Fiscal Policy and Its Implications in Belgium Assignment

Fiscal Policy and Its Implications in Belgium - Assignment Example The government may also choose to increase its own spending and with this, jobs are created, an element that lowers the unemployment rate. Briefly, Fiscal policy is a major driver of the nation’s economic performance. Government spending would include the purchase of goods and services. Since it has the power to lower or rise, real GDP It qualifies to be a fiscal policy tool. The government can influence economic output if it adjusts its spending. Apart from the effect of government spending on the economy, it also affects businesses dealing with goods and services bought by the government thus multiplying through the economy (Moller, 52). The GDP may be stimulated if consumers spend the paychecks they earn from their businesses. When those dealing with government vehicles receive large orders, their sales tend to increase. This makes them hire more employees who in turn earn paychecks from the companies. The employees then spend this money on goods and services thus increasing spending, leading to a much greater result. This effect is called the multiplier effect. The changes that occur in taxes affect the average consumer income, and changes in consumption leading to changes in real GDP. These make it a fiscal policy tool. The government can influence economic output by adjusting taxes. They can be changed in several ways, and these include raising or lowering marginal taxes. Secondly, the tax rules can be modified or eliminated (Modigliani & Johnson 34). These include social security, welfare or unemployment checks. On a monthly basis, the checks go out all over the country thus serving as the income for millions of consumers. As in taxes, changes in transfer payments also leads to changes in consumer income. When consumers spend most of their income, they influence the economic output. These three tools are the ones that the government mostly administers to the economy to help it in the short term.