In these years, Chinese government executes expansionary fiscal policies in order to keep the economy growth at a stable
rate. It is very important to study the validity of the fiscal policies, which will provide the theory and practice basis for continuing the expansionary fiscal policies. In this paper, we utilize the changes of
the velocity of money to study the effectiveness of the fiscal policy in China. We find that the velocity of money present a downward trend from 1978 to 2001, but the downward trend slows down with the time going?We also find that the change of the velocity of money is positively relevant to the change of the fiscal expenditure. Making use of the estimate of the marginal propensity to consume and the mean value of the velocity of money, we measure the effect of changes of fiscal expenditure on the change of GDP, and conclude that the expansionary fiscal policies in China are effective. We also should point out that the growth rate of fiscal expenditure keep a upward trend since 1978, while the growth rate of the velocity of money present a downward trend since the 1990's, which will put great pressure on the
economic growth of China.