The Attempts of Influencing the Direction of the Economy

The Attempts of Influencing the Direction of the Economy

Public finance

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Finance and Taxation
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Australia • British Virgin Islands
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In economics, Fiscal policy refers to government attempts to influence the direction of the economy through changes in government taxes, or through some spending (fiscal allowances). It is the use of government spending and revenue collection to influence the economy.[1]

Fiscal policy can be contrasted with the other main type of economic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money. The two main instruments of fiscal policy are government spending and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy:

* Aggregate demand and the level of economic activity;
* The pattern of resource allocation;
* The distribution of income.

Fiscal policy refers to the overall effect of the budget outcome on economic activity. The three possible stances of...

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