Question

Can fiscal policies be effectively used to control economic activities?

Answer 1

To control the economic activities in a country the macroeconomic policies are often implemented through two tools sets namely fiscal and monetary policy. When the government uses the fiscal policy it indicates the spending adjustment to stimulation of the taxation or production to influence and monitor the economy. The fiscal policies be can be used effectively to control economic activities on reducing disparities of income and wealth, increasing national income, promoting capital formation, control inflation, raising proper allocation of resources, and achieving of full employment. The fiscal policy provides a protection to the country from unhealthy developments abroad and high inflation domestically. The effective fiscal policies are properly designed to curb inflation forces.