Fiscal policy is government spending and taxes that influence the economy. Elected officials should coordinate with monetary policy to create healthy economic growth. Fiscal policy reflects the priorities of individual legislators. These local needs prevail over a nation's economic priorities, and as a result, fiscal policy is hotly debated, whether at the federal, state, county, or municipal level.
It is the part of the policy that regulates and monitors the expenditures of the state economy and the way in which those expenditures are made. These expenditures are collected through taxes, which must also be monitored in order to fulfil their true function.
Fiscal policy consists of a series of activities that are focused on achieving political objectives. It is the use of power to try to resolve conflicts of the population and society. It also consists of a division of economic policy that is responsible for setting the budget enjoyed by the state through the imposition of taxes.
The main features of fiscal policy are as follows:
The objectives of fiscal policy are to accelerate the economic growth of a country or society so that, there is full utilization of all the resources that society has, whether human, material or capital. In addition, it aims to bring price stability so that, prices do not suffer significant increases and decreases. It also monitors economic growth, amortizes changes in economy and ensures the proper use of all State resources.
The instruments of fiscal policy are basically three aspects which include:
There are four different types of fiscal policy, which are detailed below:
Fiscal policy is considered to be the driving force behind state growth because it is the way in which both, economic and social development can be contributed to. It can be used to show employment levels, production levels and market prices. It is through fiscal policy that the budget that a State has with taxes and public expenditures is established, seeking to generate a balance for its citizens.
It is also very important when it comes to implementing redistributive policies or taxes. They are also a useful tool to reduce environmental pollution, this when a tax is charged for polluting the environment.
Some examples of fiscal policy are the following:
Briceño V., Gabriela. (2019). Fiscal policy. Recovered on 28 October, 2023, de Euston96: https://www.euston96.com/en/fiscal-policy/