Question

Fiscal policy is used not only to influence economic activity but also for political purposes. Discuss the above by referring also to how the size of government of Malta evolved over the decades. (not less than 1000 words)

Answer 1

Ans:-Government fiscal policy refers to the expense that a government needs to provide goods and services to its citizen and also deals with the way how the government finances the expenditure.Basicaly there are two method of raising the fund for meeting the expense as per the fiscal policy,they are taxation includes personal and corporate income tax and borrowings.

During 1930's of great depression the government of Malta tried to stabilize its economy by spending more on its resurces or cutting tax rate and as a result the consumers good spend more and that stimulates the growth in the economy.In the 1960's also the government of Malta had shown importance in fiscal policy which was being used to strengthen economic activity and also political purpose.But in 1970's the government of Malta lost its confidence in fiscal policy as a result of fear of inflation due to unemployment increasing government deficit and high inflation

During the period of 2010's the government of Malta has used its fiscal policy as one of the main economic tool to strengthen the economic activities .This includes practicable budjecting policies , good pension reforms and increasing tariffis rates on energy imports, increasing health care cost .The Malta government has also introduced and consolidated many government jobs in public sector to achieve savings in budjetary reforms.Another important tools used as per fiscal policy is installation of economic stabilizers which application has resulted to stabilize inflation at its possible lowest level,improve investment in Malta and improve competative structure of local business and it helps to reduce government debts.

The fiscal policy being used by the Malta government to manage and stabilize economy has been widely recognized by many nation .The updates and research report published by central bank of Malta in its economic review in 2010 show that Malta government deficit felt 3.8% of its GDP and has increasd 17% in exports and in the lobour market the employment has been increased to 1.5% and its GDP has been increasd by 3.4% as compared to previous years.As a result of the application of fiscal policy by the Malta government has stabilize its economy and allow its to move closure to achieve its budgetary goal.In short the fiscal policy application has impacted much influence on the economic as well as political activity of the government of Malta.