Public Finance ( 3 )
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Fiscal Policy
Public Finance ( 3 )
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Ways to finance governmentexpenditures in Hong Kong
•Tax revenue : direct and indirect taxes
•Non-tax revenue : sale of land, fees andcharges …….
•Past fiscal surplus ( 財政儲備 )
•Selling government bonds ?
Public Finance ( 3 )
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Types of Government Expenditures
•Classification byfunction: Types
•Economic services
•Security
•Social welfare
•Health
•Education
•Environment
•Community & externalaffairs
•Infrastructure
•Support
•Housing
•Classification by nature
•Capital expenditure refersto expenditure on capitalworks and is non-recurrentin nature.
•Revenue expenditurerefers to regularexpenditure.
Public Finance ( 3 )
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Fiscal Policy : GovernmentBudgeting Policy
Fiscal policy means that the governmentmakes decisions on taxation and spendingwith an aim to influence the income( GDP ) and employment.
Public Finance ( 3 )
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Economic Problems: Aneconomy is not doing well when..
•Unemployment rate is rising.
•Real GDP growth rate falls or even becomesnegative.
•Price level is falling.
•( Or, price level is rising. )
Public Finance ( 3 )
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Aims of Fiscal Policy
•Full employment ( very low unemploymentrate )
•Economic growth ( real GDP growth )
•Price stability ( without deflation andinflation )
Public Finance ( 3 )
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Types of Budget : How to achievethe above aims ?
•Surplus budget ( 盈餘預算 ) : estimatedrevenue is larger than estimated expenditure.
•Deficit budget ( 赤字預算 ) : estimated revenueis smaller than estimated expenditure.
•Balanced budget (平衡預算 ) estimated revenueis equal to estimated expenditure.
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Surplus budget ( 盈餘預算 )
•Economic condition: inflation and overheatedeconomy
•Aim: Price stability
•Policy : contractionary fiscal policy
decrease government expenditure
increase tax rate
Public Finance ( 3 )
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Deficit budget ( 赤字預算 )
•Economic condition: unemployment andfalling real GDP growth
•Aims: Reducing unemployment andeconomic growth
•Policy : expansionary fiscal policy
increase government expenditure
decrease tax rate
Public Finance ( 3 )
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What type of budget policy would you advisethe Financial Secretary of the HKSAR to adoptto achieve economic growth and highemployment ?
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