Question

thoroughly explain fiscal policy and its relation to the four pillars

Answer 1

Fiscal policy is the policy if the government on the basis of which it decides the spending and the tax rates. Increment and decrement in the tax rates, the government's decision to start a big project are the examples of the fiscal policy. The history of fiscal policy can be traced from the Great Depression of the 1930s when the traditional economics of automatic equilibrium began to fail and J M Keynes advocated the role of government intervention for the stabilisation of the economy. It is therefore also called the Keynesian economics. The very assumption of fiscal policy is that there is no automatic stabilisation in the economy and no full employment.

The four pillars of any good economy are Stabilisation, Innovation, Knowledge, and Industrialisation. For these four pillars, fiscal policy plays an important role. Stabilisation can be achieved through fiscal policy, the spending of governments and other incentives leads to innovation, subsidies and tax cut in education sector leads to spread of knowledge, and government spending and tax incentives help in industrial growth.