Chapter

On Macroeconomics of Fiscal Policy

Surajit Das

in Economics

Published in print October 2015 | ISBN: 9780199458950
Published online September 2016 | e-ISBN: 9780199086900 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199458950.003.0005

Series: ICSSR Research Surveys and Explorations

On Macroeconomics of Fiscal Policy

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The deficit financed government expenditure multiplier is stronger than the tax-financed government expenditure multiplier, ceteris paribus, in enhancing aggregate level of activity and employment in a demand constrained situation. The fiscal deficit does not necessarily cause crowding-out of private investment. It does not necessarily cause demand-pull inflation either. The sustainability of public debt is also not necessarily a matter of deep concern. The higher foreign indebtedness as a consequence of financing a larger fiscal deficit is also not inevitable. In fact, expansionary fiscal policy broadens the size of the market. It seems that the real basis of the opposition of fiscal deficit by the businessmen and the industrial leaders is political.

Keywords: macroeconomic policy; fiscal policy; crowding-out; public debt; fiscal deficit; inflation; unemployment

Chapter.  13707 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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