Fiscal generally refers to government finance. It can apply to several government finance issues.
One common term that fiscal is applied to is “fiscal policy.” The way a government manages its resources – including collection of revenue and spending money – is called the fiscal policy. The end goal of this policy is to influence the economy in one way or another.
When talking about fiscal policy, there are two important factors. These are taxation (collection of revenue) and government spending. Just as with other financial undertakings, the desired result is for the revenue to exceed the expenditure.
There are, however, three general stances that a fiscal policy may take. These are as follows:
1. Neutral: the revenue from taxes is equal to government spending. The result is that there is a neutral effect on overall economic activity.
2. Expansionary: government spending is more than the revenue from taxes. This may be due to an increase in spending, a decrease in revenue from taxes, or both. The result is a budget deficit.
3. Contractionary: government spending is less than the revenue from taxes. This may be due to a decrease in expenditure, and increase in tax collection, or both. This usually results in a surplus (but not always.)
Another common term is fiscal year, which simply defines a period wherein the government has to make a report on its financial activities. The period can also change together with the term, i.e., fiscal quarter. Companies and other entities may also employ these terms.
