Slide 1: Comparative Analysis - Fiscal

Question 1

Focuses on
1. Taxation
2. Government spending

Answer 1

Taxation

Tax Cuts: When a government reduces taxes, it puts more money in the hands of individuals and businesses. Stimulating the economy.

Tax Increases: Conversely, raising taxes can reduce disposable income and, in some cases, discourage spending and investment. However, it can also be a source of government revenue, which can be used to fund public programs and services.

Government Spending:

When a government increases or decreases spending on goods, services or public infrastructure, it either enhances or slows down economic activity. Affecting employment, business activities, inflation and economic growth.

Question 2

Set by Government

Answer 2

They are responsible for the policies.

Question 3

Targeting healthy economic growth

Answer 3

Fiscal policy focuses on promoting strong and sustainable growth.

Question 4

Effect on government budget and national debt

Answer 4

When the government increases spending or reduces taxes, it often leads to a budget deficit. This means the government is spending more money than it’s collecting in revenue (taxes).

When the government decreases spending or raises taxes, it can result in a budget surplus.

Hence, running budget deficits overtime leads to accumulated debt. And budget surpluses can help reduce the debt.

Question 5

Politically dependent

Answer 5

As it involves decision made by governments, and shaped by political considerations.