Question

Explain how growth can be achieved through fiscal policy.

Discuss how growth can be achieved through the fiscal policy.

Answer 1

Effective fiscal policy can raise a nation’s real national income by quickening the pace of economic expansion. The following budgetary actions could hasten economic expansion:

1. Policies pertaining to public borrowing and taxes can be utilised to encourage investment and saving.
2. To encourage investment in the economy, the government may provide entrepreneurs with tax breaks and other financial aid. This will consequently have a favourable impact on economic growth and activity levels.
3. Entrepreneurs can establish industries in underdeveloped areas by receiving special tax incentives such as “tax holidays” and subsidies. This will encourage the development of underdeveloped areas.
4. The government can utilise the money it collects to support the growth of the industrial and agricultural sectors. These funds can also be used by the government to provide essential economic infrastructure, including power, irrigation, transportation, and communication. To encourage economic growth, the government can create capital goods and essential or foundational sectors.
5. By creating infrastructure and social overheads, public spending policy can be used to successfully support economic growth. By offering facilities for training, education, and research, it might encourage development.