Answer to Question #107542 in Macroeconomics for Usman Tariq

Question

Problems with tight fiscal policy

Answer 1

Tight fiscal policy involves cutting government budget or increasing tax rates in order to improve government's finances.The implementation of the policy has some devastating effects some of which include;higher taxation may cause disincentive to work and the constricted budget impedes provision of public goods and services which daunts the political image of the ruling party.