Fiscal Policy And The Stable Development In Economy

Fiscal Policy is an important instrument of the country to regulate its macroeconomy. The goal of policies' effect lies in reducing the cyclical fluctuation in the economy, and the emphasis should be focused on removing the inner factors that cause the fluctuation. Since the reform and opening in China ,the economic system has succeefuly transited form planing economy to that of market economy. At the same time, the economic growth pattern has been always extensive, which on one hand caused by the inertia of system reform and on the other hand caused by the low productivity due to less importance attached to science and education for a long time. The extensive pattern of economic growth will certainly lead to the accumulation in the unbalance of economic growth Will certainly lead to the accumulation in the unbalance of aggregate demand and aggregate supply, because the potential supply of good is unlimited while the aggregate demand for these goods in a certain period is limited and the marginal propersity to consume is dismissing. The unbalance between demand and supply becomes more obvious in the late of 1990's and then blasted under the background of financial crisis in South east Asia .Positive fiscal policy was adapted just under this situation , its direct motion is to relieve the structural disequilibrium of supply and demand , which is basted on the insufficience of domestic demand and oversea demand. As everybody knows, it has achieved some effect in relieving the disequilibrium between supply and demand , improving the industrial structure and the national economy growing at a stable and large rate ,all of which ascribe the success to the fiscal policy.The achievements should be affirmed,which is illustrated in the first chapter of this thesis. However, as is mentioned above, the author thinks that the fiscal policy is not a permanent cure but only a temporary solution according to where it direct its efforts. But this quick -effective and temporary solution is not unnecessary an optimum choice in short run. on the ground, permanent cure can not be reached in a short time. For an instance, the most imperative thing for a patient is not to eliminate the pathogeny, but to control the symptoms. The second chapter is just to illustrate why the active fiscal policy must be put into effect yet and why some necessary adjustments should be made as well as personal opinion upon the direction of adjustments.The center of this thesis lies in the third chapter, which explains the ideas of the author about how to eliminate the inner factors that casue the economic fluctuation and how to stimulate the economy with exogenous growth system, which leading to the transition of policy measures from temporary solutions to permanent cures. The author thinks this can be done from at least three aspects: the first is the ideology of economic growth should be changed from that management of demand to that of supply. This measure is directed against supply. Classical economics theory states that supply creates its own demand. The most important reason why the domestic demand in china can not be pulled is, the author think, the low levels of repeated supply due to multi-factors in the long time can not adapt to the consumption demand in new period, which triggered few desire to consume of residents. In the late of 1990's ,90%supply of the commodities in the market exceeded the demand and at the same time the balance of resident's deposits kept on increasing every year, which fully showed the contradiction between supply and demand of commodities. The second is that fiscal policy should play a important role in income distributions. This measure is directed against demand. Although the problems with the supply is one factor that effect the domestic demand, the excessive decentralization of social purchasing power has a great negative influence on domestic demand. Early in 1998, the geni coefficiency had exceeded the security line of 0.4, which indicated that there were serious inequity in income distribution. A great di...