Fiscal Policy in a Low Interest Rate Environment

Fiscal policy is the second tool available for use by the government (it is used by the government at all levels). The term fiscal policy refers to the expenditure the government undertakes to provide goods and services and to the way in which the government finances these expenditures. <Tab/>There are two methods of financing: borrowing and taxation. The debt burden assumed by the government is itself an important policy variable …

…raise their investment spending in order to produce more consumer goods. Government purchases stimulate the production of the goods<Tab/> that they buy. This circle of activity generates income that further raises consumer spending. <Tab/> References Seidman, L., Reviving Fiscal Policy. (John Maynard Keynes). www.geocities.com. Dong, F., Taylor, L., Yucel, M., Fiscal Policy and Growth, Research Dept. Working Paper 0301, Federal Reserve Bank of Dallas, January 2003