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Pros And Cons Of Neutral Fiscal Policy

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Governments often disagree on the adjustment of local, state, and national economic policies. Measures implemented by these governments in relation to the collection of revenue and public expenditure are referred to as fiscal policies. Fiscal policy is the use of government revenue collection, which is derived from income tax and expenditure, to impact the fluctuating economy. Some may opt to promote expansionary fiscal policy, while certain show more interest in contractionary fiscal policy. While there are many advantages to both, certain key factors set them apart from each other. First of all, there is a general agreement that the public and government both have to participate in order to achieve a successful economy. There are three stances of fiscal policies neutral, expansionary, and contractionary. …show more content…

It is stable and can take impacts whether positive or negative. The government spending is fully funded by the tax revenue generated, and the budget outcome has a very neutral stagnant effect on the level of economic activity. Expansionary fiscal policy involves the government spending exceeding tax revenue. It is a policy usually set forth during recessions. Contractionary fiscal policy occurs when a government is spending lower than the tax revenue, and is usually undertaken to pay down the government debt. While all these policies have have shown success to economies all around the world. The theory is that expansionary fiscal policies show many more difficulties and hardships along the way as opposed to contractionary fiscal policy. The purpose of this paper is determine the positives and negatives of each policy and prove that contractionary fiscal policy is the safest one to select. We may determine the path of least resistance and select an economic policy that will, in the end, prove to be more successful than the

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