Questions tagged [fiscal-policy]

the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

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Is there a term for economic policy design built from minimizing per-household adverse impact?

May be easiest to start with an example: let's say I'm looking to eliminate the mortgage interest deduction, but want to minimize the impact on households from doing so. I also want the change to be ...
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Negative interest rates - Fiscal Policy (Demand-side)

(This is part two of a series of questions I've posted here under "Negative interest rates") Motivation: I've happen to stumble on two articles, with some weeks, that the central bank(CB) of ...
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Have all the PIIGS tried stimulus?

Greece: signs of growth come as austerity eases Last month the Greek parliament approved a stimulus programme involving highway construction that is quite large. According to the ministry of ...
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Government deficit

When the economy of a government is facing a deficit, why can't the government just increase the taxes to pay for its expenses? I've read that it should rather borrow money, because increasing the ...
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Universal Basic Income [closed]

In 2017 some countries have adopted the Universal Basic Income as an alternative to Welfare Payments, my question is, is it economically feasible by governments?
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Macroeconomics differences of 2008 financial crisis and 2020 economic crisis

How is 2020 financial crisis different from 2008 financial crisis? For example, why have stock market indices (e.g. S&P500, NASDAQ-100) recovered so quickly (about 3 months instead of longer than ...
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What does it mean by Global recession?

I am bit curious to understand what it actually means when I read global recession is coming soon. There are some questions which pop in my mind reading such news. Some of them are: What causes ...
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Fiscal budget: spending in real vs nominal terms

What does it mean in the context of a budget to “freeze spending in real terms”? And how would this differ from freezing spending in “nominal terms”? I am looking to understand how this would be ...
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Debt accumulation equation derivation: valid given that it rests on calculus and the time period is a year? (nowhere near infinitesimal?)

Above is an image of what I’m referring to. The top ‘rule of thumb’ is derived using calculus, and hence is only valid for infinitesimal changes in t. However, this equation is considered over the ...
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How is reducing government expenditure supposed to reduce aggregate demand?

In my coursebook it says that in a deflationary fiscal policy governments may reduce government expenditure (such as building hospitals and road constructions) to reduce aggregate demand but I don't ...
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Does the separation of FinCEN, and The Federal Reserve protect the integrity of a representative democracy? [closed]

From my understanding, FinCEN is controlled or heavily influenced by the UN. In addition, The Federal Reserve is not a governmental body, yet it has appointees from the current administration. I'm ...
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Why is fiscal deficit always shown as a percentage of GDP?

If the probable reason is because it must reflect the government's ability to pay back the deficit, wouldn't government income be a better indicator, rather than GDP?
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Since it doesn't change the money supply, how can an "expansionary" fiscal policy alone spur economic growth?

I understand how monetary policy can be used to heat up an economy by increasing the money supply, but how can a fiscal policy do so? When the government borrows money to increase spending, it is not ...
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Is there a good mechanism to incentivize leveraged firms to take less risks?

It seems that there are some circumstances, say when the government foresees a financial crisis, where it would like firms to hedge, take less riesk etc. However, leveraged agents benefit from risk, ...
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When the LM schedule is vertical, a change in fiscal policy (government spending) only increases the interest rate. What’s the intuition behind this?

As the government spending increases, the aggregate expenditure increases. This results in the increase in income. Now in the money market as the income increases, transaction demand for money ...
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How was sulphuric acid used to back money?

I remember reading in a economics and history book that sulphuric acid production was used as an alternative to gold standard as the basis of the value of currency due to it’s importance in making ...
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Determining the effect of fiscal policy on foreign exchange market

I'm in AP (high school) Macroeconomics and I confirm if my thinking is right. Suppose the US and Taiwan are trading, and the US government decides to decrease taxes. I think this should have two ...
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Solving complex RBC/DSGE models

Why is it important for policymakers (central bankers, the treasury department, the finance ministry etc.) to be able to solve complex dsge/rbc models as quickly and as efficiently as possible? I am a ...
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Loosely speaking, are all modern economies 'Keynesian' in their stance on spending during downturns?

Keynesian economics is defined as: increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. Do all modern economies adopt a Keynesian ...
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Does the US Federal Government keep public records of annual service payments on external (foreign-owned) public debt?

I'm doing some research on international debt policy, and I'd like to be able to compare some statistics I've compiled of external public debt in HIPC (heavily indebted and poor countries) with the ...
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How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
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Why is Crowding out more effective at full employment?

Now my professor explained to me that at full employment the increase in G (gov expenditure) shifts the IS curve to the right, but at the same time the price level increase from the rightward shift in ...
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which policy (fiscal or monetary) is better to stabilize the cycle?

I am currently studying for a test and the following sentence "In an open economy with high capital mobility, monetary policy is preferable to fiscal policy to stabilize the cycle", the "answer" is ...
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How can governments seemingly run permanent budget deficits?

How can countries afford to run budget deficits for decades on end and not become overburdened by interest payments on those debts?
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How does an elastic Money Demand affects the effectiveness of fiscal policy?

From my notes: 'The elasticity of Money Demand reduces the impact on the interest rate of the increase in government spending...' My question is: if the Money Supply is inelastic, the elasticity of ...
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Why can't direct taxes be passed on to the consumer? [duplicate]

What stops firms increasing prices of goods in the case of an increase of a direct tax such as corporation tax?

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