lo15 soc

• Fiscal policy


  The deliberate manipulation of government purchases, transfer payments, taxes and borrowing in order to influence macroeconomic variables such as employment, the price level, and the level of GDP among others
• Fiscal policy refers to the Revenue and Expenditure policy of the Government which is generally used to cure recession and maintain economic stability in the country
• Fiscal Stimulus

  1. Increase Government Expenditure

  2. Decrease Taxes

  3. Increase Transfer Payments
• Fiscal Restraint

  1. Decrease Government Expenditure

  2. Increase Taxes

  3. Decrease Transfer Payments
• Aggregate Demand affects


  Production or GDP
• Fiscal Stimulus

  Increase in Government Purchases, Decrease in Taxes, Increase in Transfer Payments
• Fiscal Restraint

  Decrease in Government Purchases, Increase in Taxes, Decrease in Transfer Payments
• Multiplier


  The effect of a change in autonomous expenditure on the equilibrium level of GDP
• The MPC of the Philippines is 0.835
• Crowding out


  A reduction in private-sector borrowing (and spending) caused by increased of government borrowing
• Types of Time lag

  • Recognition Time Lag – government difficult to recognized recession
  • Action Time Lag – the process of applying
  • Effect Time Lag –the effect of the fiscal policy
• Kinds of debts


  • Internal Debts
  • External Debts
• Internal Debts


  Treasury bonds or bills (T-bills /T-bonds/securities)- can create crowding out
• External Debts


  No crowding out if debts are repaid with exports of real goods and services