GDP and Fiscal Policy Essay

698 Words3 Pages
The gross domestic product (GDP) is an essential component of measuring business cycles. The most universal description of a recession is two uninterrupted quarterly declines within the GDP, which is basically the totality of every good and service that a country produces (Shenk, 2008). This description may be deemed as one-dimensional due to the fact that GDP is a measurement of the national economic performance based on a sole economic statistic. By examining just one component of the economic activities, an assessment is determined based on the entire economy. Therefore, GDP is a critical gauge. Nonetheless, it has the capacity to foster a misleading conclusion. A more intricate characterization of a recession has been stated by the…show more content…
Appropriate government bodies make the determination of national fiscal policies. Occasionally there are involuntary economic establishments and every now and then a discretionary fiscal policy is necessary. These elements are established by the government bodies, which are predominately the President or Congress. While economic activities rise and fall; both taxes and fiscal expenditures involuntarily act in response in ways that even out the economy. For instance, during an economic deceleration, the government’s spending on benefits to the unemployed elevates automatically while the rate of unemployment increases. This spending increase is automatic in that it does not entail unequivocal proceedings by the President or Congress. Likewise, payments of tax decline automatically as the economy enters a recession (Shenk, 2008). In addition to the fiscal policy’s automatic reactions, governments have the capacity to establish discretionary fiscal modifications in order to combat an economic downturn. For instance, the stimulus package and bailouts in which Congress recently approved is a great case in point of the discretionary fiscal policy.

Fiscal policies may potentially have a remarkable impact on both the production and employment of a country. Expansionary fiscal policy seeks to enhance both an economy’s demand and output. They do this through enhanced governmental expenditures, or through the reductions of tax which
Get Access