Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 13: Fiscal Policy (Limitations of FP (Crowding out effect, size of…
Chapter 13: Fiscal Policy
Definition: Fiscal policy is the discretionary management of government spending and/ or taxation designed to influence the level of aggregate demand and hence economic activity
Taxation
Economic effects
Labour Supply & Enterprise
Resource allocation
Savings
Investments
Inflation
Limitations of FP
Crowding out effect
size of multiplier
Forecast error
time lag (recognition, administrative & Operational time lag)
Inflexibility of projects undertaken
Trade off with other macro goals
Debt sustainability
Political pressures
Government Expenditure
Economic effects
Resource allocation
Income & Wealth distribution
Potential economic growth
Economic Stability
Effects of a budget surplus/ deficit
Internal goals
effect on economic growth
effect on unemployment
effect on inflation
External goals
effect on BOP
Effect on exchange rates
Non-discretionary fiscal tools/ Automatic stabillisers
Progressive tax structure
unemployment compensation
family assistance programme
FP in SG
openness of SG economy & lack of natural resources
small multiplier
Prudent FP