Economic Development Of A Country - 1027 Words

Today, many countries are involved. We cannot get rid of economic if we want to talk about development. The term economics can be defined as the science of how people and societies deal with their limited resources to satisfy their unlimited wants (Miller, 2012). The development of a country is based on many characteristics, such as the average income per capita, level of education, the death rate every year, the population health, and many more, but the most important characteristic is the economic activity of a country, therefore it should be promoted over any type of characteristics. Fiscal policy is a very important part of the economic. Its foundation were laid after the great depression of 1929. Fiscal policy can be defined as action†¦show more content†¦In case of recession, the government can lower the tax rate in order to boost the economy growth. Expansionary and contractionary are the two basic type of fiscal policy. The term expansionary is used when there is a recession, which is a period during which industrial activity are less. During this period, the aggregation demand is reduced than what it is supposed to be in a full employment. In this situation, the government will have to augment the aggregation demand by increasing their spending. The government can also reduce the rate of taxes, and this will have an impact on the aggregation demand curve to shift to the right, which will allow consumers to have more money to buy goods and invest. The term contractionary on the other hand is used when there is inflation. During this period, the industrial activity is getting out of control. The GDP per is greater than full employment (Miller, 2012). In this situation, the government will have to decrease the aggregation demand by reducing their spending. They can also chose to increase the rate of taxes, which will slow the gr owth, because the consumers will not enough money to buy goods and invest. The type of fiscal policy that is being used in both the past and present day is expansionary fiscal policy. In this type of fiscal policy, taxes rate are reduced and the government spending increase. For example, in