Question

List one pro and one con of government use of fiscal policy​

Answer 1

One of the advantages of government use of fiscal policy is that it can lead to the increment of spending power.

Reduction of taxes by the government always translates to an increase in disposable. As disposable income increases and so does spending power.

One con of government use of fiscal policy is that it lower taxes now can lead higher taxes later on.

When the government was to expand the economy, it lowers taxes and increases it's spending. The challenge is that increased government spending will translate to an increased budget deficit. Increase in government budget deficit leads to crowding-out effect.

Crowding out effect is where increased government spending leads to a reduction personal consumption of goods and services because government spending requires the expenditure of existing resources which to be replaced requires the increase of interest rates and in most some cases, taxes.

Cheers!

Answer 2

Fiscal policy helps in the stimulation of growth of a country. It is done by ensuring there is a large increase in consumer spending by its citizens. This is done by the reduction of the taxes on good and services.

Fiscal policy however has its disadvantage which includes a lesser revenue for the government. This is because tax is an instrument of revenue for the government and a reduction means lesser gross domestic product and could lead to a budget deficit.