FISCAL POLICY

AND
PUBLIC DEBT
PRESENTED BY:
Araneta, Erika A.
Capitania, Re- ann
Roble, Gerryca M.
Valeriano, Elaine Jane J.
OBJECTIVES:

1. To be able to define fiscal policy and public debt.

2. To be able to understand the types of fiscal policy.

3. To be able to know the types oaf public debt.

4. To be able to identify the causes of public debt.

5. To be able to discuss the relationship between fiscal

policy and public debt.

WHAT Fiscal policy involves the
decision that a government
IS A makes regarding collection of
FISCAL
revenue, through taxation
and about spending that
POLICY?
revenue.
 Development by effective

1
mobilisation of resources.

Reduction in inequalities of income

2
and wealth.

7 OBJECTIVES
3
Price stability and control of

OF FISCAL

inflation.

POLICY
4 Employment generation

Reducing in the deficit in the

5
balance of payment.

6 Increasing national income

7 Development of Infastructure
2 TYPES OF FISCAL

POLICY
Expansionary Fiscal Policy Contractionary Fiscal Policy

An expansionary fiscal policy lowers A contractionary fiscal policy raises

tax rates or increases spending to rates or cuts spending to prevent or

increase aggregate demand and fuel reduce inflation.

economic growth.
2 TYPES OF FISCAL

POLICY
PUBLIC DEBTS

Public debt (alternatively, national

debt or sovereign debt), is debt owed
by the public sector, that is, by
governments and their agencies.

Public debt – the total of the nation’s

debts; debts of local and state and
nation governments; an indicator of
how much public spending is
financed by borrowing instead of
taxation.
 1. PRODUCTIVE AND UNPRODUCTIVE DEBT
PRODUCTIVE- it is used for productive purposes. Which yield some
revenue in the future, or something that can benefit the society.

6 UNPRODUCTIVE - It is used for purposes which do not yield any income

.
2. VOLUNTARY AND FORCED DEBT
TYPES OF VOLUNTARY- all public debts are voluntary in nature.

PUBLIC FORCED/COMPULSORY- this are Loans that are raised due to the
government’s borrowing from the public by using coercive methods.

DEBTS 3. INTERNAL AND EXTERNAL DEBT

INTERNAL- raised within the country or government’s borrowing within
the country.

EXTERNAL - raised in a foreign country either from government or

foreign nationals or institutions.
4. SHORT TERM (3-9 MONTHS), MEDIUM TERM (UP TO 5 YEARS), AND LONG
TERM (5+ YEARS)

5. REDEEMABLE AND IRREDEEMABLE DEBT

REDEEMABLE - a debt which is repayable back to the lender by the borrower within the
specific period.

IRREDEEMABLE - debt that has no specific redemption date or maturity period.

6. FUNDED AND UNFUNDED DEBT

FUNDED- is repaid after a long period of time and government set up separate head for it.
(floating debt or long term debt)

UNFUNDED- no fund created for its repayment. (short term loan).

 Natural calamities Defense and war

CAUSES
OF
Provision of

Budget deficit
PUBLIC infastructure

DEBTS

Less flexibility to
Economic

face economic crisis development

EFFECTPUBLIC
DEBTS
Public debt has a great effect
on the following economic
activities:

PRODUCTION
DISTRIBUTION
CONSUMPTION
TRADE
EFFECTS OF FISCAL POLICY

IN PUBLIC DEBT
1. Expansionary Fiscal Policy
Increase in government spending
Decrease in taxes
Combination of increase government spending
and decrease taxes.
if the budget was initially balanced, expansionary
fiscal policy creates a budget deficit. Government
will borrow money to pay for budget deficits,
which add to public debt.
EFFECTS OF FISCAL POLICY

IN PUBLIC DEBT
1. Contractionary Fiscal Policy
Decrease Government Spending
Increase taxes
Combination of decrease government spending
and increase taxes.
if the budget was initially balanced, contractionary
fiscal policy creates a budget surplus. When the
government runs a budget surplus, the debt
decreases.
Thank You for listening!!!!!