Presentation about Fiscal Policy and how it is implemented in Malaysia to measure Inflation.

1. FISCAL POLICY
 PRINCIPAL ECONOMY (dqs136)
 LECTURER : Pn. Norazlin Bt Mat
Salleh
 PRESENT BY :
 Nurul Aznieta Bt Sharif
 Zulaikha Bt Elias
 Nur Hielyana Bt Ibrahim
 Norazima Bt Sajali

2. 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 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.
 There are two types of fiscal policy
practised by a government.

3. Expansionary fiscal policy
• The expansionary fiscal policy is adopted to
overcome unemployment or recession
problems.
• The government will increase public
spending by undertaking public works and
reduce taxes.

4. Contractionary fiscal policy
• The contractionary fiscal policy is adopted
to overcome inflationary problem.
• During inflation, the contraction fiscal
policy is to create a budget surplus in order
to reduce aggregate spending.

5. AFFECT ON CREDIT
SCORE
 on this process, the increase in economic
productivity can cross over a very fine line
and lead to too much money in the market.
 This excess in supply decreases the value of
money while pushing up prices.
 fine tuning the economy through fiscal
policy alone can be a difficult, if not
improbable, means to reach economic goals.
 If not closely monitored, the line between a
productive economy and one that is
infected by inflation can be easily blurred.

6. The Economy Needs
to be Curbed
 When inflation is too strong,
government can use fiscal policy to increase
taxes to suck money out of the economy.
 Fiscal policy could also dictate a decrease in
government spending and thereby decrease
the money in circulation.
 the possible negative effects of such a policy
in the long run could be a sluggish economy
and high unemployment levels.
 the process continues as the government
uses its fiscal policy to fine-tune spending
and taxation levels.

7. Affect Fiscal policy
 The effects of any fiscal policy are not the
same for everyone.
 Depending on the political orientations and
goals of the policymakers, a tax cut could
affect only the middle class, which is
typically the largest economic group.
 But, when a government decides to adjust
its spending, its policy may affect only a
specific group of people.

8. INFLATION
 Can be defined as a continuous increase in
the general price level of goods and services
in the economy.
 When a persistent increase occurs in the
level of prices that lowers the purchasing
power of money, we call it inflation.
 Inflation is also a situation where there is
‘too much money chasing too few goods’.

9. CAUSE OF INFLATION
 When too much money is in circulation in
comparison to the production of goods and
services, then inflation occurs.
 The consequences is the fall of purchasing
power of money.
 During inflation, general price rise means
that the cost of living going up
continuously.
 Various measures can be taken to reduce
general price inflation to overcome or
reduce the rate of inflation.

10. QUESTION ..
How Fiscal Policy is
implemented in Malaysia
as a measure to control
inflation ?!

11. Reduce the level of government purchases
 Government purchases are expenditures by
the government sector, especially those by
the federal government, on final goods or
services.
 It is that portion of gross domestic
product purchased by governments.
 The actual purchases are typically
undertaken by individual government
agencies.

12.  Contractionary Fiscal Policy involves a
decreases in the funds appropiated to these
assorted agencies. The agencies the reduce
their purchases which decreases aggregate
productiom, imcome, and the rate of
inflation.
 A reduction in gov. expenditure will directly
affect aggregate demand.
 The government will cut the salary of all
civil servants and postpone its development
projects to reduce the purchasing power of
public.

13. Increases in taxes
 Taxes are the involuntary payments that the
government sector imposes on the rest of the
economy to generate the revenue needed.
 The increase in taxes provides the household
sector with less disposable income that can be
used for consumption expenditures.
 While tax changes tend to be administratively
easier to implement than government
purchases, they are less political palatable to
political leaders and voters who prefer lower
taxes to higher taxes.
 A highly regressive text structure can
successfully reduce the impact of inflation on
the economy.

14. Decrease in transfer payment
 Transfer payments are payments made by
the government sector to the household
sector with no expectations of productive
activity in return.
 transfer payments rely on a payment
schedule based on qualifying characteristics of
the recipients.
 The decrease in transfer payments reduces
the disposable income available to the
household sector, which then forces a
reduction in consumption expenditures,
leading to less aggregate production and
employment and subsequently a decrease in
inflationary pressures.

15. THANK YOU..
Ika
Yana
Azima
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