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  • Essay / Tax Policy Essay - 568

    Everyone has their own political leaning and that leaning comes from each person's opinion of the government. People's opinions are shaped by what parties say they will and won't do, how much they want to spend and what they want to save. In macroeconomic terms, what the government spends is called fiscal policy. Fiscal policy is the use of taxation and government spending to stimulate or slow the growth of an economy. Fiscal policy can be used for expansionary purposes, aimed at growing the economy and increasing employment, or for contractionary purposes, aimed at slowing the growth of an economy. Expansionary fiscal policy is characterized by increasing government spending and decreasing tax rates, while contractionary policy focuses on reducing government spending and increasing tax rates. It must be understood that fiscal policy is supposed to help the economy, even if some negative results may result. When governments increase their spending, crowding out can occur: government spending reduces available funds and increases the cost of capital, leading to...