- 5 Marks
PT – Nov 2021 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy
Explain the types of fiscal policies and their effects on economic fluctuations and government revenue.
Question
Countries worldwide experience fluctuations in economic activity, which affects the consistency in government revenue generation. For example, when income levels are high, all other things being equal, tax revenue rises. Conversely, when income levels fall, tax revenue drops, requiring government policies to address the fluctuations. Governments, therefore, employ expansionary and contractionary fiscal policies to moderate the effects of such fluctuations.
Required:
Explain the following forms of fiscal policy:
i) Automatic Stabilisers
ii) Discretionary Fiscal Policy
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