Lagoun Mohamed Charaffedine The first year Master financial and banks LMD Summary of monetary policy in Algeria:

Fiscal policy in Algeria 12.3) of fiscal policy: The Government is a vital and important role in the stability of the national economy by addressing the imbalances and economic problems faced by the country's economy. Vachtlal balance in the economy which results due to changes in aggregate demand and aggregate supply, may expose the economy as we have seen previously to the problem of inflation or unemployment, or stagflation (Stagflation), which is characterized by high rates of unemployment and inflation at the same time. The government can address these problems by affecting the size of the aggregate demand (AD) in the economy, through the use of instruments of fiscal policy, which consists of government spending (G) and the tax on income (T). And is this effect in two ways: direct and indirect, where direct is the way in government spending (G), which is a component of total spending or aggregate demand in the economy: When the imbalance in the economy (AD AS), the government can change the size of government spending (G), in order to influence the size of the aggregate demand (remember the multiplier effect), and thus access to the level of balance. The indirect method is to use taxes (T), which will consequently affect both consumption (C) and savings (S). The high level of tax on income of individuals leads to a decrease disposable personal income, and thus lower the volume of consumption and savings, and then decrease the size of aggregate demand. And vice versa when the government reduced the size of the tax. 12.3.1) The objectives of fiscal policy: The Government is to follow the fiscal policy (through the use of instruments of fiscal policy), in order to achieve many goals, including: 1 - maintain the stability of the general price level, and thus avoid the problem of inflation. 2 - the exploitation of all the productive resources available in the local

economy, and to reach full employment level of the local economy, and avoid the problem of unemployment. 3 - support the process of economic development, and raise the level of economic growth. 12.3.2) fiscal policy and economic gaps: Suppose that something wrong had faced the local economy, so that aggregate demand is greater than the overall width, or (AD> AS). It means that the amount of output can not meet demand in the economy. When we are in a less than full employment situation, the shortage of stock pays producers to employ new production elements, for example to increase the level of production, and then increase the volume of output (aggregate supply), to be equal to the size of aggregate demand. But if the economy is in full employment, this means that all elements of production in the economy is fully employed, and therefore it is not possible to employ the elements of new production. The high volume of aggregate demand in this case, the aggregate supply and the inability of the prosecution of aggregate demand will lead to the inflation problem (what is called this type of inflation when aggregate demand is greater than the overall width?). To address this problem, the Government is to intervene in order to achieve the following objective: the face of the gap inflationary (Inflationary Gap), a gap resulting from the increased aggregate demand for aggregate supply, at the level of employment the full, as shown in Figure No. (.111.1), and thus try to reduce the size of the aggregate demand in the economy. Since government spending is a component of the total expenditure (or aggregate demand), reducing or reducing the size of government spending will lead to reduce the size of the total expenditure to the level where aggregate demand is equal to the total display. On the other hand, the government can use the second tool from the tools of fiscal policy, a tax. When imposing a tax on income, this will lead to reducing the level of disposable personal income tax and then the value of the low level of consumption and the level of savings. If, on the government to follow a contractionary fiscal policy (Contractionary Fiscal Policy), which is to reduce the size of government spending or raise taxes to meet the inflationary gap.

Now suppose that something wrong was faced with the economy so that aggregate demand has become less of the overall width, or (AD <AS). In this case, the amount of aggregate demand is less than the volume of output in the economy, and called this case the deflationary gap (Contractionary Gap), as shown in Figure (11.1.2). If the economy is in less than a full employment situation, the increase in inventory (ie, the surplus of goods and services), will pay the producers to employ elements of lower production in order to reduce the size of the output, and thus lower the overall width to be equal to the size of aggregate demand. In this case, the economy will face the problem of unemployment, due to lay off some of the elements of productivity. (What is called this type of unemployment caused by the failure of aggregate demand for equality of aggregate supply?). The government is to intervene in order to meet the gap deflationary, by trying to increase the size of aggregate demand in the economy by following an expansionary fiscal policy (Expansionary Fiscal Policy), and is this policy in the increased size of government spending, which would increase the size of the total expenditure to a level that is equal where all of the aggregate demand with aggregate supply. But when the government's use of the second tool of expansionary fiscal policy instruments are taxes, the face of deflationary gap is by reducing the size of the income tax, as this will increase the level of disposable personal income tax value, and then the high level of consumption and the level of savings. If, on the government to follow an expansionary fiscal policy in order to face deflationary gap.