Fiscal Theory

808 views

Published on

Fiscal policy consists of measures related to central and local government revenue and expenditure. Monetary policy consists of the measures which affect the supply of money and credit and the rate of interest. Changes in the supply of money and in the rate of interest are generally closely interrelated in the sense that, other things being equal, an increase in the supply of money and credit is likely to produce a fall in the rate of interest, and vice versa. A broader definition of monetary policy adopted here includes also measures taken to change the exchange rate.

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
808
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Fiscal Theory

  1. 1. FISCAL POLICY
  2. 2. INTRODUCTION Generally, FISCAL POLICY is the economic policy done by the government in terms of controlling the budget, which covers government revenue and expenditure in order to get an optimum economic growth and to stabilize the economy in a whole. The main sources of government revenue are tax, beside foreign debt and other domestic sources such as sales of gas and oil.
  3. 3. OBJECTIVE To mobilize resources for economic growth, especially for the public sector. To promote economic growth in the private sector by providing incentives to save and invest. To restrain inflationary forces in the economic in order to ensure price stability. To ensure equitable distribution of income and wealth so that fruits of economic growth are fairly distributed.
  4. 4. ROLE The government has to play a very active role in promoting economic development and FISCAL POLICY is the instrument that the state must see. Hence the great importance of public finance in underdeveloped countries desirous of rapid economic development. In a democratic society, there is an inherent dislike for direct control regulation by the state. Hence, a democratic state must rely on indirect methods of control and regulation and this is doing through fiscal and monetary policies.
  5. 5. INSTRUMENTS OF FISCAL POLICY BUDGET TAXATION PUBLIC EXPENDITURE GOVERNMENT BORROWINGAll of these except taxation are forms of deficit financing.
  6. 6. TYPES OF FISCAL POLICY
  7. 7. OVERVIEW IN MALAYSIA (1) The direct impact of government economic activity towards the national economy is shown by the effect of government expenditure on the main macroeconomic indicators. Such a stance has been considered to accord less fiscal flexibility in times of crisis. In this regard, Malaysia has always reiterated that the prudent stance of maintaining at least a surplus position in the current account over the course of the business cycle reduces the longer- term risks for the country.
  8. 8. OVERVIEW IN MALAYSIA (2) In implementing the current fiscal stimulus programme, Malaysia did face implementation constraints initially. Hence, existing procedures were adjusted in order to enhance the efficiency of project implementation, speed up payments to contractors and remove bureaucratic delays. Besides a review of procedures, rules and guidelines on the implementation of development projects, procurement and payment to contractors, the implementation of projects was also more closely monitored.
  9. 9. CONCLUSION In Malaysia, it is belief that more expansive FISCAL POLICY will not cause a budget deficit, but only has moderate effect on output in the long run term. Hence, it can be said that the size of government sector is relatively high comparing to those of the private sector. It also implies that, the government should make a better management on public sector supporting the tax-and spend FISCAL POLICY. A higher economic growth will also affect a higher demand of public goods and services, which are more effective provided by the government.
  10. 10. CONCLUSION In Malaysia, it is belief that more expansive FISCAL POLICY will not cause a budget deficit, but only has moderate effect on output in the long run term. Hence, it can be said that the size of government sector is relatively high comparing to those of the private sector. It also implies that, the government should make a better management on public sector supporting the tax-and spend FISCAL POLICY. A higher economic growth will also affect a higher demand of public goods and services, which are more effective provided by the government.

×