Answer to Question #70277 in Macroeconomics for shahin

Question #70277
Describe the main instruments of fiscal policy that are available to government.
Expert's answer
Fiscal policy is often used to stabilize the economy over the course of the business cycle.

There are instruments of fiscal policy include:
- change in tax rates (a powerful instrument of fiscal policy in the hands of public authorities which greatly effect the changes in disposable income, consumption and investment)
- the budget of a nation
- public expenditure (the increased public spending will have a multiple effect upon income, output and employment exactly in the same way as increased investment has its effect on them)
- transfer payments;
- system of profit participation (an exemption from taxation for a shareholder in a company on dividends received, and potential capital gains arising on the sale of shares)
- unemployment benefits during periods of economic recession.

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