Fiscal Policy Essay examples
Effects on Tax Payers The U.S. budget deficits can affect tax payers in a negative aspect by increased taxes to offset the deficit. The budget deficit …show more content…
When expansionary policies are used the result is improvement because an increase in available cash. This results in a net decrease in exports because it is more profitable to sell cars domestically than to export them. The severity of the recession and resulting contraction of the economy however has forced American car manufacturers to increase their comparative advantage resulting in improved competitiveness in current and growing automotive markets, such as China and India (Colander, 2010).
A budget surplus occurs when there are more funds coming into the government than going out. A healthy economy operating at its potential output will result in increases in individual income (Colander, 2010). However, an economy producing at its optimal output will result in the governments implementing contractionary fiscal policies to fight inflation. As less cash becomes available, consumers will tend to purchase imports and domestic car manufacturers will export more cars. As the economy contracts domestic manufacturers will increase their comparative advantage to compete internationally (Colander, 2010).
Currently there are initiatives for fiscal policy to reduce the debt. Less government spending in a recession could have a detrimental effect on the United States’ current economic recovery, including the