UNIT 7: FISCAL POLICY Flashcards
How many main ideas are there in unit 7: fiscal policy
In my opinion, there are 5 main ideas:
1. Firstly, It talks about the Definition of FP
2. Secondly, it mentions the Aims of FP.
3. Thirdly, it talks about 2 types of FP. they are :
- expansionary FP
- contractionary FP
4. Next, it mentions factors that are considered in making decisions in fiscal policy
- inside factors
- outside factors
5. Finally, it talks about Deficit spending
What is IMF?
international monetary fund
what is the DEFINITION of fiscal policy?
fiscal policy is a government policy related to TAXATION and GOVERNMENT SPENDING.
What purpose does the government use Fiscal Policy for?
The government uses Fiscal Policy to:
- maintain economic growth,
- high employment,
- and low inflation.
What is an expansionary fiscal policy?
A Fiscal policy is expansionary when:
- taxation is reduced
- or government spending is increased.
what is a contractionary (or tight) fiscal policy?
-A fiscal policy is contractionary when:
- taxation is increased
- or government spending is reduced.
what factors should be considered in making decisions on the fiscal policy?
There are inside factors and outside factors:
- INSIDE FACTORS:
- the level of economic growth or unemployment likely in the future
- whether or not to run a budget deficit
- political considerations
- OUTSIDE FACTORS:
- fiscal policies of other countries
- the requirements of the IMF
What is deficit spending? is it useful or harmful for the economy? Why?
- DEFICIT SPENDING: is spending funds obtained by borrowing or printing more money instead of taxation income.
- It can be useful or harmful:
+DS is helpful for the economy: when unemployment is high or the economy is slowing down
+DS is harmful to the economy: when inflation is high or the economy is overheating.
What are the Government major economic policies mentioned in the article?
They are fiscal policy and monetary policy
Under what circumstances can fiscal policy be expansionary? Why?
(=When does Expansionary might occur? Why?)
- Expansionary might occur When the economy is not growing fast enough or unemployment is too high,
- Because Expansionary FP is used to create jobs, increasing spending and develop the economy throughout reducing taxes or increasing Government spending.
Under what circumstances can fiscal policy be contractionary? Why?
(=When does Contractionary might occur? Why?
- Contractionary might occur when the economy is growing too fast or inflation is high.
- Because the contractionary FP is used to restrict demand, control inflation and slow down the economy
throughout reducing Government spending or increasing taxes.
Why should the Government consider the fiscal policies of other countries?
Because by doing so, the Government may tempt companies to relocate by offering them generous tax programs or other benefits.
Why the Government shouldn’t print money to finance deficit?
(=why deficit spending is harmful to the economy?)
Because printing money makes money supply increases. So, the prices of goods and services increase. It causes inflation.
In what way do government spending and taxation affect the economy?
Give examples.
- Government spending and taxation directly affect the overall performance of the economy.
- For example,
if the Government increases spending to build a new highway => construction of the highway will create jobs=> people have more money from wages, salary=> people spend more money on purchases=> thus the economy tends to grow.
What are the differences between expansionary and contractionary?
how many main types of Fiscal Policy are there?
There are 2 main types of FP. They are Expansionary (or loose) FP and Contractionary (or tight) FP.
What does “deficit” mean?
“Deficit” means more spending than income.
What is Fiscal policy concerned with?
Fiscal policy is concerned with government spending and taxation.
summarize unit 7: fiscal policy
I will summarize Unit 7. Unit 7 is about fiscal policy. In my opinion, there are 5 main ideas:
1. Firstly, it talks about the DEFINITION of FP:
- fiscal policy is a government policy related to TAXATION and PUBLIC SPENDING.
2. Secondly, it mentions the AIMS of FP:
- the government uses FP to maintain economic growth, high employment, and low inflation.
3. Thirdly, it talks about 2 TYPES of FP:
- EXPANSIONARY( OR LOOSE) FP:
- when taxation is reduced or public spending is increased.
- might occur when the economy is not growing fast enough or unemployment is too high
- is used to create jobs, increase spending and develop the economy
- CONTRACTIONARY (OR TIGHT) FP:
- when taxation is increased or public spending is reduced
- might occur when the economy is growing too fast or inflation is high
- is used to restrict demand, control inflation and slow down the economy
4. Next, it mentions FACTORS affect FP:
- INSIDE FACTORS:
- the level of economic growth or unemployment likely in the future
- whether or not to run a budget deficit
- political considerations
- OUTSIDE FACTORS:
- fiscal policies of other countries
- the requirements of the IMF (International Monetary Fund)
5. Finally, it talks about DEFICIT SPENDING:
- DEFICIT SPENDING: is spending funds obtained by borrowing or printing instead of taxation:
- DS is helpful for the economy: when unemployment is high or the economy is slowing down
-DS is harmful to the economy: when inflation is high or the economy is overheating.
- WAYS OF FINANCING DEFICITS: Borrowing or printing more money.
(Nguồn tham khảo: tài liệu do Giảng viên Phạm Thị Thu cung cấp)
what is fiscal policy VN use at this time?
VN uses a COMBINATION of fiscal policy. Using contractionary or expansionary policy depends on the specific situation of the economy, inside factors and outside factors.
