Question

Identify at least one cost and one benefit of using fiscal policy as a tool to pursue the goal of economic growth.

Answer 1

Answer:

The cost is the reduction in tax paid by corporate organizations to the government, the benefit is the increase in productivity. Explanation:

Fiscal policy is the economic measures of using the revenue and expenditure of government to regulate the economy, it includes the tax measures such as direct tax for instance personal income tax, company profit tax,otherwise known as corporate tax, it also include indirect tax such as the sales tax. The fiscal policy also includes government budget such as balance budget, surplus budget and deficit budget.

Economic growth on the other hand can be defined as the increase in the output per head in an economy over a given period of time. One of the ways in which fiscal policy can help in the economic growth of a country is in the area of tax cut for corporate organizations, this measure will increase their profit which they can plough back into the production of more goods in the economy such as the expansion of their production capacity, employment of more workers which will help in reducing unemployment, and also the increase in the income of the producers of the raw materials the company's used in the production of their good, all these will have a multiplier effect on the economy and help in the economic growth of the country.