What is the role of fiscal policy in crisis?

The most important role of fiscal policy in crisis is to prevent further economic deterioration and restore the overall vitality of macroeconomics. One of the techniques used by the majority of national governments is to enforce an increase in money supply by reducing interest rates. Governments are also trying to increase overall expenses, consumer confidence and production production through fiscal policy. The national government may temporarily reduce taxes and increase its own expenses to improve the overall health of macroeconomics rather than the financial health of individual population segments.

In order to prevent complete economic collapse, the national government in crisis will use fiscal policy to stimulate aggregated demand. The economic crisis is usually referred to as a severe recession or depression where the money value of the output stagnates or decreases sharply. This usually occurs due to the gap between the cost of basic goods and services the average consumer income, in addition to the ability of enterprises to create a corresponding profitThe margin. When the government reduces the interest rate it charges to banks to borrow money, it hopes that consumers and businesses will be encouraged to ensure financing they need to buy large ticket items such as houses, vehicles and new equipment.

By supporting the increase in expenditure, the average demand for goods and services usually increases. The use of fiscal policy techniques in crisis helps to stimulate the overall production and activity of macroeconomics, but does not guarantee that every business or individual will benefit. Tax incentives can be provided to businesses to create more jobs or even higher jobs. A temporary reduction in consumer taxes or incentives to buy certain items such as houses could also be provided to provide relief from financial burden to allow further discretion income.

In addition to supporting more consumer expenditure, government expenditure has DALa common part of fiscal policy in crisis. Consumers sometimes do not spend enough to raise macroeconomics from recession, despite the reduction of interest rates and tax incentives. Since part of the gross domestic product of the economy (GDP) consists of government expenditure, it can invest in several projects such as military experiments, energy research or improving transport infrastructures. In order to complete many of these projects, the government must employ external suppliers, which in turn creates jobs and draws more money back to the consumer sector.

Since the results of the use of fiscal policy in crisis, consumers and businesses tend to gain confidence in the potential and health of the economy. They are beginning to become less conservative and restrictive in their willingness to spend and invest. To satisfy increased demand, the supplier will find ways to provide multiple products and services, which increases the amount of money circulating in macroeconomics. The government thenThey may start slightly raising interest rates to discourage high inflation and maintain growth with optimal rate.