What factors affect fiscal policy efficiency?

Fiscal policy is a general term used in macroeconomics to describe government expenditure and taxation, which is intentionally used to influence influence on the economy. The effectiveness of fiscal policy depends on a wide range of factors, many of which cannot be reliably predicted or understood in advance. Changes in behavior caused by changes in government and taxation expenditure are among the most important determinants, because attempting to increase consumer demand through government expenditure or reduced taxation would, for example, were made to a large extent ineffective if people simply save their money instead of spending it. Other factors that affect how effective fiscal policy is include the time delay between the new policy and implementation of the impact of this policy, changes in the impact policy on interest rates and other economic concerns and the actual quality of change of policy.Een taxation and expenditure. Governments tax their citizens to finance government projects and redistribute wealth to best suit the needBam of all affected individuals. Tax cuts for certain groups give people more money to spend, which in some cases can improve the country's economy by increasing consumer demand. Government spending can be combined with reduced taxes to stimulate the economy. It is often used to provide jobs and money, with the expectation that people will spend more money to help the economy.

Governments often combine reduced taxation with increased expenditures to stimulate the economy and increase consumer demand. Long -term efficacy depends mainly on the behavior of people in response to more available money. The government must usually spend more money than it earns so that it can implement it, so if the policy fails and the economy does not increase stronger, it can hardly restore lost resources. However, if such a policy is effective, the government may be able to impose a larger tax on the reinforced economy, whatThe means necessary for stimulating policy will be restored.

There is some doubt about the effectiveness of fiscal policy as a means of leakage from economic recession or depression. Increased expenses and reduced taxation tend to force the government to borrow either from their people or from foreign sources. This leads to a phenomenon called "pushing", in which loans necessary for increased expenditure and reduced taxation leads to increased interest rates that drastically reduce the effectiveness of policy.