Macroeconomic and microeconomic aspects of fiscal policy

Abstract

One of the most important forms of macroeconomic policy is the fiscal policy. The name "fiscal policy" has a narrow and a broad sense in modern economic theory. The narrow sense relates to the term "taxation", whereas in the broad sense the fiscal policy includes public (budgetary) revenues and public expenditures. Through the use of public revenues and public expenditures in order to affect the motion of the aggregate demand and aggregate supply fiscal policy achieves effects of stabilization and stimulation in the national economy. This paper provides review of the basic economic objectives of the fiscal policy of microeconomic nature (the state's influence on the behavior of economic subjects, corporate business and incentives to investment undertakings) and of macroeconomic nature (full employment, price stability, equal balance of payments). Furthermore, the work provides a short review of Serbia's taxation policy and a very important novelty within it the introduction of Value Added Tax as of January 1st, 2005.