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Effect Of A Fiscal Policy With Budget Deficit On Economic Growth 1 .edited

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Student’s Last Name 1 Student’s Name Professor’s Name Subject DD MM YYYY The fiscal policy entails strategies by which the government influences economic growth to achieve the desired output. It works like the monetary policy, which is implemented by the Federal Reserve, which is the central bank of the United States. The government uses two main tools to implement fiscal policy. It can use tax adjustment or expenditure adjustment Tax adjustment To stimulate economic growth, the government will cut taxes. As a result, investors will be attracted to invest as they will pay less fee. Also, the tax cut will increase the disposable income of consumers as their wages and salaries will be deducted less. As a result, they will have more money to spend. Their purchasing capability will increase as they will be able to afford more goods and services. The aggregate demand will increase. The high demand will increase the prices of goods and services. The high price will attract more production and investment. More goods and services will be produced, and the Gross Domestic Product will increase. More workers will be required, meaning employment opportunities will be created. Expenditure adjustment To stimulate economic growth, the government will increase expenditures. The amount of money circulating in the economy will increase. The high expenditure will increase the disposable income of consumers as more money will get into the hands of the public. Consumers will have more money ...
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