From the course: Economic Indicators

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What is fiscal policy?

What is fiscal policy?

From the course: Economic Indicators

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What is fiscal policy?

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- Just like people, governments have to manage their finances, and whether you think a government is making smart or dumb budget decisions, these activities all fall under the term Fiscal Policy. This is as true in the United States as it is in India, France, or Brazil. The overarching term Fiscal Policy really has to do with how a government taxes its citizens and businesses, how it spends that money, and how it manages its debts. After all, not all governments live within their means. In fact, very few do which is why fiscal policy also includes how a government raises debt if it can't afford what it is spending and how a government manages the interest and repayments on those debts. All of these policies together impact interest rates, tax rates, and ultimately, growth rates. Fiscal policy is important in an economy because the biggest business in most countries is usually the government itself. For a number of years, US Government spending is represented around 18% of the entire…

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