INTRODUCTIONTO FISCAL POLICY.
MEANING:- Fiscal policy is an indispensable tool to regulate economic activity. It is also known as the policy through which government manages its revenue and expenditure programmes to produce desirable effects. . It aims to monitor and stabilise th e economy. It alters the tax rates, public expenditure and other tools to maintain stability in an economy. It avoids any undesirabile ffects on growth of economyx.
TRADITIONALVIEWS: . Believed in LAISSEZ-FAIRE. They intended to reduce the size of public sector. They saw government expenditure as hindrance to market mechanism They viewed taxes as unproductive expenditures which may divert the resources. . Government should spend and tax least. Balanced budget. . Productive expenditures
MODERNVIEWS:- Denied classical views. Government intervention required According to keynes- In advanced economyas income increases) propepensity to consume decrease,propensity to save increases. This creates disequilibrium in economy due to this gap (low consumption and high saving) Here government needs to interfere to boost demand by raising public expenditure. .
KEYNESVIEWS:- Government intervention through fiscal instruments. Recognised fiscal policy as an instrument of economic stability. Fiscal policy should entail progressive taxation, increased public spending, deficit financing. Grant of subsidies and social insurance programmes. Favoured expansionary effect of public expenditure.
I am Saurav Kumar;I hail from Vaishali, Bihar. I am pursuing graduation in Economics from Banaras Hindu University.I am in 3rd year.I have q