Fiscal policy is when the government uses spending and taxes to help control the economy. The main goals are to keep the economy stable, help it grow, reduce unemployment, and keep prices from getting too high (which is called inflation). Here are the main things that make up fiscal policy:
Government Spending: This is money the government spends on things like roads, schools, and healthcare. For example, if the government spends an extra 1.5 trillion. This shows how spending money can have more impact than the amount spent.
Taxation: Changing tax rates can affect how much money people have to spend. If personal income taxes go down by 1%, people are likely to spend about 0.5% more.
Transfer Payments: These are programs that help people in need, like unemployment benefits and food assistance. When the economy is doing poorly, these payments help boost demand. For instance, if transfer payments grow by 150 billion.
Budget Deficits and Surpluses: Keeping track of budget deficits (when spending is more than income) and surpluses (when income is more than spending) is important for the economy’s health. In 2023, the U.S. national budget deficit was expected to be $1.4 trillion. This shows why managing debt is so important.
In short, effective fiscal policy uses these tools to help the economy stay strong and stable.
Fiscal policy is when the government uses spending and taxes to help control the economy. The main goals are to keep the economy stable, help it grow, reduce unemployment, and keep prices from getting too high (which is called inflation). Here are the main things that make up fiscal policy:
Government Spending: This is money the government spends on things like roads, schools, and healthcare. For example, if the government spends an extra 1.5 trillion. This shows how spending money can have more impact than the amount spent.
Taxation: Changing tax rates can affect how much money people have to spend. If personal income taxes go down by 1%, people are likely to spend about 0.5% more.
Transfer Payments: These are programs that help people in need, like unemployment benefits and food assistance. When the economy is doing poorly, these payments help boost demand. For instance, if transfer payments grow by 150 billion.
Budget Deficits and Surpluses: Keeping track of budget deficits (when spending is more than income) and surpluses (when income is more than spending) is important for the economy’s health. In 2023, the U.S. national budget deficit was expected to be $1.4 trillion. This shows why managing debt is so important.
In short, effective fiscal policy uses these tools to help the economy stay strong and stable.