The paper “ Efficiency of Fiscal Policy” is a meaningful example of the case study on finance & accounting. According to Handerson (1987), the major goals of macroeconomic policies are to achieve full employment, price stability, sustained economic growth, and external balancing. To achieve these goals the Government intervenes in the economy through monetary or fiscal policies (Block & Hirt, 2008). Monetary policies are characterized by the manipulation of the stock of money in circulation in a country in order to be able to achieve the goals of macroeconomic policy.
Aschauer (1985) explains that fiscal policies are the government's plan for spending and taxation. Fiscal policies are designed to steer aggregate demand in some desired direction (Chaloupka, 2011). This paper will concentrate on fiscal policy. It was felt that in a capitalist society government participation in the market should be very minimal. Those who supported this emphasized the need to leave the allocation of resources to market forces of demand and supply so that if the demand is greater than supply the prices would rise and vice versa (Clarke & Dela, 2008).
This process would clear the market as they argued but over the years many changes take place. The political ideology report led to the establishment of socialistic states where the size of public spending was larger than the private sector (Nickerson & Silverman, 2003). However, despite the different ideologies the need for government participation in economic activity is important for various reasons such as; Public spending is required to provide goods and services that cannot be provided through the market (Clarke, 2004). The government must formulate and implement economic policies that are needed to guide, correct, and supplement the course that the economy will take on its growth and development (Crawford, 2007). Denis & McConnell (2003) acknowledge that even where market forces are used to allocate resources there must be a significant large public sector to provide regulation and laws that will provide the required protection otherwise there will be no property rights and there cannot be a market without exclusive ownership rights.
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