The main problems associated with fiscal policy

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  The main difference is that the legislative lag of fiscal policy is longer, although the effectiveness lag may be shorter. The other problems are more specific to fiscal policy.

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  The main tools used by the government to implement a fiscal policy are explained. Also, the three main stances on fiscal policy are discussed. Finally, the funding methods and types of expenditures are explained.

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  Potential problems with persistent deficits therefore include the accumulation of foreign debt with associated interest payments or domestic assets passing increasingly into the hands of foreigners.

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  The end result being more consumption and/or investment. As with the expansionary fiscal policy example above this increases output, lowers unemployment, and creates economic growth.

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  The main instruments of macroeconomic policy are changes in the rate of interest and money supply, known as monetary policy, and changes in taxation and public spending known as fiscal policy.

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