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hello sir,why is borrowing money from capital market and spend it on public work a fiscal policy?my understanding of fiscal policy is increase or decrease of tax by govt to control money in circulation.pls help
Fiscal policy is the use of government revenue and expenditure to influence the economy.
Although the main government revenue is from taxes, there are times when the government spends more than they collect in tax, in which case they borrow to make up the difference. There are other times when they spend less than they collect in tax – in which case they use the extra to repay borrowings.
It is only in a fully balanced economy that the tax revenue will equal the spending.
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