Fiscal policy is a policy used by government to collect revenue and expenditure and it helps to influence economy. Revenue is generated from the taxes whether those taxes are direct or indirect taxes. Fiscal policy alludes to the government’s scheme of taxation, expenditure and various financial operations, to attain the objectives of the economy. Fiscal policy refers to that policy which is administered by Ministry of Finance. Fiscal policy is changed every year according to government rules and regulations. It is an instrument used by government to maintain equilibrium between government receipts by different sources and spending on different projects.
Types of FISCAL Policy
- Expansionary Fiscal Policy: Expansionary fiscal policy refers to that policy in which government reduces taxes and increases spending on public.
- Contractionary Fiscal Policy: Contractionary Fiscal Policy refers to that policy in which government increases taxes and reduces public expenditure.
Objectives of Fiscal Policy
- It provides employment opportunity: Government helps public by providing them employment opportunity to unemployed people which helps in development of economy. Government fix some amount for generation of employment for unemployed people.
- Increase economy development: Fiscal policy is a policy used by government to collect revenue and expenditure and it helps to influence economy.
- Maintain price level: Fiscal policy also helps government to maintain price level which helps in development of economy.
- Equilibrium in BOP ( Balance of payment): Fiscal policy also helps to maintain equilibrium to Balance of Payment by charging direct or indirect taxes and generation of revenue.
- Development of country: Every country has to make fiscal policy which maintain equilibrium and develop economy. With this policy , all work work is done govt. planning and proper use of fund for development functions .
Techniques used in Fiscal Policy are:
- Taxation policy
- Government Expenditure policy
- Deficit Financing Policy
- Public Debt Policy
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