Macroeconomics: fiscal policy

4. Taxation and equilibrium NNP...………………………………………..…………………..5
5. Taxes effect on consumtion and saving schedules……………………………..……………7
6. Balnaced budget multiplier……………………………………..……………………………8
7. Fiscal policy over a cycle……………………………………….……………………………9
8. Financing deficits and disposing of surpluses………………………………………………10
9. Fiscal policy in Lithuania……………………………...……………………………………10
10. Conclusion…………………………………………………………..………………………11
11. Definintions……………………………………………………………...…………………13
12. References………………………………………………………………….………………14
13. Test…………………………………………………………………………………………15
14. Answers………………………………………………………………………………….…16
Introduction
It is crucial to recall at the outset that the consumption, investment, and import-export decisions of household and business are based upon private self-interest and that sum of these decisions may result in either recession or inflation. In contrast, government is an instrument of society as a whole; hence, within limits government’s decisions with respect to spending and taxing can be altered to influence the equilibrium NNP in terms of general welfare. The fundamental function of the public sector is to stabilize economy. This stabilization is achieved in part through fiscal policy, that is, through the manipulation of the public budget – government spending and tax colections – for the expressed purpose of increasing output and employment or reducing the rate of inflation.
Fiscal policy
Fiscal policy is the economic term which describes the actions of a government in setting the level of public expenditure and how that expenditure is funded. The fundamental purpose of fiscal policy is to eliminate unemployment or inflation in order to stabilize the economy. This stabilization is achieved throuh the manipulation of the public budget – government spending and tax colections – for the expressed purpose of increasing output and employment or reducing the rate of inflation.
Employment Act of 1946
By the end of World War II, the nation was finally shrugging free of a drastic economic recession that culminated in the Great Depression. During that time, unemployment rates soared into the twenties of percent, and only radical government spending seemed to curb further degradation. The U.S. Congress, fearful of another bout of unemployment spurred by the return of discharged war veterans, sought to...

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