Nama : Yulinda Rahma Sari

NPM : 1810111429
Kelas : 4ECAM Assaigment of Fiscal Policy 1

Soal:
1. Explain what is meant by fiscal policy. Presentation and how many types of fiscal policy
2. Mention fiscal policy goals
3. What is meant by the APBN, and state and explain the functions of the APBN
4. Explain the relationship between Philip's curve and the amount of unemployment in the
economy
5. In a slowing economy like this, what kind of fiscal policy will the government do.
Explain your opinion accompanied by examples of fiscal policies that can be carried out
by the government in the current economic slowdown.

Jawaban:

1. Fiscal policy is an economic policy carried out by the government to manage and direct
economic conditions in a better or desired way by changing or updating government
revenues and expenditures. One of the things highlighted from this fiscal policy is the
control of government expenditure and revenue or country.

Types of fiscal policy

Fiscal policy is divided into 2 (two), according to theoretical terms and according to the
amount of revenue and expenditure.

 Based on theory
Fiscal policy in terms of theory is how it is viewed non-practically. The types of fiscal
policy in terms of theory are:

 Functional Policy
It is a policy for consideration of budget expenditures and additional employment
opportunities carried out by the government due to indirect effects of national income.

 Intentional Policy
It is a fiscal policy that is intended to overcome the economic problems being faced by
deliberately manipulating the budget, both through changes in taxation and changes in
government spending. There are three forms of this type of fiscal policy, namely:
≥ Make changes to government spending
≥ Make changes to the tax collection system
≥ Make changes simultaneously both in government management and the tax
collection system

 Accidental Policy
This policy is intended to control the speed of the business cycle so that it is not too
volatile. In conditions of depression, this policy is intended to increase the economic
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Nama : Yulinda Rahma Sari
NPM : 1810111429
Kelas : 4ECAM Assaigment of Fiscal Policy 1
activities that occur. While in a state of inflation, this policy will reduce this activity. The
types of automatic stabilizers or unintentional fiscal policies are proportional taxes,
progressive taxes, minimum price policies, unemployment insurance.

 Based on Revenue & Expenses

Balanced Fiscal Policy
Balanced fiscal policy is a policy that makes the amount of revenue and expenditure the
same. One of the advantages of balanced fiscal policy is that the State does not need to
borrow funds from domestic or foreign parties. While its weaknesses, economic
conditions will be worse if the state of the country's economy is in an unfavorable
condition.

 Surplus Fiscal Policy

A surplus fiscal policy is a policy in which the amount of income must be slightly higher
than the amount of expenditure. This fiscal policy is a way to avoid inflation.

 Fiscal Policy Deficit

Fiscal deficit policy, which is the opposite of surplus policy. Means the amount of
income is lower than the amount of expenditure. Some of the advantages of this fiscal
policy are that it can overcome the sluggishness and depression of economic growth. As
for the disadvantages, the state budget is always in a state of deficiency.

 Dynamic Fiscal Policy

Dynamic fiscal policy is a policy that is similar to a balanced fiscal policy but with the
addition of improvisation that is equal in number but over time both will increase in size.
The purpose of this policy is to provide income that can meet government needs that
increase over time.

2. Fiscal Policy Objectives

Broadly speaking, the purpose of fiscal policy is to influence the course of the
economy with the following targets:

 . Increase GDP and economic growth. Fiscal policy aims to increase economic growth to
the fullest because it has a major influence on state revenues or revenues, including:
customs and excise, land and building taxes, income tax, state foreign exchange, imports,
tourism, and others.
In addition, examples of intended state expenditure include:

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 Construction of public facilities and infrastructure.
 Armament shopping.
 Government project.
 Plane and other programs for community welfare.

 . Expanding employment and reducing unemployment. As we know, unemployment is

one of the problems that is a scourge in a country. In Indonesia, the unemployment rate
has decreased by 140,000.
According to the percentage of the open unemployment rate, if in February 2017 the
figure reached 5.33%, in February this year the figure was at the level of 5.13%.
It is also inseparable from the implementation of fiscal policy. Fiscal policy is indeed
applied and is a priority in efforts to prevent unemployment.

 Stabilize the prices of goods / overcome inflation. The fall in the price of an item makes it
lose hope for the private sector. However, rising prices can also cause inflation.
On the other hand, inflation can provide benefits such as creating full employment
opportunities. However, inflation can also have a negative impact on low-income groups
or people due to decreased purchasing power.
The problem of unstable inflation has great potential to make people's confidence
in the government decrease. Through fiscal policy, the level of national income,
employment opportunities, the level of national investment, and the distribution of
national income are also expected to run well.

 Achieve national economic stability.

 Spur economic growth.
 Encourage investment.
 Open broad employment opportunities.
 Realize social justice.
 As a form of income distribution and distribution.
 Reducing unemployment.
 Maintaining the stability of prices of goods and services to avoid inflation.

3. The National Budget is a detailed list of systematically prepared plans for state revenues
and expenditures for one fiscal year (1 January-31 December). The APBN consists of 3
main components, namely state revenue, state expenditure, and state financing.

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 APBN function
The APBN function is always associated with three functions, namely allocation, distribution
and stabilization. But in Indonesia, based on Article 3 Paragraph 4 of Law No. 17 of 2003,
the State Budget has affirmed the following functions:

> The authorization function, that the state budget is the basis for implementing revenue and
expenditure in the year concerned.
> The planning function, that the state budget serves as a guideline for management in
planning activities in the year concerned.
> Oversight function, that the state budget serves as a guideline for assessing whether the
activities of the state government are in accordance with the stipulated provisions.
> The allocation function, that the state budget must be directed to reduce unemployment and
waste of resources. Efficiency and effectiveness of the economy.
> Distribution function, that state budget policies must pay attention to a sense of fairness
and propriety.
> The stabilization function, that the government budget is a tool to maintain and strive for a
balance of economic fundamentals.

4. The unemployment rate has been believed to be correlated with general price increases
(inflation). The Phillips curve explains the negative relationship between the inflation rate
and the unemployment rate. When the inflation rate is high, the unemployment rate will
be low and vice versa.

The Phillips curve is still a guide for world economists in determining policies and future
steps in the economy.
that there is a negative relationship between the percentage increase in wages with a
decrease in unemployment. The years where the unemployment rate is low are also the
years where the increase in wages is high, and vice versa, the years where the
unemployment rate is high the rate of increase of the wage is low.
Because wages and salaries are the main input costs for companies, wage increases must
lead to higher prices for products and services in an economy, which in turn drives higher
overall inflation rates. As a result, Phillips graphed the relationship between general price
inflation and unemployment, not wage inflation. This graph is known as the Phillips
Curve.

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From the Philis Curve chart it can be seen that the inflation and unemployment rates have
a negative relationship. The higher the inflation rate, the unemployment rate will
decrease, and vice versa.

5. In the face of a slowing economy, the government has made contractive fiscal policies
aimed at reducing economic output because fiscal policies indirectly take part in
economic growth. Government decisions regarding fiscal policies adopted by a country
can change output in the economy, both increasing and decreasing.

A decrease in tax T or an increase in expenditure G has a multiplier effect on a country's

income (economic output). The reason is that higher incomes cause higher consumption.
An increase in government spending causes an increase in income, then increases
consumption, which in turn increases income, then increases consumption and so on.

Fiscal and Monetary Policy Facing Covid-19

The Indonesian government adopted a comprehensive policy in the fiscal and monetary
sector to deal with Covid-19. In the fiscal sector, the Government has implemented a
policy of refocusing activities and budget reallocation. For this reason, the President of
the Republic of Indonesia, Joko Widodo, issued Presidential Instruction No.4 / 2020,
instructing all Ministers / Heads / Governors / Regents / Mayors to accelerate the
refocusing of activities, budget reallocation and procurement of goods handling services
for Covid-19.

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Kelas : 4ECAM Assaigment of Fiscal Policy 1
Furthermore, the Ministry of Finance will reallocate the state budget funds of Rp62.3
trillion. The funds are taken from official travel budgets, non-operational expenditure,
salaries, for handling / controlling Covid-19, social protection (social safety net) and
business incentives. APBD is also expected to be refocused and reallocated for these 3
matters.

Strengthening the handling of Covid-19, is done by providing facilities and medical

devices, medicines, incentives for the medical team to handle Covid-19 patients and other
needs. Social safety net is given to increase the purchasing power of the community
through the Family Hope Program (PKH), the Indonesia Smart Card (KIP), the nine basic
food packages and the prosperous rice. Ministries / Institutions / Local Governments are
expected to increase labor-intensive programs including the Village Fund. While the
incentives of the business world are carried out to help business actors, especially
MSMEs and the informal sector.

The Ministry of Finance also issues PMK 23/2020 which provides tax stimulus for
employees and the business world, namely the employee income tax borne by the
Government, exemption from import income tax, reduction of PPh Article 25
installments. In addition, the provision of incentives / facilities for Value Added Tax that
is affected by Covid-19.

The President of the Republic of Indonesia also gave directions for the Ministries /
Institutions to prioritize the purchase of MSME products, encourage SOEs to empower
MSMEs and MSME products into e-catalogs.

In the monetary sector, monetary policy taken must be aligned with fiscal policy in
minimizing the impact of Covid-19 on the national economy. Therefore the monetary
authority must be able to maintain the rupiah exchange rate, control inflation and provide
monetary stimulus for the business world. It is hoped that there will be relaxation in bank
lending and intensifying the distribution of People's Business Credit (KUR).

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