This presentation explains the four goal of fiscal policy.

1. Quuen'sCollegeBusinessStudies2012
Fiscal Policy
Prepared by Timothy Durant
PART
1

2. Quuen'sCollegeBusinessStudies2012
Types of Fiscal Policy
Discretionary
Fiscal
Policy
Non-Discretionary
Fiscal
Policy
DELIBERATE AUTOMATIC

3. Quuen'sCollegeBusinessStudies2012
Discretionary Fiscal
Policy
Taxation
-Direct
-Indirect
Government
Purchases
Transfer
Payments
TOOLS

4. Quuen'sCollegeBusinessStudies2012
What Are Transfer Payments?
Definition
This refers to any money received which has not been
earned in that particular period.
Welfare,
Food Stamps,
Unemployment
Benefits etc.

5. Quuen'sCollegeBusinessStudies2012
Goals of Fiscal Policy
2. Unemployment 3. Inflation
4. Balance of
Payments
High levels of
unemployment
place a burden on
government and
by extent society.
Government will
seek to keep
unemployment
rates as close to
the Non-
Accelerating
Inflation rate as
possible.
High levels of
inflation negatively
affects society.
Government will
seek to keep
inflation rates as
low as possible
due to their
significant impact
on many other
aspects of the
economy
Balance of
payment deficits
will weaken the
international
reserves of a
country.
Government can
use fiscal policy
to correct balance
of payment
disequilibria.
1. Influencing Aggregate Demand

6. Quuen'sCollegeBusinessStudies2012
2. Unemployment
How Does Fiscal Policy Work?
Lower income taxes,
increase government
purchases or increase
transfer payments
Increases/Influences
aggregate demand.
Gross Domestic
Product increases.
Unemployment falls
Expansionary
Fiscal Policy

7. Quuen'sCollegeBusinessStudies2012
How Does Fiscal Policy Work?
3. Inflation
Raise income taxes,
decrease
government
purchases and
reduce transfer
payments
Decreases/Influences
aggregate demand
Curbs inflation
Contractionary
Fiscal Policy

8. Quuen'sCollegeBusinessStudies2012
How Does Fiscal Policy Work?
4. Balance of
Payments
Deficit
Raise taxes, decrease
government purchases and
reduce transfer payments
Income levels
decline
Imports decline
Surplus
Lower taxes, increase
government purchases and
increase transfer payments
Income levels rise
Imports rise