2.12-Fiscal Policy.pptx.ppt

INSTITUTE: USB DEPARTMENT: BBA Bachelor of Business Administration Business Environment BBO-305 Mr. Kapil Sharma UNIT 1 : Chapter 2.1 FISCAL POLICY DISCOVER. LEARN. EMPOWER ...

INSTITUTE: USB DEPARTMENT: BBA Bachelor of Business Administration Business Environment BBO-305 Mr. Kapil Sharma UNIT 1 : Chapter 2.1 FISCAL POLICY DISCOVER. LEARN. EMPOWER  Space for visual (size 24) FISCAL POLICY Course Outcome CO No Statement Level Will be covered in To understand the basic components CO1 of business environment for growth Remember this lecture and survival of businesses. To apply environmental analysis CO2 techniques for smooth functioning Understand of businesses. To analyze the impact of continuously changing government CO3 Apply regulations on business and its profitability. To assess the legal, social, financial and global environmental factors CO4 Analyse impacting businesses and their growth 2 To create an entrepreneurial venture CO5 Apply FISCAL POLICY AND ITS GOALS IN INDIA What is Fiscal Policy????? The policy of the Government of the country very much influence its Economic activities. Fiscal policy is the policy related to revenue, expenditure and debt of the Government for achieving a set of definite objectives. Term “Fisc” in English language means Treasury. Hence policy related to treasury or Government expenditure is called Fiscal Policy. According to Lipsey and Stenier: “Fiscal policy is defined as the conscious attempts of the Government to achieve certain macro goals of policy by altering the volume and pattern of its revenue expenditure and balance between them.” Objectives of Fiscal policy Full Employment Price Stability Reduction of Economic Inequality Economic Development Methods or Tools or Instruments of Fiscal policy Taxation policy Government Expenditure policy Public Debt policy Deficit Financing Automatic stabilizers versus discretionary fiscal policy There is an important distinction between automatic stabilizers and discretionary fiscal policy. Some types of government spending and taxes, which automatically increase and decrease along with the business cycle, are referred to as automatic stabilizers. The word automatic refers to the fact that changes in these types of spending and taxes happens without actions by the government. With discretionary fiscal policy , the government is taking actions to change spending of taxes.  Budget deficits and surpluses. When government expenditures exceed government tax revenues in a given year, the government is running a budget deficit for that year. The budget deficit, which is the difference between government expenditures and tax revenues, is financed by government borrowing; the government issues long-term, interest-bearing bonds and uses the proceeds to finance the deficit. The total stock of government bonds and interest payments outstanding, from both the present and the past, is known as the national debt. Thus, when the government finances a deficit by borrowing, it is adding to the national debt. When government expenditures are less than tax revenues in a given year, the government is running a budget surplus for that year. The budget surplus is the difference between tax revenues and government expenditures. The revenues from the budget surplus are typically used to reduce any existing national debt. In the case where government expenditures are exactly equal to tax revenues in a given year, the government is running a balanced budget for that year.  Expansionary and contractionary fiscal policy Expansionary fiscal policy is defined as an increase in government expenditures and/or a decrease in taxes that causes the government's budget deficit to increase or its budget surplus to decrease. Contractionary fiscal policy is defined as a decrease in government expenditures and/or an increase in taxes that causes the government's budget deficit to decrease or its budget surplus to increase.  Difference between Expansionary & Contractionary fiscal policy CONTRACTIONARY EXPANSIONARY Problem-Recession Problem- Rising Inflation Actions- Increase Actions- Decrease government spending or cut government Spending or taxes. raise taxes. Result- Real GDP and the Result- Real GDP and the price level rise. price level fall.  REFERENCES Reference Books- K. Aswathappa, Essentials of Business environment. Francis Cherrunilam, International Trade and Export Management, Himalaya Publications. References of websites- google.com https://www.toppr.com/guides/business-studies/business-environment/indian-industrial-policies/, https://study.com/academy/lesson/what-is-business-environment-definition-factors-quiz.html 17 THANK YOU