Fiscal Policy & Inflation
Upcoming SlideShare
Loading in...5

Fiscal Policy & Inflation



Presentation about Fiscal Policy and how it is implemented in Malaysia to measure Inflation.

Presentation about Fiscal Policy and how it is implemented in Malaysia to measure Inflation.



Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds



Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

Fiscal Policy & Inflation Fiscal Policy & Inflation Presentation Transcript

  • FISCAL POLICY  PRINCIPAL ECONOMY (dqs136)  LECTURER : Pn. Norazlin Bt Mat Salleh  PRESENT BY :  Nurul Aznieta Bt Sharif  Zulaikha Bt Elias  Nur Hielyana Bt Ibrahim  Norazima Bt Sajali
  • Fiscal Policy  Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.  it was determined that the government had to take a proactive role in the economy to regulate unemployment, business cycles, inflation and the cost of money.  There are two types of fiscal policy practised by a government.
  • Expansionary fiscal policy • The expansionary fiscal policy is adopted to overcome unemployment or recession problems. • The government will increase public spending by undertaking public works and reduce taxes.
  • Contractionary fiscal policy • The contractionary fiscal policy is adopted to overcome inflationary problem. • During inflation, the contraction fiscal policy is to create a budget surplus in order to reduce aggregate spending.
  • AFFECT ON CREDIT SCORE  on this process, the increase in economic productivity can cross over a very fine line and lead to too much money in the market.  This excess in supply decreases the value of money while pushing up prices.  fine tuning the economy through fiscal policy alone can be a difficult, if not improbable, means to reach economic goals.  If not closely monitored, the line between a productive economy and one that is infected by inflation can be easily blurred.
  • The Economy Needs to be Curbed  When inflation is too strong, government can use fiscal policy to increase taxes to suck money out of the economy.  Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation.  the possible negative effects of such a policy in the long run could be a sluggish economy and high unemployment levels.  the process continues as the government uses its fiscal policy to fine-tune spending and taxation levels.
  • Affect Fiscal policy  The effects of any fiscal policy are not the same for everyone.  Depending on the political orientations and goals of the policymakers, a tax cut could affect only the middle class, which is typically the largest economic group.  But, when a government decides to adjust its spending, its policy may affect only a specific group of people.
  • INFLATION  Can be defined as a continuous increase in the general price level of goods and services in the economy.  When a persistent increase occurs in the level of prices that lowers the purchasing power of money, we call it inflation.  Inflation is also a situation where there is ‘too much money chasing too few goods’.
  • CAUSE OF INFLATION  When too much money is in circulation in comparison to the production of goods and services, then inflation occurs.  The consequences is the fall of purchasing power of money.  During inflation, general price rise means that the cost of living going up continuously.  Various measures can be taken to reduce general price inflation to overcome or reduce the rate of inflation.
  • QUESTION .. How Fiscal Policy is implemented in Malaysia as a measure to control inflation ?!
  • Reduce the level of government purchases  Government purchases are expenditures by the government sector, especially those by the federal government, on final goods or services.  It is that portion of gross domestic product purchased by governments.  The actual purchases are typically undertaken by individual government agencies.
  •  Contractionary Fiscal Policy involves a decreases in the funds appropiated to these assorted agencies. The agencies the reduce their purchases which decreases aggregate productiom, imcome, and the rate of inflation.  A reduction in gov. expenditure will directly affect aggregate demand.  The government will cut the salary of all civil servants and postpone its development projects to reduce the purchasing power of public.
  • Increases in taxes  Taxes are the involuntary payments that the government sector imposes on the rest of the economy to generate the revenue needed.  The increase in taxes provides the household sector with less disposable income that can be used for consumption expenditures.  While tax changes tend to be administratively easier to implement than government purchases, they are less political palatable to political leaders and voters who prefer lower taxes to higher taxes.  A highly regressive text structure can successfully reduce the impact of inflation on the economy.
  • Decrease in transfer payment  Transfer payments are payments made by the government sector to the household sector with no expectations of productive activity in return.  transfer payments rely on a payment schedule based on qualifying characteristics of the recipients.  The decrease in transfer payments reduces the disposable income available to the household sector, which then forces a reduction in consumption expenditures, leading to less aggregate production and employment and subsequently a decrease in inflationary pressures.
  • THANK YOU.. Ika Yana Azima Az