Economics for Common People – Part 16 Fiscal Policy

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1️⃣ What Is Fiscal Policy?

Fiscal Policy refers to the use of government spending and taxation to influence the economy.

It is controlled by the government.

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2️⃣ Tools of Fiscal Policy

• Government Spending
• Taxation
• Subsidies
• Public Borrowing

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3️⃣ Expansionary Fiscal Policy

Used during economic slowdown.

• Increase government spending
• Reduce taxes

This increases demand and creates jobs.

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4️⃣ Contractionary Fiscal Policy

Used during high inflation.

• Reduce government spending
• Increase taxes

This reduces demand and controls inflation.

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5️⃣ Example

If unemployment increases:

• Government may launch employment schemes.
• Government may invest in infrastructure projects.

This is Fiscal Policy in action.

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6️⃣ Importance of Fiscal Policy

• Stabilizes the economy
• Reduces unemployment
• Controls inflation
• Promotes economic growth

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Fiscal Policy shapes the economy through government decisions.

— Shaktimatha Learning