IV. Text understanding

Exercise 7. Find in the text and translate a passage describing:

5. definition of the terms “fiscal policy”, “monetary policy”

6. an expansionary position of fiscal policy

7. ways of funding government expenditures

8. fiscal deficit funding.

Exercise 8. Agree or disagree with the statements:

9. The idea of using fiscal policy to combat recessions was introduced by Adam Smith in the 1830s.

10. Fiscal policy refers to the overall effect of the budget outcome on economic activity.

11. Monetary policy attempts to stabilize the economy by increasing or decreasing taxes and/or government spending.

12. Government spending can`t be funded by sale of fixed assets.

13. Governments spend money on transfer payments such as welfare benefits.

14. A fiscal surplus is never saved for future use.

15. When income from taxation or other sources falls, reserves allow spending to continue at the same rate.

16. Changes in the level and composition of taxation and government spending can impact on aggregate demand and the level of economic activity.

Exercise 9. Answer the questions:

7. What is the difference between fiscal and monetary policy?

8. What are two main instruments of fiscal policy?

9. What can changes in the level and composition of taxation and government impact on?

10. Explain the essence of three possible positions of fiscal policy: neutral, expansionary, and contractionary.

11. How can government spending be funded?

12. How does government consume fiscal surplus?

V. Reading and comprehension.

Exercise 10.

1. Read the text. Define its main points and summarize them.

Voluntary taxation

Voluntary taxation is a theory that states that taxation, naturally a coercive act, should be a voluntary act instead. The idea states that instead of people being forced to pay taxes by their government they should have the option to pay taxes. In this theory people control how much they pay and where they spend it. It is a part of Objectivist politics and many ideologies.

Here is an example of how this system could function.

A state would distribute tax forms that could be filled out by recipients. The forms would have options on them for what the recipient would like to spend his or her money on. For example, there could be a section for military spending, or separate sections for defense in general and specific conflicts in particular. There would also be sections to be for elected officials (who would still be necessary to carry out the wishes of the people) and also sections for charities.

The form would be divided into more and more sections so that people could specify their decisions. In other words the entire form would be under the category of general. Then there could be a section for education and then even further for elementary school education. People could choose which sections they wanted and contribute to those sections. For example they could contribute different amounts to each section of education or to the section of education in general, allowing their elected officials to decide the best way to allocate the money.

The arguments for this theory are as follows:

• It allows greater freedom.

• It performs both the function of collecting money for the government and allowing the population to decide where money should be spent. It is similar to allowing everyone to vote on government spending except that it is in a different format.

• It allows government officials to easily keep track of the wants of their voters and the nation as a whole.

• It allows people to vote directly in a sense. For example they can decide that everyone should have health care by contributing to that section.

The arguments against this theory are as follows:

• The government would suffer because it would not receive enough money.

• No one would pay taxes and thus the nation would fall into anarchy.

• People with money would have a greater say in government then those without money.

• The forms would be difficult to create to adequately have every option that everyone would like. An option for "other" could become out of control in large nations.

• This would give the public a greater share in the legislation process.

Notes:

coercive – примусовий

charities – доброчинність

to have a say – мати право голосу, вплив.