Funding the deficit

A fiscal deficit is often funded by issuing bonds, like treasury bills. These pay interest, either for a fixed period or indefinitely. If the interest and capital repayments are too large, a nation may default on its debts, usually to foreign creditors.

Consuming the surplus

A fiscal surplus is often saved for future use, and may be invested in local (same currency) financial instruments, until needed. When income from taxation or other sources falls, as during an economic slump, reserves allow spending to continue at the same rate, without incurring additional debt.

III. Language

Exercise 3. Find in the text and put down English equivalents to the following word combinations:

Намагання уряду, подолати економічний занепад, грошово-кредитна політика, рівень економічної діяльності, сукупний попит, розподіл ресурсів, повністю фінансується, надлишок бюджету, охорона здоров`я, споживання податково-бюджетних запасів, продаж твердих активів, у невизначений термін.

Exercise 4. Fill the blanks with the suitable words:

1. The term … refers to government efforts to keep the economy stable by increasing or decreasing taxes and/or government spending.

(foreign policy, fiscal policy, monetary policy)

2. …. fiscal policy is usually associated with a budget deficit.

(contractionary, neutral, expansionary)

3. Contractionary fiscal policy is usually associated with a ...

(deficit, surplus; balanced budget)

4. A fiscal deficit is often funded by issuing …

(treasury bills, shares; bonds)

5. Monetary policy attempts to stabilize the economy by controlling … and the supply of money

(interest rates, taxes, prices)

Exercise 5. Make up the possible word combinations out of the following and translate them:

Fiscal government aggregate tax budget economic monetary

demand supply policy activity spending deficit surplus activity reserves revenue

Exercise 6. Match the definitions to the economic terms in the left column:

Monetary policy fiscal policy a contractionary fiscal policy siegniorage an expansionary position of fiscal policy a neutral position of fiscal policy

a). position occuring when net government spending is reduced either through higher taxation revenue, reduced government spending, or a combination of the two; b). government efforts to keep the economy stable by increasing or decreasing taxes and/or government spending; c). position implying a balanced budget where G = T (Government spending = Tax revenue); d). attempts to stabilize the economy by controlling interest rates and the supply of money; e). position involving a net increase in government spending (G > T) through rises in government spending, a fall in taxation revenue, or a combination of the two; f). the benefit from printing money;