PSCI231 Final: Macroeconomi Stabilization Summary for Final

• School: University of Waterloo
• Department: Political Science
• Course: PSCI231
• Professor: Brent Needham

Document Summary

Fiscal policy: the use of policy by a nations government in order to change levels of taxation and spending. As a nation enters a recession, governments may raise spending in order to supplement firms and households and encourage spending. At the same time governments will lower taxes to provide yet more incentive to spend. Can be dictated through the announcement of the budget, showing where government spending will be going towards. Because of this, and especially the issue of increasing or lowering taxes is an heated issue of political debate. Subsidies, spending or stimulus of any kind are an outflow. When fiscal policy is enacted to stabilize the economy, so taxes are lowered and spending on social programs are increased then revenue usually falls ==> outflow, thus the government runs a deficit during this time. Fiscal policies are often designed with the business sector in mind as it one of the main contributing factors to economy prosperity and growth.