Question

1) Define and explain fiscal policies.

2) Explain what the government budget is and what a budget surplus, budget deficit, and government debt are.

3) Define and explain the relationship between fiscal policies and the government budget.

Answer 1

1. It is policy through which government adjusts their spending and tax rate to monitor, control and affect the national economies. Fiscal policy is followed by government to make necessary adjustment in the economic activities related to demand and supply of goods and services; it also affects tax regulation, government spending on different items. Public debts to channelize the various aspects of an economy.
2. Government budget is statement that shows how government will generate its revenue from different sources and how they will invest on development activities related to different projects and policy designed for social welfare. Government earns its revenue from different types of taxes (direct and indirect) and from other resources which generates good amount of revenue for government.
Budget surplus= total revenue from sources > total expenditure on different items or projects. Means government revenues are higher than their expenditure.
budget deficits = total expenditure on different items or projects > total revenue from sources means government expenditure are higher than their incomes
government debts relates with among of money government borrows from general public , commercial bank or Reserve bank to finance their deficit amount i.e. fall short of during expenditure on different goods and services means when government expenditure are higher than their revenue they borrow money from general public and commercial bank to make the expenses meet to complete their liabilities.
3. government budget and fiscal policy are interrelated when government design fiscal policy in which they decides what is to be done in terms of project of welfare nature they organize finance from government budget this is to be spent on different policy and project to complete them. Through government budget, fiscal policies are carried out to great extent.