A Prom to Remember

The first thought to the mind, when hearing the words “fiscal policy”, would be “What’s that?” Fiscal Policy is when the government takes actions to manipulate factors to help the economy. An example would be the Bush tax cuts. When President Bush cut the tax rate, it allowed workers to hold on to more of their earnings.1 Classical and Keynesian economics have some similarities but there is once major difference: who’s in charge of adjusting the market? In Classical Economics, the market will be able to adjust on its own. In Keynesian Economics, the government must step in to solve issues with the market. (395-396) Can the Business Cycle relate to Fiscal Policy?

The business cycle and fiscal policy can relate. The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.

Furthermore, labor and wages also relate to fiscal policy, but what’s Labor and wages and how does it relate to fiscal policy? Labor and wages are a varied amount of money a worker gets based on their skill level and education, as well as according to supply and demand.(221) Demand for labor is set by the demand from what the worker does. Demand for supply would be from people who provide labor in exchange for wages. An example for demand for labor would be a workforce going on strike because they believe they are getting cheated on pay. An example of labor supply would be if the salary of a job fulfilled the needs of a laborer, that laborer would put in labor for that specific job, based on the jobs salary. This all ties into fiscal policy because without the government taking charge by giving the law of minimum wage, many laborers would be getting wages lower than they should be. So, how does all of this relate to taxes?

MLA Report

1. “Remember the Bush Tax Cuts on This Labor Day.” Heritage.org 2007

Heritage. 1 September 2006 <http://www.heritage.org/Research/Economy/wm1204.cfm>

2. O’ Sullivan, Arthur and Steven M. Sheffrin. Economics: Principles in Action.

Boston: Person Education, 2007.

3. “What