Fiscal policy 0810

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Fiscal policy 0810

  1. 1. Session VII
  2. 2. Fiscal Policy
  3. 3. How does Fiscal Policy Work <ul><li>Non discretionary element </li></ul><ul><ul><li>Government spending increases during slowdown </li></ul></ul><ul><ul><ul><li>Increase in benefits to vulnerable sections </li></ul></ul></ul><ul><ul><ul><li>Increase in eligible beneficiaries </li></ul></ul></ul><ul><ul><li>Government spending decreases during boom </li></ul></ul><ul><ul><ul><li>Reduction in benefits to vulnerable sections </li></ul></ul></ul><ul><ul><ul><li>Decrease in eligible beneficiaries </li></ul></ul></ul>
  4. 4. <ul><li>Discretionary element </li></ul><ul><ul><li>Government investment in infrastructure to boost demand </li></ul></ul><ul><ul><li>Reduction in tax rates </li></ul></ul>
  5. 5. Fiscal stimulant <ul><li>Choice between increase in government expenditure and tax cut </li></ul>
  6. 6. Government debt <ul><li>Borrowing from Central Bank </li></ul><ul><li>Borrowing from domestic market </li></ul><ul><li>Increased taxes </li></ul><ul><li>Borrowing from abroad </li></ul>
  7. 7. Fiscal deficit <ul><li>Excess of government expenditure over revenue </li></ul>
  8. 8. Government Expenditure Government Receipts Fiscal Deficit Revenue Deficit Deficit on Capital Account Revenue Expenditure Revenue Receipts Capital Expenditure Capital Receipts
  9. 9. Fiscal deficit and the economy <ul><li>Is fiscal deficit harmful? </li></ul><ul><li>Why economists are bothered about fiscal deficit </li></ul>
  10. 10. Union Budget <ul><li>Annual Financial Statement of the Government </li></ul>

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