What Is an Expansionary Fiscal Policy?

As an important means of national macro-control, finance can be divided into "expansive fiscal policy" and "definitive fiscal policy" according to the different effects of fiscal policy on economic operation. In the period of economic recession, by issuing government bonds, increasing fiscal expenditures and reducing taxes to stimulate aggregate demand growth, reduce unemployment, and enable the economy to recover as quickly as possible, this is called expansionary fiscal policy.

Expansionary fiscal policy

Fiscal act

Expansionary fiscal policy

Expansionary fiscal policy

Tax reduction

Generally speaking, tax cuts will increase

British economist JM

Keynesian

In terms of megatrends,

Austerity fiscal policy is a policy action by the state to suppress or reduce the total demand of society through fiscal distribution activities. It is often adopted under the tendency that the total social demand has greatly exceeded the total social supply. Its typical form is to reduce the size of government expenditure through fiscal surplus. Because fiscal expenditure constitutes part of the total social demand, and fiscal surplus means freezing a part of the total social demand, thereby achieving the purpose of compressing the total social demand. To achieve fiscal surpluses, on the one hand, it is necessary to increase taxes and, on the other hand, to reduce expenditures as much as possible. If the increase in taxes and the corresponding increase in expenditures are not possible, there will be no fiscal surplus. The effect of increasing taxes on reducing the total social demand will be offset by the effect of increasing expenditures on expanding the total social demand.

Since the founding of the People's Republic of China, the normal state of national economic operation has been that total social demand is greater than total supply. Tight fiscal policies have been implemented in several national economic adjustments in order to correct the shortcomings of rapid economic development, serious imbalances in proportion, and inflation. Implementation of the "Adjustment, Consolidation, and Enrichment" policy (1961 ~ 1965) The main task of this adjustment was to overcome the severe proportion imbalance and chaos that the "Great Leap Forward" brought to the national economy. The main austerity measures are: vigorously reduce the size of investment in capital construction, save non-productive expenditures, and reduce the purchasing power of social groups; reduce staff and reduce national wages; implement "contribution, reduction, and management" of extra-budgetary funds to increase budgetary revenue; We will strengthen the centralization and unification of fiscal work and achieve a comprehensive balance. While implementing austerity measures, we have also taken effective measures to increase production and increase effective supply, such as strengthening financial support to agriculture and reducing farmers' burdens, adjusting the investment structure to increase the production of agricultural and light industrial products, and clearing capital to fully utilize the potential of materials. Wait. After five years of hard work, the national economy has been rapidly restored and developed. From 1963 to 1965, the total output value of industry and agriculture grew by an average of 15.7% per annum, and fiscal revenue increased by an average of 14.7% per annum. Various economic indicators recovered or exceeded the best levels of the first five-year plan period (1953-1957).