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What is fiscal discipline ? What …

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What is fiscal discipline ? What happens when fiscal discipline is not maintained in the economy ?
  • 1 answers

Yogita Ingle 5 years, 1 month ago

Fiscal discipline refers to a state of an ideal balance between the revenues and the expenditures of the government. It requires timely check on the expenditures, in view of the limited revenues of the government.

Lack of fiscal discipline causes greater flow of money than the volume of output in the economy. It leads to inflationary condition where wages catch prices and prices catch wages. Because of high cost of production with low aggregate demand, process of investment will be in trouble. When investment get struck or is reduced, then unemployment prevails which lead to low level of equilibrium trap.

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