Fiscal Policy to Manage an Book Report

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At a general level, the fiscal policy decreased the individuals' purchasing powers, which subsequently translated into lower levels of consumption. In other words, people bought commodities at higher prices, but they lowered their purchase volumes. The government will probably end up with the same level of federal revenues, but their collection structure will suffer modifications. In other words, the same amount of taxes was once collected through lower taxes and higher purchases, whereas now, the same amount of revenues is collected through higher taxes, but lowered purchase volumes.

The second part of the fiscal policy materialized in even more devastating impacts. The first impact was felt by the economic agents who first registered decreasing sales of their products and services. Secondly, they suffered as they were forced to pay higher taxes and contributions to the state budgets. Their organizational revenues were as such subjected to a dual hit. The result was that of more and more common downsizing processes and the increase in the number of economic agents filing for bankruptcies. The socio-economic effect of unemployment did not tardy. Instead of resolving the economic problems of the country, the fiscal policy only deepened them.

Fiscal policies are levers to be used rarely and with specific objectives. The main element to be considered in the use of fiscal policies is the future stability of the country and its complete and complex apparatus. Economic growth is an important goal for any state, but stable and sustainable growth is more important. Fiscal policies should only be used in isolated incidents and when they can generate benefits for the populations. A laudable fiscal policy refers to the increase in taxation of the tobacco and alcohol products. This materializes in restrictions for the populations through reduced
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access and as such improved health.

Economic growth however should not be tempered with through fiscal policies. It should be naturally and economically efficiently achieved. Additionally, as history has shown, long-term economic stability cannot be achieved through governmental intervention, but it can only be achieved based on its own economic principles. This is the sole means in which a country's economic state is stable and sustainable.

For decades, economists and entrepreneurs have fought to reduce the intervention of the government within the economy. The works of Adam Smith and his militating for the invisible hand are relevant in this sense. Even today, as globalization spreads throughout the entire planet, the scope is that of creating a free and liberalized market, where prices are set in full accordance to demand and supply, where monopolies are non-existent and where economic decisions are not made on political considerations. Natural economic prosperity is the scope of the modern day society and this is why agreements and institutions such as the North American Free Trade Agreement or the World Trade Organization were created. The excessive use of fiscal policies to achieve economic growth takes societies back to a time in which governments ruled the economy; to an inefficient and unsuitable era.

References:

Auerbach, A.J., 1997, Fiscal policy: lessons from economic research, MIT Press, ISBN 0262011603

Michele, H., 2006, Fiscal policy and monetary policy: how they work together to stabilize the economy, Associated Content, http://www.associatedcontent.com/article/57081/fiscal_policy_and_monetary_policy_how.html?cat=3 last accessed on October 5, 2010

O'Grady, S., 2010, Greece paves way for IMF rescue deal by agreeing savage cuts, The Independent, http://www.independent.co.uk/news/world/europe/greece-paves-way-for-imf-rescue-deal-by-agreeing-savage-cuts-1959630.html last accessed on October 5, 2010

Monetary fiscal policy, Country Studies, http://countrystudies.us/united-states/economy-7.htm last accessed on October 5, 2010

Sources Used in Documents:

References:

Auerbach, A.J., 1997, Fiscal policy: lessons from economic research, MIT Press, ISBN 0262011603

Michele, H., 2006, Fiscal policy and monetary policy: how they work together to stabilize the economy, Associated Content, http://www.associatedcontent.com/article/57081/fiscal_policy_and_monetary_policy_how.html?cat=3 last accessed on October 5, 2010

O'Grady, S., 2010, Greece paves way for IMF rescue deal by agreeing savage cuts, The Independent, http://www.independent.co.uk/news/world/europe/greece-paves-way-for-imf-rescue-deal-by-agreeing-savage-cuts-1959630.html last accessed on October 5, 2010

Monetary fiscal policy, Country Studies, http://countrystudies.us/united-states/economy-7.htm last accessed on October 5, 2010

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