in combating recessions. Monetarists contested saying the fiscal policy would be ineffective if the money supply remained constant, as a result, this view point became rare. Now macroeconomists subscribe to the idea that fiscal policy, and monetary policy can aggregate demand curve. They also concur that government should not try to proportion the budget no matter what state the economy is in. They agree that the budget acts as a balancing option to keep the economy stable.

Fiscal policy is a means by which our government regulates its level of spending and tax rates to observe and impact a country’s economy. It is a budget strategy through which a central bank influences the nation’s money source. The positive and negative consequences of fiscal policy include shortage, surplus, and debt. All have fluctuating effects on how individuals view the economy, make subjective decisions, and react to unsettling changes. Individuals should consider focusing on making independent decisions that provide short and long-term profits in uncertain periods. The decisions made by individuals have lasting effects on the economy when spending increases and reinvestments in the economy are established.

net spending by the public. This raises demand for products and employment. It must be noted here that only change in net spending can positively or negatively. If the government incurred a deficit of 15% for 2 consecutive years it would be considered a neutral fiscal policy. If it was a deficit of 15% last year and 10% this year it would be a contractionary fiscal policy but if it ran a surplus of 15% last year and 10% this year it would be called an expansionary fiscal policy ("Economic Effects of Fiscal Policy", 2017.

In 2007-2009 the recession in the U.S economy was long and deep. At some point the economic activity was reasonable in 2008, but the economy overtaken by a financial problems that could improve the economic weaknesses. The economy was recovered in mid of 2009. GDP has been in a stable path since then, although the jump has been unequal and slowed down in 2011. The high rate of long term unemployment and the labor rate has decreased the labor market. In the paragraphs below, I’m going to define the fiscal policy and explain how it could resolve the economic paths in the short term long term.

Macroeconomic policies are used to maintain and smooth out the fluctuation of the business cycle to keep the growth rate constant. There are two types of macroeconomic policy, Fiscal and Monitary. Fiscal Policy is a macro policy that allows the Government to increase or decrease the amount of economic growth by either increasing or reducing the level of taxation and Government spending. The annual budget is an example of fiscal policy. Fiscal policy takes a long time to implement as it can only be changed every 12 months but goes into effect immediately.

The most effective policy is the fiscal policy. Before I explain why the fiscal policy is more effective, I need to explain the differences between the two policies. First, I will be explaining the monetary policy. According to the website “The Economic Times,” it clearly explains that the monetary policy is made up of actions of a central bank, regulatory committee, and a currency board. They are involved in determining the size and the interest rate of money supply. The policy maintained actions such as buying or selling government bonds and change the amount of money banks are required to keep in the bank. The federal reserves are in charge of the monetary policy. There are two types of monetary policy, which are called contractionary and

Many economists have been of the opinion that fiscal policy is not only ineffective, but can even be harmful in the long-run. Fiscal policy includes all of the interventions of a responsible economic policy concerning public spending and taxes that are made to influence the level of aggregate demand of the economy(Corsetti& Müller, 2012). An expansionary fiscal policy is aimed at raising the equilibrium level of income, while a restrictive fiscal policy is normally aimed at containing inflation caused by excess aggregate demand or to contain an excessive deficit of the state budget. Keynesian theory argues that the macroeconomic effects of fiscal policy depend crucially both on the way in which it is conducted (change in spending or tax variations), and the way the public sector’s borrowing requirements (excess spending on tax revenues) are financed(Davig&Leeper, 2011). Given the fact that taxes and government expenditures take a prolonged time period for materialization, fiscal policy inculcates fiscal biases, and relatively long decisional lags.

So when the government decides what goods and services they want to purchase; what payments it wants to distribute; what taxes it’s going to collect or cut, then they are engaging in fiscal policy. Fiscal policy directly affects the budget and the deficit. Expansionary fiscal policy is when spending is higher than the revenue or the budget is in deficit. Expansionary fiscal policy raises the aggregate demand when the government increases purchases and keeps taxes constant and when they cut taxes and increase transfer payments giving households larger disposable incomes. Bottom line, these actions increase consumption therefore raising aggregate demand. (Turnovsky, 2004) Capital, labor, and technology determine a natural rate of output, about which fiscal policies can cause temporary fluctuations in the economy.

Keynesian economists believe that growth-oriented, or expansionary, fiscal policy is necessary in a recession because private sector investing and consumption drops. Expansionary fiscal policy can directly create jobs and economic activity by injecting money into the economy through either government spending or a reduction in taxes. To do this, the government must often spend more that current revenues from taxes. In this case, government deficit spending is necessary to maintain a reasonable level of economic activity. This is where monetary policy comes in. Monetary policy attempts to create the money needed by the federal government without increasing inflation as a result of increasing the money supply through securities sales.