Fiscal policy refers to the government’s use of taxation and spending to Nonprofit Debt the economy’s overall health and achieve specific economic objectives. As such, the primary responsibility for fiscal policy lies with the government. The government formulates and implements fiscal policies through various legislative and executive actions.
1.1 Policy Formulation: The government’s economic and finance ministries or departments are responsible for crafting fiscal policies. These institutions analyze economic indicators, such as GDP growth, inflation rates, unemployment levels, and budget constraints, to develop appropriate fiscal strategies. The goal is to stabilize the economy during downturns, stimulate growth during periods of stagnation, and ensure long-term fiscal sustainability.
Legislative Approval
Once fiscal policies are formulated, they often require approval from the legislative body, such as the parliament or congress. In democratic countries, fiscal policy decisions may undergo debates and discussions among lawmakers before becoming law. This democratic process ensures that fiscal policies align with the country’s overall economic and social objectives and reflect the consensus of elect representatives.
For example, if the government increases Chile Email List spending to boost economic growth, the central bank may adjust interest rates to avoid overheating the economy.
Central Bank and Monetary Policy
While the government is responsible for fiscal policy, the central bank is task with managing monetary policy. Monetary policy involves controlling the money supply, interest rates, and credit availability to influence economic activities such as inflation, employment, and investment.
2.1 Coordination with Fiscal Policy: Effective coordination AGB Directory between fiscal and monetary policy is essential for optimal economic outcomes. The central bank must be aware of the government’s fiscal plans to calibrate its monetary policy accordingly.