Financial Terminology Series -2

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FISCAL POLICY



 The idea of Fiscal policy has been populated by the British Economist John Maynard Keynes (1883 - 1946). He believed in that, Government could change economic conditions by making adjustments in tax rate and government spending.

Government or Regulators (i.e. RBI in India) to control the economy, try to better unemployment rates, control inflation, give stability to business cycles and impact interest rates.

Example:

Let we assume, the Indian market is witnessing Recession right now, to fuel the economy govt. reduce the tax rate on individual earning as well may be on goods and services also, in that case, people will have more money to spend or invest as they are paying fewer taxes. Increase in consumer Investment or spending will lead to economic growth.
The government can also take another measure to increase the sentiment by providing more Job opportunities, for example; by making more flyovers, highways. As it will create more job opportunities, automatically unemployment rate will go down. 

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