There are three main types: higher taxes (revenue generation) to fund government spending, revenue generation plus lower government spending, and lower taxes plus lower government spending. Austerity has been used in many countries, such as the United States and Greece.
How does austerity work?
Austerity measures restore confidence in the borrowing country's budget management. The proposed reforms create more efficiency and support a stronger private sector. For example, targeting tax evaders brings in more revenue while supporting those who do pay their taxes.
What are some examples of austerity policies?
Austerity policies include tax increases and government program cuts. Austerity measures may result in a decline in available social services and a reduced individual disposable income. Austerity measures are considered harsh economic policies intended to reduce the government's budget deficit.
