The term macro- economics is used to refer to the type of economics that is concerned with the general functioning of the economy of a particular country. Macro- economic principles include the determinants of exchange rates, taxes, government borrowing and spending, credit and financial rules. The primary goal why federal governments set these policies is to cut down the risks of uncertainty in its operations. Other functions of macro- economic policies include, determine the decisions of companies to either export or import goods and services, production, and manufacture and hire or fire employees, decisions to invest in education and infrastructure, decision to save, borrow or consume. This essay endeavors to focus more on macroeconomic principles set by the government and its role in the economy.
Fiscal policy is a policy that is related to the way in which a government makes adjustments to its tax rates and spending levels in a bid to monitor and influence the economic status of a country. The main reasons for enacting the fiscal policy are; increase the growth rate by raising investments rates, to facilitate the socially and economically prime investments and formation of capital (Dianah & Joseph, pp 16). Similarly, Kenya is one of the developing countries and has the primary goals of the fiscal policy. Kenya Revenue Authority (KRA) are among the organizations that proposed for the fiscal policy in Kenya citing many benefits that would come with it, for instance, stabilize the economy and better resource allocation. Those who opposed the fiscal policy cited the system of bureaucracy as the main issue that would stifle the growth in the economy (James &John, vol. 8, no.2). Before the enactment of the fiscal policy Kenya experienced challenges such as poor allocation of resources, too much spending, and stunted economic growth. However, the implementation of the economic growth boosted the economy in the first decade since independence. The expansion of the market within East Africa region and consistent economy are some of the benefits of the policy.
Between 1964-1973, the GDP of Kenya was 6.6% per year; Kenya was thus compared with the recently industrialized East Asia states. Therefore, fiscal policy plays a great role in building the economy of a country (Horrobin, pp 243).