# 1. There are two types of fiscal policies i.e. expansionary fiscal policy and contractionary fiscal policy. The expansionary fiscal policy is applied when there is a need to keep the economy growing. This is because it helps in creating more employment opportunities across the country by stimulating the aggregate demand. The expansionary fiscal policy can either be implemented by increased government spending or tax cuts. However, increased government spending makes more sense than tax cuts in a growing economy because when the economy is growing it is likely that many people are able to afford basic commodities therefore, government must look beyond making basic needs affordable. The government should therefore direct its spending on developing infrastructure so as to make the country ready for increased production as well as increasing population which are expected in a growing economy (Mühleisen, Towe, & Cardarelli, 2004).
#2. The best fiscal policies for promoting economic development should be those which lead to a balanced society i.e. which redistribute country’s wealthy. For example, government decreasing tax on basic commodities and increasing it’s spending on the underdeveloped parts of the country. While social policies which promote economic developments are enacting laws and regulations that protects the fundamental rights of the people like the right to access of clean water and freedom of speech.
Redistribution of wealth and income is important because it helps to create a balanced society. Where, the gap between the rich and poor is minimized so that everyone in the society can afford basic needs.
Manipulating business cycle is more important than redistribution of wealth because, when the economy is left to go into recession everyone in the society will become poorer. When the government manipulates business cycle wealth is created and more employment opportunities. The increased jobs may spread in long run to decrease extreme poverty in the country. The non-fiscal policies which are counterproductive in manipulating business cycle are those which urge the government on to interfere with the forces of demand and supply (Mühleisen, Towe, & Cardarelli, 2004).
The public sector is better placed to manipulate business cycle and redistribution of wealthy. This is because government cooperation will always work for the interest of the government unlike private sector players who may have selfish interests.
#1 .The employee’s rights are mainly protected in majority of state co-operations that’s why state companies have not been experiencing industrial unrests such as employee strikes. The employees in government cooperation have union representatives who bargain with the management on improving workers welfare.
The national indicators associated with tax rates is increased commodity prices when cost of production has not increased. While, increased number of students attending public colleges and universities is an indicator of improved public education standards. Lastly, the indicators for improved welfare safety net are increased access to free education for children from the poor and increased non-governmental organizations which seek to support the less privileged in the society (Mühleisen, Towe, & Cardarelli, 2004).
These data bases for analyzing economic growth are effective because they revolve around decreasing the gap between the rich and the poor. However, data on public health sector should be incorporated.
#2 . The Phillips curve shows the inverse relationship between unemployment and level of inflation in a country. The curve depicts a short run scenario where employment is foreseen to decreasing when the inflation is increasing. All political parties embrace moderate inflation and low unemployment rate. The Phillips curve has been put on dilemma by stagflation which depicts a situation of high unemployment and inflation. Therefore, stagflation has made the Phillips curve to lose credibility because in long run both workers and employers take inflation into consideration before entering into contracts. Hence, many employment contracts will be keenly crafted to increase pay in accordance with anticipated inflation making unemployment to rise to previous level (Friedman, & Laidler,1975).
References
Friedman, M., & Laidler, D. E. (1975). Unemployment versus inflation?: an evaluation of the Phillips Curve. London: Institute of Economic Affairs.
Mühleisen, M., Towe, C. M., & Cardarelli, R. (2004). U.S. fiscal policies and priorities for long-run sustainability. Washington, DC: International Monetary Fund.
