Fiscal Policy

FISCAL POLICY

Exselsa Cartwright, Clarence Allen, Jarred Hodges, and Martha Guerrero

ECO/372

September 20, 2014

Introduction

Any nation’s fiscal policies are determined by Government authorities’ only to, stabilize the economy the Government bodies usually the President of the country or the Congress to set the fiscal policies. For instance, the government spending usually increases when the economy is slowing down and the increasing government expenditures will lead to increase the autonomous investment and reduce the unemployment rates in the economy. The same way tax payments received by the government will decrease automatically when the country is heading towards the recession.

“Moreover, to the automatic responses of fiscal policy, governments may make discretionary fiscal changes in the face to an economic downturn” (Krugman, et.al. 2009).

The fiscal policy of the government can be divided into two; one is expansionary fiscal policy and the other one contractionary fiscal policy. An expansionary fiscal policy includes will be used to close the recessionary gap real gross domestic product is less than potential GDP and contractionary policy will be used to close the inflationary gap potential GDP is less than the real GDP. This paper will examine the fiscal policies and its influences on the taxpayers, unemployed individuals, future Social Security, Medicare users, and Phoenix university student, United State’s financial on an international level and the country’s Exports and Imports.

Taxpayers and Unemployed Individuals

There are different types of taxes used in economics which include revenue tax, company tax, sales tax, and excise tax. The expansionary fiscal policy involves decreasing the tax rate to stimulate the economy. This policy will help both the taxpayers, and unemployed individuals to gain more. For instance, the cutback in taxes corporate tax, sales tax, excise tax allow business people to earn more economic profits and this will...