Economics Fiscal Policy Questions Medium
Fiscal policy refers to the government's use of taxation and spending to influence the overall economy. It involves decisions related to government revenue generation, expenditure allocation, and debt management. The primary objective of fiscal policy is to stabilize the economy, promote economic growth, and address various macroeconomic issues such as inflation, unemployment, and economic inequality.
On the other hand, fiscal sustainability refers to the long-term ability of a government to maintain its fiscal policy without jeopardizing its financial position or burdening future generations. It focuses on ensuring that government revenues are sufficient to cover expenditures over the long run, without accumulating excessive debt or relying heavily on borrowing. Fiscal sustainability involves maintaining a balanced budget or achieving a sustainable level of debt that does not pose a risk to the overall economy.
In summary, while fiscal policy deals with the short-term management of government finances to achieve economic objectives, fiscal sustainability focuses on the long-term viability and stability of the government's fiscal position. Fiscal policy is a tool used to achieve fiscal sustainability by ensuring that government revenues and expenditures are in balance and that the overall fiscal position remains sustainable over time.