fiscal policy question (1 Viewer)

[gc653]

What is a limitation/weakness of the fiscal policy in achieving full employment ??


Also does anyone know the trends in economic growth, inflation and employment that extends over the past 24/25 years ????? Or any links that show past stats and positive trends would be great too .I need to use these to show the effectiveness of the fiscal policy.

 

[AAAAB]

If the government loosens fiscal policy and increases government expenditure relative to taxation, government expenditure and consumer spending will rise, increasing economic growth and thus, the derived demand for labour, so cyclical unemployment falls to the natural rate. I guess one limitation is the converse - tighter fiscal policy curtails government spending and lowers the derived demand for labour. Further, I think fiscal policy addresses structural unemployment over cyclical. Sure it's a macroeconomic policy, but if the government allocates resources to efficient industries, it promotes employment only within those industries to the exclusion of others. So growth is promoted in some industries but inhibited in others. Fiscal Policy also has a time lag of around 6 months so it's intended effects won't be impactful immediately.

Economic growth has increased since the 90s with the exception of 1991-92 or 92-93 (can't remember to be honest) during Australia's recession where Australia experienced negative economic growth for three consecutive quarters. We average an annual growth rate of 2-4% as an advanced economy. We grew 2.8% last year, about 5.5% during the global resources boom of 2006-07.

Give me time to get back to you on the other two - I don't have stats as far back as 25 years ago (sorry).

Hope this helps!

 

[AAAAB]

its intended effects*