ECON 336 Chapter Notes - Chapter 12: Fiscal Policy

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copperalpaca520

19 May 2012

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Path dependency = how a country"s institutions develop depends critically upon where they start. At the beginning of the fiscal system (1959s), local governments were responsible for day-to-day services, such as education, public safety, health care, housing, and social security. However, all of the money came from through the revenue-sharing system, under which the central government had all the money. The decline of the budget, 1978 1993. As soes profits declined so did the revenue to the central government. The growth in the rural areas was great but at the time china had no real tax administration in place that could have taxed rural-based growth. A system was implemented in 1988 that made the provinces pay fixed amounts to the central government. This reform aimed to recentralize the fiscal reform and was composed of three elements: Aimed to simplify the tax structure, eliminate distortionary elements, and increase transparency. A single 17% vat was implemented on manufacturing.

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A recent report on GDP growth rates showed that the GDP of Dorada, a developed economy, has declined by 1.5 percent this year. Emily George and her friend Tabitha Jude, both students of economics, are discussing the possible reasons for the decline in the growth rate. Emily feels that the government deficit has reached an unsustainable level, as a result of which interest rates now are extremely high. This has reduced government expenditure in recent times, leading to a decline in GDP. Tabitha however disagrees. According to her, the fall in GDP must imply a fall in consumer spending as household consumption accounts for the largest share in Dorada's GDP. Which of the following, if true, will strengthen Emily's claim that the high fiscal deficit is affecting the government's ability to spend?

A. The central government's grants-in-aid to the local governments increased by 7 percent.

B. A sizeable portion of the tax revenue generated in Dorada is being used to make interest payments on sovereign debt.

C. The President's economic advisory council is of the opinion that the fiscal deficit should not exceed 3 percent of the country's GDP.

D. Given that the government of Dorada has never defaulted on sovereign debt, it enjoys very high credit ratings.

E. The government of Dorada scaled up its defense expenditure by more than 50 percent in the last two years.

magentacoyote534

Write an essay of about 300-400 words about the monetary system: a brief look at Vietnam's banking system, including its development, the role of the central bank, the currency, and the central bank's influence on the level of prices. Interaction of the monetary system with the government's fiscal policy, including government indebtedness.

Data:

Population: 89.7 million

GDP (PPP): $359.8 billion

5.4% growth

5.7% 5-year compound annual growth

$4,012 per capita

Unemployment: 1.9%

Inflation (CPI): 6.6%

FDI Inflow: $8.9 billion.

Note: Please, I want an honest answer, do not copy or plagiarize directly from any sources. Thank you.

amethystseal852

In a federal political system authority is:

a) disagreement among the founders regarding the role of religion in government.
b) agreement among the founders that a strong central government is a threat to liberty.
c) the failure of the unitary system originally attempted.
d) political compromise aimed at getting the Constitution ratified.

pearllama817

ECON 336 Chapter Notes - Chapter 12: Fiscal Policy

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