As demand for services increase, tax rates and service fees often increase. This results in a slower rate of new development and revenue growth. Discuss a local policy example where this principle applies. Fiscal Policy

Tax Policy

(*) Taxes have different effects on demand, taking into account whether the government taxes firms directly or indirectly. Due to the increasing demand for services, more income goes to tax (Maican & Orth, 2018). Customers have to pay higher fees, which causes them to spend less on their consumption. An increase in price leads to a decrease in the number of services provided. As a result, this will lead to a slower pace of new developments and sales growth. This is an example of fiscal policy.

Fiscal policy is the use of government spending to influence the economy. Fiscal policy is used by the government to control the level of aggregate demand in the economy to promote price stability, employment growth, and economic growth (Tan, 2017). In terms of tax policy, the government has two options to change the tax rate and composition, as well as the amount of spending in different sectors of the economy. As the economy grows, spending cuts are expected to reduce aggregate demand and compress the economy, a powerful policy tool when inflation is high.