Question

since fiscal policy can be manipulated for partisan political interests: we may see lower interest rates before elections and higher interest rates after elections. the economic business cycle may drive the political business cycle. the political business cycle may drive the economic business cycle. we may see lower inflation and higher unemployment before elections.

Answer 1

The assertion is True; fiscal policy describes the government's measurements of taxes and spending that have a direct impact on a nation's economy over a given time frame.

What is Fiscal Policy?

Fiscal policy refers to governmental acts that employ tax revenue and expenditure as a tool to achieve economic goals. When making such decisions, policymakers take into account how their decisions would impact the entire country, including its people, businesses, investors, and international markets.

• In order to have a macroeconomic impact on the nation, the government may modify tax rates and spending levels through the use of fiscal policy.
• It frequently coincides with the monetary policy that a nation's central bank implements.
• When there is a problem with inflation, more stringent fiscal policies can be implemented to address the situation.
• Fiscal policies that are more expansive are employed to combat economic contractions like deflation.
• The hypothesis that questioned conventional economists' belief that an economy had a self-correcting mode may be the source of the policy.

Why is Fiscal policy important?

The government's finance department is implementing this policy to maintain the appropriate balance between public spending and tax revenue for fostering economic stability. Imagine a nation where the economy is weakening. The government might choose to implement certain expansionary policies, such cutting tax rates. In order to improve aggregate demand and consumption, the objective is to increase consumer disposable income.

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