Indian Fiscal Policy Impacts

Deficit spending refers to government spending that exceeds federal income and taxes over a period of time. The government can increase borrowing to obtain money from taxes or from foreign governments. The money that is borrowed is then put back into the economy through government spending. While deficit spending will increase government debt, it is believed to stimulate the economy to end a recession. Deficit spending has several advantages and disadvantages to government borrowing.

In addition, the government spending is one of the components of aggregate demand, consequently, lower GDP. In a demand-deficient recession, consumption and investment tend to decrease due to lower income and revenue, the (X-M) component tends to level off or worsen in short run, which makes government spending an essential device to stimulate the economy. Therefore a decrease in the government spending will cause an even deeper recession and a larger budget deficit.

Another form of macroeconomic policy is fiscal policy, which involves the use of the Commonwealth Government’s budget in order to achieve the Government economic objectives. By varying the amount of government spending and revenue, the government can effectively alter the level of economic activity, which in turn will influence economic growth, inflation, unemployment and the external indicators of the economy.

This helped people survive the difficulties and tragedies that were happening before them and it made life a little bit easier than it already was. Before the New Deal people who didn’t have a job couldn’t make money, which then meant that they wouldn’t be able to provide food and other resources for their families. Now that people are being provided with jobs they are able to make money and were now able to provide and were able to begin reconstructing their lives. The more people who have jobs, the more people survive and the more our society grows in the right direction(Source G). This connects to the claim because without The New Deal then the unemployed wouldn’t have jobs. If The New Deal wasn’t created, then there would so many people on the streets dying of no food, no shelter, and other reasons. If this happened then our society would only decrease and it would soon enough hit rock

What is Fiscal Policy?“It refers to the central government's policy on lowering or raising taxes or increasing or decreasing public expenditure in order to stimulate or depress aggregate demand”(Bloomsbury Business Library). This means the ability

The New Deal allowed the government to create new programs that either provided relief or recovery, or were a reform for the problems during that time. In the time of an economic crisis, the government should get involved and provide a safety net for Americans. Government involvement is necessary to work towards a resolution, but too much involvement will put too much power in the Government’s hands, which could lead to a government type we do not want in America. During economic busts, the government should use the programs that are currently in place to provide a safety net and support Americans. However, during economic booms Americans should provide for themselves and not be reliant on the government to provide for them.

To balance the budget, the government should increase taxes and decrease expenditures to fight inflation.

In response to the Great Depression, many of the programs introduced by FDR were effective because they helped fix the economy by using federal intervention and redirecting the economy’s cash flow to help decrease the amount of unemployment.

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

An open market purchase of government securities  An increase in the discount rate  A cut in the required reserve ratio 14. Deficits may be desirable in the short run if they  help to stabilize the economy when the economy falls below potential output  increase savings necessary for future investment and growth  increase savings necessary for future consumption and demand  help to stabilize the economy when the economy is above potential output 15. If for a country, the quantity of its currency demanded exceeds the quantity supplied, then there is a  balance of payments surplus 

Fiscal Policy can be explained in many ways, for example. Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy—on such macroeconomic variables as GNP and unemployment and inflation.

What is deficit spending and why is it done. Deficit spending by the government is when the government spends more money than it is raising in taxes or generating from other sources over a given period. The main reasons for the government to do something like this would be to stimulate growth and stability in the economy. During periods of deficit spending the government must carefully consider the added debt and the intended effects of their spending plan. The tremendous borrowing/spending power of the United States government can have either a positive or negative effect in both the private and public sector.

An advantage to deficit spending is when the government steps in with tax cuts and lower interest rates for businesses so they can invest in hiring new employees which in turn the unemployment rate goes down and consumers start spending their money. Another advantage to deficit spending is when the government gives tax rebates to consumers, which stimulates the economy as well. Stephanie Kelton, from New Economic Perspectives, says consumer spending makes up 70% of the GDP. The other 30% is made up of Investment Spending, Government Spending, and Net Exports. How can the other 30% make up for the consumer’s 70%? This is why it is advantageous for deficit spending to keep the economy thriving. Unfortunately, there are always disadvantages that come

In this way, the government is able to maintain the balance of the budget, which is one of the factors of economic stability.

Deficit spending in an economy has its own advantages and disadvantages. The advantages of deficit spending are as follows: