Unit7: Fiscal policy

Vocabulary Contractionary adj /kənˈtrækʃəneri/ Global economy n /ˈɡloʊbl ɪˈkɑːnəmi/ Grant n,v /ɡrɑːnt/ International Monetary Fund /ˌɪntərˈnæʃnəl ˈmʌnɪteri fʌnd/ Shrink adj /ʃrɪŋk/

LOGO

FISCAL POLICY

Group 7:

1.Trần Thị Kim Lương 2.Nguyễn Thị Mai

3.Nguyễn Thị Thanh Mai

UNIT 7`

1

2

I Vocabulary

Deficit (n) / ˈdefɪsɪt/ Deficit spending (n) / ˈdefɪsɪtˈspendɪŋ/

Budget deficit

(n) /ˈbʌdʒɪt ˈdefɪsɪt/

Judgment (n) /ˈdʒʌdʒmənt/ Expansionary (adj) /ɪkˈspænʃənri/

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70

120

I Vocabulary

Contractionary (adj)

/kənˈtrækʃəneri/

Global economy (n) /ˈɡloʊbl ɪˈkɑːnəmi/ Grant (n,v) /ɡrɑːnt/

International Monetary Fund

/ˌɪntərˈnæʃnəl ˈmʌnɪteri fʌnd/ Shrink (adj) /ʃrɪŋk/ inevitably (adv) /ɪnˈevɪtəbli/

I Vocabulary

loose (adj) /luːs/

tight (adj) /taɪt/

aggregate demand (n) /ˈæɡrɪɡət dɪˈmænd/

I Vocabulary

Words Pronunciation Meaning

Deficit (n) / ˈdefɪsɪt / Thâm hụt

Deficit spending (n) / ˈdefɪsɪtˈspendɪŋ/ Bội chi

Budget deficit (n) /ˈbʌdʒɪtˈdefɪsɪt/ Thâm hụt ngân sách Judgment (n) /ˈdʒʌdʒmənt/ Sự đánh giá

Grant (n)

(v)

/ɡrɑːnt/ Khoản viện trợ

Viện trợ Expansionary (adj) /ɪkˈspænʃəneri/ Mở rộng

Contractionary (adj) /kənˈtrækʃəneri/ Thắt chặt

I Vocabulary

Words Pronunciation Meaning

Global economy (n) /ˈɡloʊbl ɪˈkɑːnəmi/ Nền kinh tế toàn cầu

International Monetary

Fund (n) /ˌɪntərˈnæʃnəl ˈmʌnɪteri fʌnd/ Quỹ tiền tệ quốc tế

Inevitably (adv) /ɪnˈevɪtəbli/ Một cách hiển nhiên Aggregate demand (n) /ˈæɡrɪɡət dɪˈmænd/ Tổng cầu

II Summary

 There are 4 main ideas:

 Firstly, the influence of government spending and taxation to the overall

performance of the economy

 Secondly, it talks about deficit:

- Deficit runs when government spends more than it receives

- Deficit spending is spending fund obtained by borrowing or printing instead of taxation

- Deficit spending can be either harmful or helpful for the economy

II Summary

 Thirdly, it is fiscal policy:

1 This is a government policy related to taxation and public spending; the government uses it in an attempt to maintain economic growth, high employment and low inflation

2 There are 2 types of fiscal policy:

- Fiscal policy is expansionary or loose when taxations is reduced or public spending is increased with the aim of stimulating total spending in the economy, known as aggregate demand

- Fiscal policy is contractionary or tight when taxation is increased or public spending is reduced in order to restrict demand and slow down the economy

 Finally, it talks about the other factor influencing of Government decision

on fiscal policy

- Inside factor: unemployment rate, inflation rate, political consideration…

- Outside factor: fiscal policy of other countries, IMF, …

III Questions

1 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 and people spend more money on purchases, thus, the economy tends

to grow

2 What is deficit spending? Is it useful or harmful for the economy?

Why?

- Deficit spending is spending fund obtained by borrowing and printing instead of taxation – can be helpful or harmful for the economy

- For example: Government programs offer many jobs’ opportunities for workers then activate the cash flows in the economy, making it grow In another hand, deficit spending may lead to rising prices, inflation when unemployment is low

III Questions

3 What are the government’s major economic policies mentioned above?

- They are fiscal policy and monetary policy

4 What are they aimed at?

- They are aimed at maintaining economic growth, high employment and slow inflation

5 Under what circumstances can fiscal policy be expansionary? Why?

- Fiscal policy is expansionary when a government fells is economy is not growing fast enough or unemployment is too high

- Because when increasing spending or cutting taxes, the government leaves individuals and businesses with more money to purchase good or invest in new equipment So raise demand which requires additional production, creating jobs, generating more spending The result is higher employment and a growing economy

III Questions

6 Under what circumstances can fiscal policy be contractionary?

- Fiscal policy is contractionary when inflation is high

- Because a contractionary fiscal policy reduces the amount of money in the economy available for purchasing goods

7 What factors should be considered in making decisions on the fiscal policy?

They are:

• the level of economic growth or unemployment likely in the future;

• whether or not to run a budget deficit by spending more money than

government raises;

• political considerations;

• fiscal policies of other countries and by the requirements of IMF

8 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

III Expanded Questions

• 1 How does fiscal policy influence government’s budget deficit?

• - When fiscal policy is expansionary, government budget deficit increase

• 2 How do you think that the government using fiscal policy is effective or not? Why?

• - Not yet Because taxes in Vietnam are uncompleted in law and there are a lot of gaps exist, while government is unreasonable and ineffective, such as Government focus more the expansionary fiscal policy in defense,

however not in education