Fiscal Policy

Fiscal policy refers to the use of government spending and taxation to influence a nation's economy. As a primary instrument of applied macroeconomics, it is employed by governments to manage aggregate demand and achieve key objectives such as stabilizing economic cycles, fostering sustainable growth, reducing unemployment, and controlling inflation. This is accomplished through two main stances: expansionary policy, which involves increasing government spending or decreasing taxes to boost economic activity, and contractionary policy, which entails decreasing spending or increasing taxes to cool down an overheating economy.

1. Introduction to Fiscal Policy
   1. Definition and Scope
      1. Definition of Fiscal Policy
      2. Historical Development of Fiscal Policy
      3. Scope within Economic Policy
      4. Relationship to Public Finance
   2. Core Objectives of Fiscal Policy
      1. Economic Stabilization
         1. Smoothing Business Cycles
         2. Reducing Output Volatility
         3. Counter-cyclical Policy
      2. Fostering Economic Growth
         1. Promoting Investment
         2. Enhancing Productivity
         3. Long-term Growth Strategies
      3. Full Employment
         1. Reducing Unemployment
         2. Addressing Cyclical Unemployment
         3. Structural Employment Policies
      4. Price Stability
         1. Controlling Inflation
         2. Preventing Deflation
         3. Managing Inflationary Expectations
      5. Redistribution of Income
         1. Reducing Income Inequality
         2. Social Welfare Programs
         3. Progressive Policy Design
   3. Distinction from Monetary Policy
      1. Definition of Monetary Policy
      2. Key Differences in Tools
      3. Institutional Responsibilities
      4. Interaction between Fiscal and Monetary Policy
      5. Relative Effectiveness