Fiscal policy consists of measures related to central and local government revenue and expenditure. Monetary policy consists of the measures which affect the supply of money and credit and the rate of interest. Changes in the supply of money and in the rate of interest are generally closely interrelated in the sense that, other things being equal, an increase in the supply of money and credit is likely to produce a fall in the rate of interest, and vice versa. A broader definition of monetary policy adopted here includes also measures taken to change the exchange rate.

1. FISCAL POLICY

2. INTRODUCTION
 Generally, FISCAL POLICY is the economic policy
done by the government in terms of controlling
the budget, which covers government revenue
and expenditure in order to get an optimum
economic growth and to stabilize the economy in
a whole.
 The main sources of government revenue are
tax, beside foreign debt and other domestic
sources such as sales of gas and oil.

3. OBJECTIVE
 To mobilize resources for economic growth,
especially for the public sector.
 To promote economic growth in the private
sector by providing incentives to save and invest.
 To restrain inflationary forces in the economic in
order to ensure price stability.
 To ensure equitable distribution of income and
wealth so that fruits of economic growth are
fairly distributed.

4. ROLE
 The government has to play a very active role in
promoting economic development and FISCAL
POLICY is the instrument that the state must
see.
 Hence the great importance of public finance in
underdeveloped countries desirous of rapid
economic development.
 In a democratic society, there is an inherent
dislike for direct control regulation by the state.
 Hence, a democratic state must rely on indirect
methods of control and regulation and this is
doing through fiscal and monetary policies.

5. INSTRUMENTS OF FISCAL
POLICY
 BUDGET
 TAXATION
 PUBLIC EXPENDITURE
 GOVERNMENT BORROWING
All of these except taxation are forms of deficit financing.

6. TYPES OF FISCAL
POLICY

7. OVERVIEW IN MALAYSIA
(1)
 The direct impact of government economic
activity towards the national economy is shown
by the effect of government expenditure on the
main macroeconomic indicators.
 Such a stance has been considered to accord less
fiscal flexibility in times of crisis.
 In this regard, Malaysia has always reiterated
that the prudent stance of maintaining at least a
surplus position in the current account over the
course of the business cycle reduces the longer-
term risks for the country.

8. OVERVIEW IN MALAYSIA (2)
 In implementing the current fiscal stimulus
programme, Malaysia did face implementation
constraints initially.
 Hence, existing procedures were adjusted in
order to enhance the efficiency of project
implementation, speed up payments to
contractors and remove bureaucratic delays.
 Besides a review of procedures, rules and
guidelines on the implementation of
development projects, procurement and
payment to contractors, the implementation of
projects was also more closely monitored.

9. CONCLUSION
 In Malaysia, it is belief that more expansive
FISCAL POLICY will not cause a budget deficit, but
only has moderate effect on output in the long
run term. Hence, it can be said that the size of
government sector is relatively high comparing
to those of the private sector.
 It also implies that, the government should make
a better management on public sector
supporting the tax-and spend FISCAL POLICY. A
higher economic growth will also affect a higher
demand of public goods and services, which are
more effective provided by the government.

10. CONCLUSION
 In Malaysia, it is belief that more expansive
FISCAL POLICY will not cause a budget deficit, but
only has moderate effect on output in the long
run term. Hence, it can be said that the size of
government sector is relatively high comparing
to those of the private sector.
 It also implies that, the government should make
a better management on public sector
supporting the tax-and spend FISCAL POLICY. A
higher economic growth will also affect a higher
demand of public goods and services, which are
more effective provided by the government.