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Fiscal Policy

Fiscal Policy:

Public or government finance is a field of economics. This deals with budgeting the revenues and expenditures of government (i.e., or public sector). It is regarding the identification of and appraisal of the means and effects of government financial policies.  The public finance deals with the financing of the State actions and it talks about the financial operations of the public treasury. Fiscal economics is the other name for public finance.

The functions of government were minimum in early days of the development of economic philosophy. Economic decisions were guided by the market forces of demand & supply and the government was not predicted to interfere with the working of market forces. Previous governments limited their activities to

a) The maintenance of law and order 
b) The defense of the country
c) Administration of justice
d) General administration. 

The early State was a police State. Modern governments do not imprison their activities to the barest minimum. Moreover the activities executed by the early State, modern governments take on a number of growth and development-oriented projects and wellbeing activities for the welfare of the people. The modern State is a Welfare State. Thus there is a change in the idea of a modern State that is a wellbeing State. The State has to mobilize sufficient resources for meeting out the ever rising expenses, as the functions and responsibilities of the State have multiplied.

Fiscal economics in current days has undergone far-away changes. Such changes can also be studied via macro aspects of fiscal policy. It associates to macroeconomic functions of the government.

It is concerned with taxation, public expenses and monetary policy that affect the overall extent of employment and price level. It might be noted that there is a link among economic theory and the theory of public finance.

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