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Fiscal Policy - Coggle Diagram

- - - - Transparency
      - Accountability
  - - - Gov finance budget deficit
        
        Issuing bonds
        
        Printing money
        
        Selling national asset
        
        International borrowing
    - - Real balance vs. Strutral balance
      - based on adjustment of business cycle
      - Do govs pursue gov balance?
- - - - late to have statstics
      - not able to forecast covid victim
      - difficult to account for informal labor
    - - only 0.26%
    - - lower ICOR means higher productivity of capital
      - VN's ICOR increase year by year -> inefficient
  - - - economy has plenty of spare capacity
      - Low Propensity to Import and Tax
        
        The marginal propensity to import (MPM) is the change in imports induced by a change in disposable income
        
        A low MPM means that an increase in income leads to a relatively small increase in imports
        
        low marginal propensity to tax means that an increase in income leads to a relatively small increase in tax revenue
        
        less of additional income is "leaked" out of economy through imports or taxes
      - Labor and capital are underutilized.
      - increased gov spending stimulate demand -> higher production & employment w/o inflation
      - High Propensity to Consume Extra Income
        
        The marginal propensity to consume (MPC) the proportion of an additional unit of income spent on consumption
        
        high MPC: when income increases, a large portion of it is spent on consumption -> increase in AD, stimulate economic activity
    - - Economy is close to capacity limits
      - Rising demand causes rising inflation
      - Higher inflation causes rising interest rate
    - - gov capital investment -> higher multiplier effects
      - Economists calculate long-run multiplier
        
        1.5 for developed countries
        
        1.6 for developing countries
    - - initially ∆Y = ∆G.
      - Y increases => C raise ⇒ Y raise => C raise...
      - Finally, the increase of Y is larger than the increase of initial ∆G.
- - - - A tax is regulated by laws
      - Fee is regulated by laws
        
        gov degrees, national/local resolutions for public services
        
        private org for specific service: fee for late charge in comm. banks
    - - Tax
        
        The most important financial resource of state budget
        
        The financial resource for the perfomance of state agencies
      - Fee
        
        Also source of state budget
        
        Compensation for state agencies' operating costs
    - - Tax: nationwide
      - Fee: nationwide & local
        
        car-keeping fee
        
        health care fee
    - - Tax: indirect compensation for the gov via investment in infra construction or welfare improvement
      - Fee: direct compensation for service providers
    - - Tax: Sate agencies assigned by the gov
      - Fee
        
        Sate agencies by local
        
        private service providers
  - - - Income tax
        
        individual
        
        corporate
      - Consumption tax
        
        VAT
        
        excise tax: thuế hàng hóa
      - Property tax
    - - Direct: tax on property/income possessed
      - Indirect: tax on commodities on sale, the end users are taxpayers
  - - - most important income of state budget
      - used for social-economic development targets
    - - Stimulate/constran domestic production/comsumption in each period of socioeconomic development
  - - - Aggregate supply
        
        Y = F(K,L) - K, L constant short term
      - Aggregate demand
        
        Z = C(Y-T) + I(r) + G
      - When the economy at equilibrium: Y = C(Y-T) + I(r) + G
        
        G,T are fixed by policy
        
        Y is fixed by factors of production
        
        r based on economic situation -> flexible for Demand - Supply
        
        Y - C - G = I(r)
        
        (Y - T - C) + (T - G) = I(r)
        
        Y - T - C: private saving
        
        T - G: public saving
        
        A fall in saving by tax reduction or gov expenditure increase
        
        reduction in tax, increase disposable income
        
        increase consumption
        
        Y, G constant -> C increase lam I reduce
        
        r must raise
        
        public agency invest more, make it not profitable for private -> create crowd out effect
        
        Investment dem di gui ngan hang lam r tang
        
        Saving schedule to the left
        
        Saving (T-G) giam -> Investment I(r) giam -> interest rate tang
    - - C = C(Y-T)
        
        Lower T -> Higher disposable income (Y-T) -> C increase
        
        as MPC > 1
        
        MPC: the fraction of additional income that is spent on consumption. MPC 0.8 means every extra dollar of income, 80 cents are spent on consumption and 20 cents are saved
        
        ΔC = ΔT*MPC >ΔT -> reduction in S.
        
        As S reduces -> NX falls correspondingly
      - Y = C(Y-T) + I(r) + G + NX
      - NX = Y - C(Y-T) - G - I(r)
      - NX = S - I(r)
        
        S depend on tax and gov expenditure
        
        i depend on interest rate
        
        NX depend on I and S
      - T giam lam C tang/G tang
        
        reduce national saving (Y-C-G)
        
        shift the saving from S1 to S2
        
        NX = S - I, S giam lam giam NX
        
        Fiscal expansion lam giam national saving -> trade deficit
- - - - increase in expenditure/tax reduction
      - theorectically, the increase of output is at least equal to the increase in expenditure/tax reduction
      - create crowding effect
    - - Tăng thâm hụt ngân sách -> tăng lãi suât thực
        
        giảm đầu tư khu vực tư
        
        vốn từ bên ngoài đổ vào
        
        đồng nội tệ lên giá
        
        giảm xk ròng
  - - - Auto-stabilizer: depend on fluctuation of business cycle
      - Discretionary: suddenly change tax and spending, not depend on business cycle
    - - Pro-cyclical: expansionary in booming period
      - Counter-cycle: expansionary in recession period
  - - - stimulus fiscal
        
        apply for recession and high inflation rate
        
        expansionary policy to prevent of worsen economy
      - distractionary fiscal
        
        apply for booming period
        
        prevent overheated economy
    - - time lag, moral/political issue
      - If in recession the gov overspend - is it reasonable?
      - If in booming with high growth rate - why have to constrain?
      - IMF advice: must sterilize to be rescued economies
    - - Being limited to access international capital market
      - Weak institution leading to overspending in booming period
- - - - tax creditors
      - reduced tax rates
    - - lower interest rate than commercial loans
  - - - gov subsidies to basic R&D
      - Farming subsidies to preserve natural ecosystems
      - Credit subsidies for SME
        
        too costly for banks to assess creditworthiness
      - Social targets
        
        safety net for the poor
        
        income redistribution policies
        
        broad-based employment policies
  - - - pay bakers to compensate for their losses
      - require banks provide loans to bakers
        
        gov absord all failed loans