Question

The debate is still going on in the country whether Fiscal policy is relevant. In at least 3 paragraphs make a case for the use of fiscal policy showing the rational for using it.

Answer 1

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. here government uses several tools like taxation, spending, debt, subsidy etc to influence the economy. as we have learnt from our lessens the economy is not always self correcting in its nature. great depression of 1930s is a great example which shows why fiscal policy is important for the economy.

in situation like recession and depression when business persons have low consumer confidence and low investment in the economy, expansionary fiscal policy boosts the economy by increasing moneysuply in the economy with the help of reduction of tax and increasing government spending.

in situations like high fiscal and current account deficit in the economy, fiscal policy comes to the rescue by cutting government expenditure. in an economy where unemployment is a big problem government investment helps to reduce it by creating employment oportunity through government spending and it is also a part of fiscal policy. so fiscal policy plays a big role in the economy.