What is the role of fiscal policy in the recession?

Fiscal policy is one of the main vehicles that the government affects or attempts to influence the state or outcome of the economy. In other words, the government can use it to form or promote the economy for the required result. For this reason, the government applies fiscal policy in the recession to try to reverse the unfavorable trend and turn the economy for the better. The government can apply fiscal policy in the recession by modifying its expenditure habits or downwards or the opposite evaluation of the tax rate.

During the recession, the government could decide to engage in fiscal policies to bring the required change in demand for goods and services. This is important because the main causes of the recession are unsustainable consumption, operating the overheating of the economy and the inevitable increase in the prices of goods and services. One way to think of an economy in full economic boom is to imagine Thna is a balloon stretching on its full capacity. If the volume of air in the balloon is not maintained on desirableCapacity, soon passes its limit and bursts. If this is the case, the main objective of fiscal policy would be to try and stimulate the economy to a desirable balance between demand and supply, as well as to deal with other macroeconomic factors such as unemployment.

Application of fiscal policy in the recession can affect the economy in several ways, depending on the specific unique circumstances surrounding the economy and factories of depression. If the depression is such that manufacturers of goods and services have reduced their production, which has led to dismissal and high unemployment, the decision to use fiscal expansion will have a positive impact on the situation. The use of this type of policy means that the government involves expenditures beyond its income, stimulates the production of goods and services and reduces the level of unemployment.

Another way that fiscal policy in recession can help restore trade balance in the economy afterThe recession is to reduce personal income taxes. Where the government does, consumers will have additional income with which they stimulate the economy by increasing consumption. Increasing employment also means that workers have income with which they can contribute to market activities, and hopefully help the economy recover from recession in a faster way.