Fiscal Capacity

AAA

DEFINITION of 'Fiscal Capacity'

In economics, the ability of groups, institutions, etc. to generate revenue. The fiscal capacity of governments depends on a variety of factors including industrial capacity, natural resource wealth and personal incomes.

INVESTOPEDIA EXPLAINS 'Fiscal Capacity'

When governments develop their fiscal policy, determining fiscal capacity is an important step. Identifying fiscal capacity gives governments a good idea of the different programs and services that they will be able to provide to their citizens. It also helps governments determine the tax rate necessary to provide a certain level of programs. The theory behind fiscal capacity can also be used by other groups, such as school districts, who need to determine what they will be able to provide to their students.

RELATED TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  3. Interest Equalization Tax

    A federal levy on the purchase price on foreign stocks and bonds ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  6. Personal Income

    Total compensation received by an individual. Personal income ...
Related Articles
  1. What Is Fiscal Policy?
    Economics

    What Is Fiscal Policy?

  2. How The U.S. Government Formulates Monetary ...
    Personal Finance

    How The U.S. Government Formulates Monetary ...

  3. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

  4. The Treasury And The Federal Reserve
    Bonds & Fixed Income

    The Treasury And The Federal Reserve

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center