The Effects of Fiscal Policy on Private Business Investment Essay

The Effects of Fiscal Policy on Private Business Investment - Essay ExampleAs a point of departure, private business investments are considered as fundamental channels in which fiscal policy influences the economic harvest-festival. For instance, the endogenous economic growth model explains the dynamism in the capital stock, which is believed to influence the long-term per capita growth rate. This can happen through two ways namely more numerical investment and more-efficient investments. This follows that the aspect of fiscal policy can be said to influence investments by varying domestic contract, which influence the Growth Development crossway (GDP) of a nation, thus influencing the economy growth of a country. Considering a model of a tight fiscal policy where expenditure is reduced and increased receipts like in the case of the US, immense negative expectations are eminent. This reduces the viable incentives fro investments. On equal measure, the fiscal policy, particularl y the short terms, can directly arrogate investment through the cost of capital attributed to the tax system (Razin, Assaf, and Jacob, 2006. This follows that, the long-term fiscal policy on well-designed tax system on liberalized and privatised programmes such as for the case of the US and UK, help private sector investments because of reduced direct government involvement.For the case of government interest increase, foreign capital is attracted from the foreign investors and this increases the demand for the countrys currency. This implies that the value of countrys currency is increased. It is imperative to note that the increase in the currency value makes the exports from the country in interrogative sentence more expensive. On equal measure, when the government funds discrepancy with issuance of government bonds, the interests rates increases across the market due to the government borrowing which creates a higher demand for the credit in the financial markets. It is impera tive to note that, theoretically,