Why do a government need fiscal policy?
In: Economics
A fiscal policy is basically a budget. For a government to function, it needs to provide some basic functions (or it won’t be called a government). Typically these are things like defending the country (an army), maintaining the peace (law enforcement), maintaining rule of law (legal system), governing and regulatory bodies (parliament etc), monetary system (banks) and also other typical things like healthcare, social safety nets, education, environment, infrastructure (roads, bridges, power, water, phone).
In order to do this stuff, people need to be employed. People don’t work for free. Government collects taxes or borrows and uses these funds to pay for the other stuff mentioned above. This is what is known as the fiscal policy; how a government collects money and how it chooses to spend the money.
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