Introduction of fiscal polisy

1. 420019 ABHISHEK
420021 ROHIT
420023 PAYAL
420024 SAKSHI
420026 NARMADA
ECONOMIC
PRESENTATION
WESTERN COLLEGE OF
COMMERCE AND
BUSINESS MANAGEMENT

2. Topic :- Fiscal Policy

3. Meaning :-
Fiscal policy is the government spending and taxation that influences the economy.
Elected officials should coordinate with monetary Policy to create healthy economic growth.
They usually don’t. Why? The fiscal policy reflects the priorities of individual lawmakers. They
focus on the needs of their constituencies. These local needs overrule national economic
priorities. As a result, fiscal policy is hotly debated, whether at the federal, state, county or
municipal level.
Fiscal policy is largely based on the ideas of British economistJohn Maynard
Keynes (1883-881946), who argued that economic recessions are due to a deficiency in
consumption spending and business investment components of aggregate demand.
Keynes believed that governments could stabilize thebusiness cycle and regulate economic
output by adjusting spending and tax policies to make up for the shortfalls of the private
sector.

4. DEFINITION 1 :-
Fiscal policy, in simple terms, is an estimate of taxation and
government spending that impacts the economy. Expansionary fiscal policy:
This policy is designed to boost the economy. It is mostly used in times of
high unemployment and recession. It leads to the government lowering
taxes and spending more, or one of the two.
Fiscal policy, along with monetary policy, plays a crucial role in
managing a country’s economy. What is meant by Fiscal Policy in India?
Example of Fiscal Policy in India: Through the fiscal policy, the government of
a country controls the flow of tax revenues and public expenditure to navigate
the economy

5. DEFINITION :- 2
Fiscal policy involves the decisions that a government makes regarding collection of revenue,
through taxation and about spending that revenue. It is often contrasted with monetary policy , in which
a central bank (like the Federal Reserve in the United States) sets interest rates and determines the level of
money supply.
Fiscal policy is defined is defined as government policy concerned with raising expenditure and
revenue collection taxation to influence the economy. A Policy under government uses its expenditure and
revenue program to produce diserable effects and avoid undesirable effects in the national Income
Production and Employment.

6. What Is Fiscal Policy?
FISCAL POLICY is the means by which a government adjusts its
spending levels and tax rates to monitor and influence a nation's
economy. It is the sister strategy to monetary policy through which a
central bank influences a nation's money supply. These two policies
are used in various combinations to direct a country's economic goals.
Here's a look at how fiscal policy works, how it must be monitored,
and how its implementation may affect different people in an
economy.

7. Before the Great Depression, which lasted from October 29, 1929, to
the onset of America's entry into World War II, the government's
approach to the economy was laissez-faire. Following World War II, it
was determined that the government had to take a proactive role in
the economy to regulate unemployment, business cycles, inflation,
and the cost of money. By using a mix of monetary and fiscal policies
(depending on the political orientations and the philosophies of those
in power at a particular time, one policy may dominate over another),
governments can control economic phenomena.

9. 1. MOBILISATION OF RESOURCES TO INCRESE THE RATE OF
CAPITAL FORMATION
I order to promote and sustain
economic development ,a high the
rate of capital formation is necessary.
2. ACCELERATION OF ECONOMIC GROWTH
A high rate of economic growth , sustained over a long period is an essential
condition for achieving a rising level of living.
3. BALANCED GROWTH
A primary feature of the economic scenario in developing countries is their
excessive dependence on agriculture rather on industries and other non -
agricultural occupations.

10. 4.PROVISION OF ECONOMIC & SOCIAL
OVERHEADS
Heavy investment have to be made in infrastructure for sustaining
growth in agriculture and industries like investment for development of transport
and communication ,water management and irrigation project etc.
5. SOCIAL JUSTICE –REDUCTION OF
INEQUALITIES OF INCOME AND WEAITH
Fiscal tools can be used to bring about the redistribution
of income in favour of the poor by spending revenue raised on
social welfare activities .
6. PRICE STABILITY
Fiscal tools can also be employed to contain inflationary and
deflationary tendencies in the economic . When there is a
deflation , government may use expansionary fiscal policy to give
a boost to the economic .

11. 7. Economicstabilisation
Fiscal policy is needed for stabilisation , since full employment and price
level stability do not come about automatically in a market economic.
8. INCREASING EMPLOYMENT OPPORTUNITIES
fiscal incentives , in the form of tax rebates and concessions , can be used to
promote the growth of industries that have employment –generation potential .

12. Discretionary Fiscal Policy
Discretionary Fiscal Policy:
 The deliberate manipulation of government purchases ,
taxation , and transfers in order to promote
macroeconomic goals such as full employment , price
stability , and economic growth.
 But fiscal policy need not be automatic in order to play a
stabilizing role in business cycles.
 Some economists recommend changes in fiscal policy in
response to economic condition –so-called discretionary
fiscal policy –as a way to moderate business cycle swings.
 These suggestions are most frequently implemented during
recessions , when there are calls for tax cuts or new
spending programs to “get the economy going again.”

13. Contractionary Fiscal Policy: demand –pull inflation occurs, a
shift of AD to the right in the vertical range of AS , then
contractionary policy is the remedy.
A. A decrease in G spending shifts AD back left , once the
multiplier process is complete . Here price level returns to its
pre- inflationary level , but GDP remains at full-employment
level.
B. An increase in tax will reduce income , and then consumption
at first by the MPC times and decrease in income, and then
the multiplier process leads AD to shift leftward still further.
C. A combined G spending decrease and tax increase could
have the same effect with the right combination .
D. If the budget was initially balanced, a contractionary fiscal
policy creates a budget surplus.

14. QUESTIONS
1) The purpose of fiscal policy is to _________
a) Alter the direction of the economy
b) Change people’s attitudes toward government
c) Educate people as to the importance of economic
d) Officer insight into the way thing work
ANS :- a)
2) Fiscal policy is purposeful movements in _______ designed to direct an
economy .
a) Interest rates
b) Legal structures
c) Government regulations
d) Government spending and taxes
ANS :- d)

15. 3) Fiscal policy in India is formulated by ________.
a) RBI
b) Planning Commission
c) Finance Ministry
d)SEBI
ANS :- c)
4) An example of discretionary fiscal policy would be ____________.
a) The operation of the welfare state
b) The operation of the progressive federal income tax
c) A tax cut adopted to stimulate consumption
d) An interest rate cut implemented to stimulate consumption
ANS :- c)
5) Any Two objective of fiscal policy .