Yes, same time also decrease the tax for the


Yes, the fiscal policy of the country would change as
different fiscal policies is used for different scenarios dependent on the
country itself and that country has a choice to. There are two types of fiscal policies
and they are expansionary fiscal policy and Contractionary fiscal policy.


Firstly, Expansionary fiscal policies refers to a policy
whereby the government expands the money supply in the economy as it might be
facing a bad economy, recession, downfall or is having a slow economy and what
the government does is that it will increase the government spending and at the
same time also decrease the tax for the citizens. By increasing government
spending, it actually helps the economy as government is funding and investing
in building and setting up new infrastructures and machineries in the country and
funding on workforce training and education of working staffs. Employment rate
will increase as a result and overall it helps improve the economy of the

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By decreasing the taxes, it allows people to spend more and
this helps to increase the GDP of the economy as the consumer spending
increases leading to an increase in Aggregate Demand. Reducing of corporate
taxes means that more companies will want to spend and invest as they have more
disposable revenue and thus this will increase productivity capacity. By
lowering income tax, employees are paid a higher salary than before and this
increases their motivation to work hard for the company they work in which
overall increases their productivity.


On the other hand, Contractionary fiscal policies refers to
a policy whereby the government custs the government spending and they raise
the taxes in the economy. This policy reduces the amount of money available for
businesses and consumers to spend. It is often used in an economy when there is
high inflation rate, when the economy is still booming and it is facing
overheating whereby productive capacity is unable to keep pace with the growing
aggregate demand.


To slowdown the overheating and decrease the high inflation
rate, government have to decrease their government spending and increase taxes
which will mean that prices of things will be expensive and people will not
want to invest in Singapore’s infrastructure and economy and this leads to the
decrease of Aggregate Demand (AD) as there is decrease in consumer spending due
to high tax, decrease in investments as prices are too high to invest in, decrease
in government spending like decrease in subsidies.

Contractionary fiscal policies also lowers the employment as
employers will struggle to acquire workers that can meet the market demand. If
there are lesser capable workers around, it will be harder for employers as
they have to compete for the staffs.

Contractionary fiscal policies help to slow economic growth
into a healthy level and this depends on the government and the economy whether
to use this fiscal policy.


Therefore the use of fiscal policy will be determined by
which economy the country is under and the decision the government wants to
make for the country