Evaluating Fiscal Policy

Fiscal policy is a powerful tool in the hands of the government. Fiscal policy can promote long term economic growth by increased government spending different sectors of the economy. With a careful planning of expenditure on capital goods in the economy i.e. infrastructure, better education and health systems, government can considerably improve the potential output in the economy. Better education and health will also result in improved human capital.  Thus, improving the very basic factors of production available in the economy.

Moreover, a skilled labour force supported by a strong infrastructure will create a positive environment for firms to invest. The economy will find it easy to attract foreign capital. All these factors will lead to an increased economic growth.

 

Evaluating Fiscal Policy