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Fiscal policy
Fiscal policy uses government spending and taxation to influence the economy. It aims to achieve economic stability without inflation or deflation. The government collects revenues through taxes, fees, fines, and loans, then spends money on productive investments like infrastructure and non-productive services like education and health. The budget shows estimated receipts and expenditures. Fiscal policy can be neutral, expansionary, or contractionary depending on whether spending equals, exceeds, or is less than tax revenue. While fiscal policy aims to evenly distribute wealth and resources, limitations include inadequate data and delayed decision-making.
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Fiscal policy
- 2. WELCOME TO FISCAL POLICY UzmaSiddiqui (PUCIT)
- 3.
- 4. Fiscal Policy • Theuse of government spending and taxation to promote economy
- 5. According to Semuelson: “Fiscalpolicy is concerned with all those activities which are adopted by the government to collect revenues and make the expenditures so that economic stability could be attained without inflation and deflation”
- 6. Budget: The budgetis a financial statement showing the estimate of receipts and expenditures Budget is an anti-inflationary as the objective is to check inflation and sustain high growth of economy.
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- 8. ACTIVITIES OF THESTATE Collection of Revenues Spending of Revenues
- 9. ACTIVITIES OF THESTATE ( cont.) • Collection of Revenues Taxes Fees Fines Loan – Internal Loans – External Loans
- 10. ACTIVITIES OF THESTATE ( cont.) Spending of Revenues Productive Non-Productive
- 11. • Productive • • • • • • • Dams Roads Mills Bridges Railways Electricity Plants Engineeringunit Non-Productive Health Education Defense Justice Social Security Embassies Politics
- 12. Types of Fiscalpolicy • Neutral Fiscal policy • Expansionary Fiscal policy • Contractionary Fiscal policy
- 13. Neutral Fiscal policy G=T(Govt. spending = Tax Revenue) neutral effect on economy
- 14. Expansionary Fiscal policy •Expansionary fiscal policy means that the government is increasing government spending and reducing taxation in an attempt to increase the money available in the economy. G>T T G Contractionary Fiscal policy • Contractionary fiscal policy is when the government increases taxation and reduces government spending in an attempt to reduce money in the economy and as a result inflation. G<T T G
- 15. Budget Deficit: • Agovernment’s budget deficit is the difference between what it spends (G) and what it collects in taxes (T) in a given period: B u d g e t d e fic it ≡ G − T Budget Surplus: •The amount by which a government income exceeds its spending •Effective tool to achieve the objective of price stability
- 16. Objectives To Achieve EqualDistribution of Wealth Increase in Savings Degree of inflation To Achieve Economic Stability Price stability
- 17. Limitation of FiscalPolicy: • • • • • Lack of Elasticity Illiteracy Limited Sector inadequate Statistics Delay in decision
- 18. Islamic Point ofview: • Equally Distribution Of Resources • Collect Zakat from rich Islamic Sources of Revenue • • • • • Zakat Ushar Fitrana Sadqat Khaiarat
- 19. • Where are we now? •Recent economic issues in Pakistan
- 20. WE ARE DIFFERENT– A LOT OF SPACE TO COVER Girl in search of water Man on the moon
- 21. WE ARE DIFFERENT– A LOT OF SPACE TO COVER Child labour scavenging food
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- 28. –Road map Maintain fiscal prudenceby keeping fiscal deficit low Keeping inflation under control growth momentum Improving social indicators
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