STUDY GROUP PROJECT – COMPARATIVE ECONOMICS

How is fiscal policy established and implemented in the United States and the European Union?

STUDY GROUP PROJECT – COMPARATIVE ECONOMICS

Abstract

This paper deals with a presentation of the fiscal policy in United States and in the European Union. This is a research proposal paper of the main differences between these policies. In economics, fiscal policy is the use of government expenditure and revenue collection to influence the economy. Fiscal policy can be contrasted with the other main type of economic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money. The two main instruments of fiscal policy are government expenditure and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy: the aggregate demand and the level of economic activity; the pattern of resource allocation; and finally the distribution of income.

STUDY GROUP PROJECT – COMPARATIVE ECONOMICS

The fiscal policy established and implemented in the United States The role of government in the American economy extends far beyond its activities as a regulator of specific industries. The government also manages the overall pace of economic activity, seeking to maintain high levels of employment and stable prices. It has two main tools for achieving these objectives: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it manages the supply of money. The Federal Reserve, the independent US central bank, manages the money supply and use of credit (monetary policy), while the president and Congress adjust federal spending and taxes (fiscal policy). The Federal Reserve decides the monetary policy of the United States with a dual objective of price stability and full employment, and the obligation to facilitate economic growth. The