Chapter 11.1: Fiscal Policy
Overview
Fiscal Policy
Learning Objectives
By the end of this section, students will be able to
- Define fiscal policy
By the end of this section, you will be able to
- Define fiscal policy
Fiscal Policy
Fiscal Policy
In economics and political science, fiscal policy is the use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy. Fiscal policy, carried out by the national government and each state government, determines what services and programs will be available to the public by determining where the government's revenue is spent.
Fiscal policy is sometimes confused with monetary policy. Monetary policy is carried out by the central bank of the United States, called the Federal Reserve System or the FED. It involves the management of interest rates and the supply of money in circulation but is, for the most part, beyond the control of the people. The FED works autonomously to make non-partisan decisions that are in the best interest of the people.
The Texas Constitution requires that Texas operate under a balanced budget–Texas may spend not more than it collects. It may not deficit spend as national government does.
Reading Review Questions
Which type of policy involves revenue collection and expenditures? Who carries out this type of policy and what is its purpose?
Who controls monetary policy and what are its two main components?
What does Texas require with regards to fiscal policy? Explain what this means