Good Morning
Ms. Teetaert and fellow classmates, last week we briefly learned about the
topic of fiscal policy and as a recap I will be further discussing what fiscal
policy is. Fiscal policy is when the government adjusts its spending and taxes
rates to manage a nation’s economy. Fiscal policy consists of making decisions
to balance spending levels and taxes, these decisions are the most important decisions
the federal government has to make since increasing or decreasing one or the
other can greatly affect the economy.
This affects
the economy in the sense that if the government needs money to fix the roads
they would have to increase the taxes to obtain the money, although inceasing
taxes lowers economic activity since with higher taxes, people tend to spend
less. Also with increasing tax rates, it can decrease disposable income since
it takes money out of households. The government also may need to increase
taxes when there is inflation since increasing taxes can lower demand.
Now if the government decides to incease their
spending, it increases economic activity since people would benefit from these
spendings and the tax rates won’t be as high which means that consumers will
have more money to spend and that more money will be left in households. Although,
with a decrease in spending means a decrease in taxes which usually leads to
high demand which lead to high production levels since people are consuming so
much.
How does
this relate to the real world? Fiscal policy relates to the real world in the
sense that the government can either take money out of your pockets or leave it
in there which may lead you to thinking you have more money to spend which either affects us all or some. The decisions
the federal government makes on either increasing taxation or decreasing it
will affect us and the health of the economy.
Work cited
"What Is Fiscal Policy?" Investopedia. N.p., 16
May 2004. Web. 19 Apr. 2015.
"Fiscal Policy." The Canadian Encyclopedia. N.p.,
n.d. Web. 19 Apr. 2015.
Infoplease. Infoplease, n.d. Web. 19 Apr. 2015.
<http://www.infoplease.com/cig/economics/government-unique-situation.html>
