How is fiscal policy established and implemented in the united states and the european union?

Pages: 8 (1861 mots) Publié le: 12 mars 2011

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



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. Ineconomics, 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 andcomposition 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.


The fiscal policy established and implemented in the United States The role of government in the American economyextends 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 thesupply 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. Theorganization also oversees the U.S. banking system, publishes reports, such as the Beige Book, on the U.S. economy, and acts as lender of last resort. The Fed can affect the external value of the currency, the U.S. dollar in particular through the use of interest rates (payment to lenders) to motivate the gain or capital flight, and thus influence the money supply and economic growth United States(such as protectionism in disguise who leads a subsequent devaluation of the dollar and therefore a better price competitiveness). Finally, the Fed is independent of political institutions. The Federal Reserve Act defines the mission of the Fed: "Maintaining an average growth of monetary aggregates and the amount of credit consistent with potential output growth in order to work towards thefollowing objectives: a rate of maximum employment, stable prices and interest rates low long-term rates." The Federal Reserve decides on a final of U.S. monetary policy, decision-making body is the Federal Open Market Committee or FOMC, which can be translated as "for the Federal government intervention in markets of interest rates" equivalent a "Monetary Policy


Committee. The FOMC sets goals on the rate at day-to-day of U.S. money market, the Fed Funds. To achieve this, the instruments available are: the discount rate, the rate of reserve requirements, especially the market operations of interest rates, mainly on government bonds short. Thus, the Fed does not clearly defined milestones to guide its monetary policy and has abandoned the policyof strict monitoring of monetary aggregates. She practices a policy of fine tuning, adjusting its rates more frequently than their counterparts, making it more responsive. The Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and...
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