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Literature and theory report - Essay Example

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Fiscal policy stipulate how much government expenditures are to be shared among the different sectors in the economy. In this report, I have considered three…
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Literature and theory report
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Literature and theory report

Download file to see previous pages... mong economists with one school of thought arguing that the government expenditure is a problem to the economy while the other thinking is that it is a solution to economic betterment. Further notes that European Union has not adopted strict approach of fiscal obligation, taxation reduction and economic freedom.2
Furth is concerned with data on deficits, expenditure, taxation and growth in relation to the fiscal policy stand of thirty-seven European countries. His research revealed that structural deficits would predict stimulus followed by reduction on deficit, and he documented a variability of fiscal policies that many economies have pursued in paradox to a number of prevalent generalizations of European austerity.3 He notes that increasing taxes would be far more harmful than expenditure cuts,4 and the effect of tax increment have a huge difference, and they cannot be together labelled as austerity as they would conceal more than there is in the revelation of fiscal policy.5
Furth research has shown the relationship that exists between increased government expenditure and economic progress. Other economists had focused on government debt and its effect to the economy. It had been noted that government debt hurt the economy by burdening not only the current generation but also the future generation.6 Due to high debt the current generation is forced to pay for the interest of the loan advanced to the country for which benefit will be consumed by future generation. Moreover, the future generation will carry on the burden and mistake of their predecessors because the rate of interest will be much higher that the benefit of which it was taken. Furth’s research presents another angle to fiscal policy approach that the government can utilize without resulting to changing the taxation system. It reveals that there has been a considerate role of the government inability to set up good fiscal policies. Governments have concerned themselves in increasing taxes in ...Download file to see next pagesRead More
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