Unit 7: Fiscal Policy

• The last, fiscal policy is a government‘s policy related to taxation and public spending.. Expansionary fiscal policy is used when taxation is reduced or public spending is increased

• /'dʒenəreitiη/ŋ/

• /´ʌltiη/mətli/

• /'preʃə/

• /di,tə:mi'neiʃn/

• /ˈdʒɛ.nə.ˌreɪt/

• /,kɔris'pɔndiɳ/

• /kənsidə'reiʃn/

• /pə´tiη/kjulə/

• Harm- thiệt hại

• Concerned- Có liên quan

II Summary

This reading have 3 main ideas :

Fi sc al

T h

e in

fl u e n c

e

of g

o v er

n m

e

nt s p e n di

n

g a

n

d ta xa ti

o n

D e

fi ci t

Fi sc

al p

ol ic y

• The first is the influence of government spending and taxation on the overall

performance of the economy.

• The second is deficit Deficit runs when the

government spends more than it receives To finance deficit, there are 2 ways: borrowing or printing more money Deficit spending is

spending funds obtained by borrowing or

printing instead of taxation It is harmful or

useful for economy.

• The last, fiscal policy is a government‘s policy

related to taxation and public spending

 There are 2 kinds of fiscal policy : expansionary and contractionary Expansionary fiscal policy is used when taxation is reduced or public spending

is increased while contractionary fiscal policy is used when taxation is increased or public

spending is reduced

 The factors influencing Government’s decision on Fiscal policy are: unemployment level, economics growth, inflation, political considerations, fiscal policy of other countries and other organizations such as : IMF, WB… so on.

III Answer questions

1 Which way of government spending and

taxation affect the economy? Give example

• Government spending and taxation directly affect the overall performance of the

economy

• Example: If government increase taxes,

individual income and corporate income will reduce, they purchase fewer goods and the economy tends to shrink.

Short questions.

2 When does deficit run?

• Deficit runs when the government spends more than it receives

3 What is “ deficit spending” ?

• Deficit spending is spending fund obtained by borrowing and printing instead of taxation

4 What is fiscal policy?

• Fiscal policy is a government’s policy related

to government spending and revenue.

5 How many types of fiscal policy? What are they?

• There are two types of fiscal policy, they are expansionary policy and contractionary policy.

1 Is deficit spending harmful or useful for

economy and when is it harmful or useful?

• Deficit spending can be harmful or useful for the economy It is harmful when

unemployment rating is low or inflation is high and it is useful when unemployment rating is high

Long questions.

2 When is fiscal policy expansionary or contractionary? Why?

• Fiscal policy is expansionary when government spending is increased or taxation is decreased It is used when

unemployment rating is high and economy is slowing down with the aim increasing employment level and promoting economy growth

• Fiscal policy is contractionary when government spending is decreased or taxation is increased It is used when inflation

is too high and economy is overheating with the aim

keeping inflation under the control and slowing down the economy

3 What are the factors influencing government’s decision on fiscal

policy?

• The factors influencing government’s decision on fiscal policy are:

+ unemployment level, economic growth, inflation: when

unemployment level is high and economy is slowing down

government will use expansionary policy and inflation is too high and economy is overheating government will use contractionary policy + political consideration such as beliefs about the size of the role that government should play in the economy or the likely public reaction

to a particular course of action

+ fiscal policy of other countries, which may

tempt companies to relocate by offering them generous tax programs or other government – controlled benefits.

+ other organization such as IMF, which often grants aid packages subject to conditions

relating to fiscal policy

4 Which fiscal policy is using in VietNam?

• Vietnam is using expansionary fiscal policy because the current global economic is

slowing down so Vietnam economy is also weakened lead to people’s lives are difficult and unemployment rate is high

5 How is public debt situation in Vietnam, at the present? How do public debt affect to the economy?

• At the end October last year, the clock vietnam’s public debt at

76.706 billions of dollars, total loans increased by 11,8% year,

+ repayment pressure is large

+ Economic growth has fallen

+ budget deficit and huge public debt, public debt trend is

increasing

+ inflation is high and it is hard to restrain

• In the short term, public debt is well for economic growth, it attract foreign investment by buying government bonds.

• In the long term, public debt is not well, if it increase too high it will constrain economic growth.

Thank for listening !