Fiscal policy

Fiscal policy

This involves government expectation, raising taxation, revenue, and managing national debt to improve economic performance

Fiscal policy is announced once a year in the "budget"

Budget deficit: this occurs when government expenditure is greater than government taxation revenue in the budget year

Fiscal policy will cause the money invested to multiply. "One person's expenditure is another person's income"

The multiplier is the change in real GDP when there is a change in an injection

Limitations of fiscal policy

• Budget occurs yearly and it is difficult to change over time.
• Low credit rating
• Increased interest
• Inflation
• Size of multiplier (determined by savings, taxation, and imports)