Paul Turner discusses the fiscal stimulus in his ‘Interpreting economic data’ column. As he explains, a fiscal stimulus involves government tax and government expenditure. Government tax is a source of income for governments, whereas government expenditure involves cash outflow from government funds. Many countries are currently facing a ‘budget deficit’. A country facing a budget deficit is a country that is in debt — the country’s expenditure is higher than its tax receipts, such as income tax and VAT. An expansionary fiscal policy works by stimulating the economy through an increase in government expenditure. In this column, I would like to illustrate a fiscal stimulus using real world examples.
A good example of a fiscal stimulus is US President George W. Bush’s administration of fiscal policy, which was a combination of tax cuts, expenditure for fighting two wars, and a free-market ideology.
Your organisation does not have access to this article.
Sign up today to give your students the edge they need to achieve their best grades with subject expertise
Subscribe
