Question

As a member of Congress, what changes would you suggest to fiscal policy to balance the budget? Explain at least two ways you would use the tools of fiscal policy to balance the budget by recommending an "increase" or "decrease" to each tool in your explanation.

Answer 1

You could raise taxes to create more income (assuming your budget is in deficit).

You could lower interest rates which should convince businesses to invest more and borrow more which would stimulate the economy and thus create a larger tax base.

Answer 2

If I were a member of Congress and had to provide a proposal to balance the government budget through fiscal policies, I would have two options:

-On the one hand, I could propose to increase taxes to the general population, either raising the tax rates or lowering the minimum from which to start collecting taxes. In this way, a greater amount of money would enter the federal treasury, and the government could access more financing to carry out its policies.

-On the other, I could propose to decrease public spending, that is, to cut government programs with the objective of reducing the amount of money spent by it, so that the money that enters with taxes is more than enough to meet the remaining expenses.