金融英语课件李丽 马跃ISBN 9787810788175 PPTchapter_14.pptVIP

Chapter 14 Governments in the Financial System Chapter 14 Governments in the Financial System In addition to monetary policy as one of the tools that a national government uses to influence its domestic economy, the second tool available to government is fiscal policy. The term fiscal policy refers to the actions of a government in setting the level of public expenditure and how that expenditure is funded. One of the most important financial institutions in any economy is the government treasury. Generally speaking, the treasury department exerts a powerful impact on the financial system because of two activities that it pursues on a continuing basis. One of these is fiscal policy; the other is debt management policy, which involves the refunding or refinancing of the central government’s huge debt in a way that contributes to broad economic goals and minimizes the burden of the government’s debt. These treasury policy making activities influence interest rate and the availability to achieve its economic goals but not to disturb the functioning of the financial markets or unduly interfere with the operations of the central bank. 1. Fiscal Policy and Its Effect on  the Economy Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. Fiscal policy is said to be tight or contractionary when revenue is higher than spending (the government budget is in surplus) and loose or expansionary when spending is higher than revenue (the budget is in deficit). Often the focus is not on the level of the deficit, but on the change in the deficit. Thus, a reduction of the deficit from $200 billion to $100 billion is said to be contractionary fiscal policy, even though the budget is still in deficit. The most immediate impact of fiscal policy