10.1 Definition of Fiscal Policy:
Fiscal policy is playing an important
role on the economic and social front of a country. Traditionally, fiscal
policy in concerned with the determination of state income and expenditure
policy. But with the passage of time, the importance of fiscal policy has been
increasing continuously for attaining rapid economic growth.
Accordingly, it has included public
borrowing’ and deficit financing as a part of fiscal policy of the country. An
effective fiscal policy is composed of policy decisions relating to entire
financial structure of the government including tax revenue, public
expenditures, loans, transfers, debt management, budgetary deficit, etc.
The policy also tries to attain
proper balance between these aforesaid units so as to achieve the best possible
results in terms of economic goals. Harvey and Joanson, M., defined fiscal
policy as “changes in government expenditure and taxation designed to influence
the pattern and level of activity.”
According to G.K. Shaw, “We define
fiscal policy to include any design to change the price level, composition or
timing of government expenditure or to vary the burden, structure or frequency
of the tax payment.” Otto Eckstein defined fiscal policy as “changes in taxes
and expenditure which aim at short run goals of full employment price level and
stability.”
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