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. Fiscal Deficit

    When a government's total expenditures exceed the revenue that ...
  5. Fiscal Effort

    The amount of revenue collected by a government, often shown ...
  6. Equalization Payments

    A payment to a state, province or individual from the federal ...
Related Articles
  1. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  4. Economics

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  5. Economics

    An America with Donald Trump as President

    Take a closer look at some of policy proposals from Republican presidential candidate Donald Trump, and what a future with President Trump might look like.
  6. Investing

    Who Supports Donald Trump's Campaign?

    Explore the common characteristics among voters who prefer Donald Trump for the 2016 election, including youth, modest incomes and lack of education.
  7. Investing

    Can Donald Trump Really Win the Presidency?

    Understand why demographic trends and his lack of broad appeal are likely to keep Donald Trump from being a serious contender for the presidency.
  8. Stock Analysis

    The Top Performing Airlines Right Now

    Learn about the airline industry and its top-performing companies. Understand these top-emerging airlines and why they have taken more market share.
  9. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  10. Economics

    What Does Infrastructure Mean?

    Examples of infrastructure include mass transit, communication, sewage, water and electric systems, plus roads, bridges and tunnels.
RELATED FAQS
  1. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  2. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  3. How does the role of Medicare/Medicaid affect the drugs sector in the U.S.?

    Medicare and Medicaid have enormous influence on the pharmaceutical, or drugs, sector in the United States. For instance, ... Read Full Answer >>
  4. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  5. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
  6. What do I do if I think an accountant is in violation of the Generally Accepted Accounting ...

    The Financial Accounting Standards Board (FASB) promulgates generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!