Government+Spending+or+Taxation?


 * Government Spending or Taxation?**

Government Spending or Taxation What is Fiscal Policy? It is the approach that government at the federal, provincial or municipal level takes towards it own spending and taxation. __ Government Spend __ Pros - Has a greater impact then a cut taxes on the economy because of the effect of the spending multiplier. - The government also has the ability to focus spend on a specific region Cons - Implementation is slow because of spending lags - Government spending is harder to reverse __ Taxes __ Pros - Tax cuts can be implemented for a short period of time then it can be re-imposed - Taxes changes quickly take effect Cons - People don’t like paying taxes An example of lags during the recession was it took time for government to recognize the recession. Decide and agree on a plan of action. Begin spending and for the impact to become evident.

The relationship between expansionary fiscal policy and national debt is expansionary fiscal policy means government is increasing spend or making tax cuts which reduce government revenue. This causes deficits to increase or move into a deficit if the budget is currently balanced.

The relationship between Federal, Provincial and municipal fiscal policy is they are all interdependent. Increased spending by the federal government can be counter acted by raising taxes at the Provincial or municipal level.



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John Sayre and Alan Morris, Principles for Microeconomics, McGraw-Hill Ryerson, 2009, page 183-401

[|Economics: Fiscal Policy - CliffsNotes]