Understanding Fiscal Policy: Objectives and Instruments

hello everyone my name is minisetti I hope you all are staying healthy today we are going to talk about meaning

objectives and instrument of Physical policy so what is Physical policy Physical policy is a policy under which

government uses its expenditure and revenue programs to produce desirable impact on production employment and

national income Physical policy is the policy under which government uses its expenditure and revenue programs to

produce desirable impact on production national income and employment as we know government do so many expenditure

for welfare of society for example expenditure on roads expenditure on education expenditure on public health

at the same time government receive income in form of taxes under Physical policy government use its expenditure

and revenue in such a way so that it can produce positive effect on national income production and employment now we

are going to talk about objectives of Physical policy first objective of physical policies full employment in

order to achieve this objective government increase their expenditure for example government increase

expenditure on school Hospital Park so that more and more people can get Employment Plus government reduces taxes

and give incentives to private sector so that they can also increase their investment and provide jobs to so many

people second objective is price stability during the time of deflation prices are very low because demand is

very low Market is very down in order to increase demand government increase public expenditure and reduce taxes as

taxes reduce demand increase demand increase prices also increase and become stable third object is reduction in

economic inequalities in economic inequalities gap between rich and poor to reduce economic inequalities

government impose more taxes on rich people and use this tax income on welfare of weaker section a third

objective is economic development in order to achieve the objective Economic Development government increased Capital

formation or we can say that government increase investment for underdeveloped country capital for formation is small

factor to increase income output and employment now we are going to talk about instruments or we can see the

tools of Physical policy first instrument of Physical policy taxation during the time of inflation prices are

very high to control inflation government increased taxes as Government increased taxes spending form is demand

of people fall as demand fall price is also full this process will continuous until price becomes stable neither too

high nor too low on the another head in case of deflation prices are very low Market is very down because demand is

very low to increase demand government reduced tax is that government reduce taxes spending increase means demand

increase and prices also this process will also continue until our price becomes stable now we are going to talk

about next instrument of Physical policy it will call government expenditure as we know government do so many

expenditure for welfare of society or for example expenditure on public health expenditure on education expenditure on

training expenditure on employment expenditure on Social Security through this expenditure government generate

income in economy when income increase aggregate demand increase output increase and employment increase but

government change their expenditure according to situation of market for example in case of Boom prizes are very

high there is already so many money in Market in this time period government reduce their expenditure on the

Netherland during depression prices are very low Market is very low down at this time period government increase their

expenditure next instrument of physical policies public debts public debts means loans taken by government public debts

Miss loans taken by government sometime government expenditure exceed from their income during this time period

government borrow money from Banks from public as well as from International Financial unit during depression

government debts are very effective because in this time period private sector don't want to invest because

demand is very low if Government take debts and use this money on a public work program or in infrastructure or do

some investment as a result demand national income and employment will increase and we can overcome from

depression this is all about a fiscal policy meaning and objective and instrument I think you got it and thank

you so much for watching this video bye take care