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Report Thread starter 4 years ago
can anyone help me to do this question? i have seen this on past papers but i don't know what information do i need to answer this question?
how the fiscal policy effective in generating economic growth?
can anyone help me please?
Badges: 16
Report 4 years ago
I'm not sure what exam board you do, but I can help you if it's Edexcel.
From memory,
There's 2 types of policies. Monetary policy - by the Bank of England, which manipulates interest rates to increase consumer spending. so, decrease of interest rates = more people borrow = more money into the economy.

Then there's fiscal policy - the one you need. It's regulated by the government, and it adjusts government expenditure (basically how much the government spends on stuff) and tax rates (how the government gets money). The idea is to balance the two, so that the money going in is the same as the money going out. The government ideally want to do this without borrowing money - as they're trying to pay off debts rather than create it. There are two types of fiscal policy, expansionary and contractionary. Expansionary is where the government go on a spending spree, and contractionary is them trying to save and being a bit stingy. I would say that expansionary leads to economic growth, *however* expansionary creates a larger government deficit - as the government are spending more on the country. However - it's also good. if they spend more on education, more people will get better jobs, creating more demand and supply and therefore injecting money into the economy - as remember, people with jobs will spend more, injecting money into the circular flow of income.

I would like to point out I'm rubbish at explaining stuff. If what I said makes 0 sense - try looking it up on the internet.

Oh, and if it's a 20 marker, make sure you have 5-ish paragraphs. 3 KAA (knowledge, application, and analysis) and 2 evaluation points. Evaluation is the "however". (That's for Edexcel though! Not sure what you do.)

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