In my opinion the fiscal policy should be an expansionary one. The text defines this policy as “ a policy that consists of government spending increases, tax reductions, or both, designed to increase aggregate demand therefore raise real GDP”. I think that if the government spends, or invests, more money on programs and actions that will bring more jobs, therefore, more income to the people and the country itself, the country’s real GDP would increase. The way I see it is that if more people have jobs, the country’s output would be a lot greater thus the country’s real GDP would be higher. All this can happen only and only if, the ...view middle of the document...
I think of these ones, as long run investments. Either way, as long as the money is spent on the right things, the outcome will be noticeable right away or it will help on the improvement for the future.
One of these examples is the solar panels that produce energy. These last years we have seen an increment on houses that have those panels. WHY? The government gives out tax rebates to people who own them. Also, those people will pay a lot less every month on the electric bill, plus it helps the environment and it creates more jobs. This government incentive creates more and more people to get them thus the money keep flowing, which helps the economy.
The second reason I chose this policy is because of the tax reductions or rebates to the people. As we all know, the more money we have in our pockets, the more money we spend (hopefully is not just me). I think that by having a higher income, due to taxes cuts or rebates, workers will invest more money thus create the economy to grow. As workers invest, the more income these workers will get, which only means the more money they will keep spending or investing. As long as the money keeps flowing (either investing or just spending it) the economy will grow.
As I said before, the only way the expansionary policy would work is if the government spends the money on the right programs to create more jobs and more output of the country’s goods. And if the workers invest or spend that extra money they get from the tax cuts or reductions.