Answer to Question #259240 in Economics for Deema

Question

12) How can financial and fiscal policy help promote development?

Answer 1

Discretionary fiscal policy refers to the deliberate manipulation of taxes and government spending in order to change the real volume of national production and employment, controlling inflation and accelerating economic growth. There are two types of discretionary fiscal policy. Stimulating fiscal policy is applied when production declines during high unemployment and low entrepreneurial activity. Such a policy is aimed at increasing production and employment,

Built-in stabilizers, Changes in tax revenues, Unemployment benefits, and other social payments, Subsidies to farmers, Increase in government purchases and transfers. 

Deliberate manipulation of taxes and expenses or active fiscal policy

Passive fiscal policy, in which the necessary

changes in government spending and

taxes are entered automatically

Incentive Fiscal Policy

Restrictive fiscal policy of the population by increasing public procurement and transfers; and manipulation of tax rates. With an increase in government purchases, aggregate demand grows, and the volume of production increases. As a result of the reduction in tax rates, there is an increase in the aggregate supply, while the price level decreases.

Restrictive fiscal policy is applied during the period of economic recovery to curb business activity, reduce production, eliminate excess employment, reduce inflation. All these actions are applied by reducing public procurement and transfers as a result

the volume of production and aggregate demand decrease, with an increase in taxes, there is a decrease in the aggregate supply from entrepreneurs and demand from households, while the price level increases.

The limited ability of discretionary fiscal policy to adapt to the needs caused by new economic proportions makes it necessary to  

 supplement it with another type of fiscal policy that can continuously adjust tax revenues.

This is done automatically using so-called built-in stabilizers. The second type of fiscal policy is automatic.

The limited ability of discretionary fiscal policy to adapt to the needs caused by new economic proportions makes it necessary to supplement it with another type of fiscal policy that can continuously adjust tax revenues.

This is done automatically with built-in stabilizers. The built-in stabilizer is an economic mechanism to reduce fluctuations in employment and output levels without resorting to

too frequent changes in the government's economic policy.