• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

How can the government use fiscal policy to achieve its objectives?

Extracts from this document...

Introduction

Principles of Macroeconomics An Unpredictable Economic Future During the last decades the economies of all the countries of the world have been undergoing expansions and recessions. The problem is that the future of the economy cannot be predicted therefore governments will have to adopt their tools and prepare to face incoming recessions. Some of the main tools are fiscal policies. What are fiscal policies? How does the government use the fiscal policies to achieve their objectives? Every government has a budget which they use for many purposes such as to finance, stabilize the economy and encourage its development. The budget himself is calculated through the receipts (the income the government gathers through taxes mainly) ...read more.

Middle

The same applies for the discretionary fiscal policy, but this one has to be initiated by the government. Often the fiscal policies will have a supply side effect as taxes will discourage the people to work which will lower the potential GDP and also people will start to save more and their consumption will decrease, following a decrease in the real GDP. But how have some governments of the world used fiscal policies to achieve their objectives over the years? The Albanian government adopted the policy of privatization. They say that one day Sali Berisha (Prime Minister of Albania) woke up and decided to privatize the banking and electrical system. This was planned bt the government therefore it was a discretionary policy. ...read more.

Conclusion

Despite this in the last year the Albanian economy has experienced high economic growth and this is expected to keep on going for a long time along with low inflation and stable exchange rates. The point for this policy has always been to have a steady economic growth, keep a low budget deficit and take international small loans only and they seem to have everything under control so far. Fiscal policies are one of the most important tools to regulate the economy and stabilize it. They can be either automatic or discretionary. Albania undertook the path of privatization and so far it all sorted out well for them. The only visual disadvantage the fiscal policies have is their supply-side effect which lowers both potential and real GDP. In my opinion the economy can never be self-regulated and work at a full-employment level, therefore the fiscal policies are vital. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. What are the government objectives? Explain why each is important and how the government ...

    (The total demand for all goods and services from all sources in the economy) These policies will encourage firms to expand output and consequently take on more labour. However, care must be taken not to overdo expansionary policies, lest growth leads to pressure on resources and accelerating inflation, which would only worsen the problem and severity of unemployment.

  2. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    This suggests that in an economy, we will not get to the point of full employment. Instead, we can lower the natural rate of unemployment. The natural rate of unemployment is the proportion of the workforce which chooses voluntarily to remain unemployed when the labour market is in equilibrium.

  1. Comparing the effects of immigration on GDP in Malaysia, Japan and South Africa.

    Immigrants with native English language facility-not just from the West but also from places like Ghana and the Philippines-would bring improved linguistic competence and a more diverse classroom environment. 8.0 Disadvantages of Immigration 8.1 Social There are quite a number of social disadvantages of having immigrants in the country.

  2. the limitations of Fiscal Policy

    Eliminate Recessionary Gap in the Short Run Furthermore, with the current government short run goal to fight recession in the economy, fiscal policy could not effectively counter the recessionary gap. Therefore, the government used monetary policy to eliminate the recessionary gap in the short run.

  1. To what extent does the government budget/statement reflect current government priorities?

    looking at the government's main aims and objectives and comparing whether the money they are spending on each one is reflecting that; for example if in public order and safety the government wanted to initiate huge crackdown on underage drinkers and vandalism then surely the money spent in that area would be increased dramatically.

  2. Budget 2004-05 and Economic Analysis of Pakistan

    Tax Revenue (CBR) 510000 510000 580000 Direct Taxes 161100 161500 181900 Income Tax 154200 154638 174362 Capital Value Tax 700 600 650 W. W. Tax 6200 6262 6888 Indirect Taxes 348900 348500 398100 Customs Duties 78100 86600 103200 Sales Tax 223100 218400 249200 Federal Excise 47700 43500 45700 b )

  1. Bangladesh. Most government aim for full employment and stable prices. Which of those two ...

    The textile industry in particular has provide large job opportunity for people and especially for women as traditionally Bangladeshis are skilled at the trade of weaving, sewing and designing. However, workers do still need a certain level of training to make modern machineries work.

  2. Demonstrate how an appropriate use of fiscal policy can achieve a target level of ...

    The ways these work is that if national income rises then so too do tax revenues, this in turn means that government expenditure will decrease, which therefore means an increase in the level of national income. The national level of income will vary depending on the amount taxes change with income.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work