ECON 104 Chapter Notes - Chapter 1: Justin Trudeau, Direct Tax, Indirect Tax

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19 Jan 2018

School

Simon Fraser University

Department

Economics

Course

ECON 104

Professor

Vasyl Golovetskyy

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Intro & Canadian Government

Government: The group of people who control and make decisions for a country, state, etc.

Economics and Government:

What does Economics Study?

- Describing and analysing of the production, distribution, and consumption of goods and services

What is the Main Attribute of Government?

- Uses force to make people behave in certain ways

What is the difference between Public Finance and Public Choice?

- Public Finance: Studies what the government should do with focus on taxation, expenditure, and

regulations

- Public Choice: Studies what the government is made of people who have their own objectives,

and studies what the government actually does rather than what it should do

Name some responsibilities for each level of government. Name some responsibilities shared by different

levels of government.

- Federal: National defense, foreign policy, immigration and citizenship, employment insurance,

money, postal services, banking, federal taxes, fisheries, shipping, railways, pipelines, Aboriginal

lands and rights, criminal law

- Provincial: Education, health, direct taxes, prisons, marriage, property and civil rights, and

highways (road regulations)

- Municipal: Policing, firefighting, drinking water, recreation, snow removal, recycling, and

garbage collecting

- Shared Responsibilities for Environment, Power over Agriculture and Immigration

Who is the Canadian Head of State?

- Queen Elizabeth II

Who is the Canadian Head of Government?

- Prime Minister Justin Trudeau

What is the difference between a direct tax and an indirect tax?

- A direct tax is a tax imposed on an individual. An indirect tax is a tax imposed on a transaction.

Explain what the Equalization Program does and how it does it.

- Provinces with high fiscal capacity subsidize the provinces with low fiscal capacity so that people

do not lose their access to public services when they move from a province to another province

(provided he pays same taxes)

What do the governments do?

- Each level of government has a list of areas of responsibilities to fulfill

Why is it difficult to evaluate the size of the government?

- There are many multidimensional concepts

- Single measure of its size may be misleading, or even meaningless

What are some possible measures of the size of the government?

- Regulations, production, redistribution, redistribution, representation, fixing market failure,

social security

How has the size of the government changed over last 150 years, in Canada and in other countries?

- It has grown tremendously

Whe have the rih outries’ goverets started to grow at an accelerated rate?

- Over the last 100 years

Explain how calamities may create a larger government.

- Government regulates a lot during the wars, nationalizes some production, controls prices,

employs an army, etc.

- Thus helping a country grow

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Document Summary

Government: the group of people who control and make decisions for a country, state, etc. Describing and analysing of the production, distribution, and consumption of goods and services. Uses force to make people behave in certain ways. Public finance: studies what the government should do with focus on taxation, expenditure, and regulations. Public choice: studies what the government is made of people who have their own objectives, and studies what the government actually does rather than what it should do. Name some responsibilities for each level of government. Name some responsibilities shared by different levels of government. Federal: national defense, foreign policy, immigration and citizenship, employment insurance, money, postal services, banking, federal taxes, fisheries, shipping, railways, pipelines, aboriginal lands and rights, criminal law. Provincial: education, health, direct taxes, prisons, marriage, property and civil rights, and highways (road regulations) Municipal: policing, firefighting, drinking water, recreation, snow removal, recycling, and garbage collecting. Shared responsibilities for environment, power over agriculture and immigration.

Related Questions

What are the effects of world hunger? world hunger simply means that there are lots of people with an insufficient amount of food. World hunger has become a major problem nowadays. It is presented in media to the public and, as a result, people behave become aware of it. World hunger has serious social and environmental effects, but there is also some solution.

Some of the social effects of world hunger are malnutrition and illiteracy. When a human body does receive a daily sufficient amount of nutrients, it will not do its functions well. If this condition remains for a long time, the body will eventually die. According to Ziegler(2007) in 2006, hunger and diseases resulted from it were the main death cause of 36 million people (para2). Also, people who do not have enough food have few chances to go for education because obviously, they will not be financially mentally, and physically ready to study.

Some of the environmental effects of world hunger are logging and agriculture. Result in trees many services to the environment where there are they are in industrial areas absorb carbon dioxide and provide us with oxygen, which in agricultural areas are in addition to the above work windbreaks to protect crops and provide shade and provide us with wood, and dead trees in the forest other services important to the environment they lose their leaves periodically and the fallen leaves decomposed "humus" feeds the soil and maintains soil fertility, which provides a constant temperature of about wild animals that find shelter forest, a place suitable for life. According to Harcurt(2011) "many of these great impact on agricultural production and hence nutrition"(para3).
And forests from renewable resources, which goes a lot of human trees to get wood for the furniture industry, paper, and clothing.
Has resulted in over-cutting of trees and forest degradation and its orientation towards drought

Some of the solutions for world hunger are even though the government is doing a lot of solutions to reduce world hunger still are facing this problem. The solution is that government should have to pay all basic expenses to under 18 and over 50 and also give enough employment to young people. Accordingto Ziegler (2007) everyone should work together to find a solution to this problem(para4).
One another solution for decrease world hunger is government should give equal and free education to all citizens even they are rich or poor.

In conclusion: The government should help world hunger or poverty to support people with food and money. Also, someone must fix problems such as health or education to prevent hunger. Also, climate change should make the environment better. If everyone helps us to support people with money or food we won't find world hunger.

indigomoose382

1.The production possibilities frontier can be used to demonstrate which of the following?
(i) The best tradeoffs that individuals and societies should make
(ii) The tradeoffs forced on individuals and societies because of scarcity
(iii) The wealth maximizing output combination that an individual or society should choose

Select one:

a. (ii) only

b. (i), (ii) and (ii)

c. (i) only

d. (iii) only

2. Unlimited wants and limited resources:

Select one:

a. Can be overcome through innovation

b. Are not problems faced by wealthy industrialized nations

c. Necessitate choices about the goods to services to consume

d. Can be overcome by increasing wealth

3. What are the two sub-fields of economics?

Select one:

a. For-profit economics and not-for-profit economics

b. Private markets and the public sector

c. Microeconomics and macroeconomics

d. Market and non-market economics

4. What do economists mean by "self-interested behavior"?

Select one:

a. It means undertaking activities that benefit yourself and a small group of others who are important to you

b. It means undertaking activities motivated by greed

c. It means undertaking activities that maximize one's own welfare

d. It means wanting to pursue a life of leisure

5. When economists say that people act rationally, they mean that:

Select one:

a. People do not make incorrect choices

b. People are governed by what others think about them and act accordingly

c. People consider the significant consequences of their actions and make decisions that further their self-interests

d. There are certain common codes of conduct that everyone adheres to

6. Which of the following actions reflect self-interested behavior?
(i) Warren Buffett, one of the world's wealthiest individuals, donated more than $30 billion to humanitarian causes such as AIDS and tuberculosis initiatives.
(ii) Pfizer Inc., a private pharmaceutical company, sponsored a disease-management program for Florida's Medicaid patients with chronic illnesses such as asthma, diabetes and heart disease.
(iii) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class.
(iv) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class only if your mother pays you $8 an hour.

Select one:

a. All of the above actions except (iii)

b. All of the above actions

c. (ii) and (iii) only

d. (iv) only

7. Which of the following does not qualify as a market?

Select one:

a. Bloomingdales Department Store

b. The underground drug trade

c. Amazon.com

d. The French Immigration Department

8. Which of the following is not a key assumption of economics?

Select one:

a. People do not undertake activities that make others better off

b. People are self-interested

c. People have limited resources to acquire their wants

d. People are rational

9. Which of the following is not likely to cause the production possibility frontier to shift out?

Select one:

a. An increase in the quantity of innovations

b. An increase in specialization which allows people to develop higher levels of skill at their chosen profession

c. Developing markets where self-interested individuals can interact

d. Relying only on governments to allocate resources

10. Which of the following statements is false?

Select one:

a. Scarcity affects everyone, including very wealthy people

b. Rational people never make mistakes

c. Economists assume people are rational

d. Economists assume people have unlimited desires

11. Which of the following statements is false?

Select one:

a. When you volunteer to help at a soup kitchen, you face an opportunity cost of your time

b. Mother Teresa faced trade-offs when deciding to help lepers in India rather than some other needy group

c. Economics brings tradeoffs to light but does not inform us of which trade-offs society should make

d. When the government funds research into cancer, it is able to avoid trade-offs because public funds are used rather than private funds

12. Which of the following topics does economics study: (i) the study of human behavior; (ii) the market for organ transplants; (iii) cost and benefits of building a suicide barrier in the Golden Gate Bridge; (iv) the functioning of political institutions.

Select one:

a. (i) and (iii) only

b. (ii) and (iii) only

c. All of the topics listed

d. All of the topics except (iv)

13. Which the following would be likely to raise your opportunity cost of going to college full-time?
(i) You have been offered a full-time job as wardrobe assistant to Paris Hilton that pays $60,000 per year.
(ii) You have been offered a merit scholarship that pays for two years of tuition.
(iii) Your landlord increases the rent on the apartment you are currently living in and will continue to live in even if you choose to attend college full-time.
(iv) An increase in the value of your college trust fund set up by your grandfather.

Select one:

a. All of the above

b. (i) and (iii) only

c. All of the above except (ii)

d. (i) only

14. While microeconomics is concerned with the behavior of individuals and firms, macroeconomics:

Select one:

a. Does not make use of "micro" ideas such as opportunity cost or self-interest

b. Is concerned with the performance of entire economies

c. Is concerned with normative matters such as fairness, equality and ethics

d. Is only concerned with government activity

15. You own a Ford car that has lousy gas mileage. You finally trade it for a Hyundai, which is equal in virtually every aspect except that the Hyundai gets much better mileage. What is likely to happen to your gas consumption?

Select one:

a. I get better gas mileage and since the cost of driving has gone down, I will drive more so my gas consumption will remain the same

b. It will fall since I will now use less gas

c. I get better gas mileage and since the cost of driving has gone down, I will drive more so the effect on my gas consumption is indeterminate

d. It will go up since I will now drive more

azurewoodchuck319

Let's change it up a little. You may have to dig a little for this one. Fannie Mae and Freddie Mac are two banking giants that have been in news because of their role in the 2008 financial crisis. Due to this many in the government believe that the two companies should be put out of business. On the other hand, there are many who believe the companies should remain as they are. See The Case For Keeping Fannie and Freddie Alive. The argument both ways is in a sales pitch for the two contrary opinions. how would you convince someone either way on the issue of Fannie and Freddie? A reference is required to support your post

On just one major piece of economic policy, President Obama and House Republicans share the same basic opinion: kill off government-backed mortgage giants Fannie Mae and Freddie Mac.

This rare bit of consensus might also prove to be a devastating mistake.

Fannie and Freddie which guarantee mortgages were placed under federal conservatorship in 2008 as the housing bust reached its apex. The firms are roughly within $42 billion of repaying the $187.5 billion they received from taxpayers, but Obama and much of Congress plan to wind them down in the belief that another federal bailout will never again be necessary.

We can't leave taxpayers on the hook for irresponsibility or bad decisions by some of these lenders or Fannie Mae or Freddie Mac, Obama said in a speech this month. We've got to encourage the pursuit of profit, but the era of expecting a bailout after you pursue your profit and you don't manage your risk well, that puts the whole country at risk. And we're ending those days. We're not going to do that anymore.

But the political debate has been lopsided thus far focused on putting Fannie and Freddie into the grave, while largely ignoring what their demise could mean for homebuyers and the economy a sharp jump in interest rates, and a drop in the availability of mortgages.

Senate Majority Leader Harry Reid (D-NV) has objected to plans to end both companies.

These are the government organizations that have made homeownership so easy, Reid recently told Nevada Public Radio. I don't agree with the president. He says he wants to get rid of them. I'm going to look closely at his recommendations because on their face, I don't like them.

Mostly, economists and investors are framing the issue in the same way as Reid.

It boils down to a tradeoff between shifting risk away from the government and taxpayers, versus keeping mortgages inexpensive and widely available, said Jed Kolko, the chief economist at the real estate firm Trulia. When push comes to shove, it's hard to do both.

Their executives received outlandish bonuses during the boom, only to foist the eventual losses caused by years of mismanagement onto the public. It rightfully enables sucker punches from Capitol Hill that voters approve of, even though the rescue kept the entire housing sector alive. Of the $1.75 trillion worth of mortgages originated last year, about 90 percent were made through the federal government.

This point matters because Fannie and Freddie ensure that the housing market does not seize up during a recession, said Ken Fears, an economist for the National Association of Realtors. Even if more private capital is needed in the mortgage industry, having the government participation creates liquidity that keeps the entire sector operating during tough economic times, Fears said.

Lawmakers tend to assume that the markets can transition over five or 10 years to a mortgage industry with a modest government backstop, or no taxpayer support at all. Before retiring at the end of May as a managing director for bond investor PIMCO, Scott Simon said that this amounted to a fantasy.

The private market can make mortgages, but they would trade at much higher yields and the down payments would be much higher because the private market cannot make competitive, fixed-rate mortgages with 20% or less of a down payment on the loans, Simon told National Mortgage News. Most of the people who think we should shut [the GSEs] down have a pure philosophical belief and they don't care what the outcome is. Or they simply don't understand anything about how housing finance works.

Fannie and Freddie help the economy with their guarantees, Simon reasoned but exposed taxpayers to their risks by having their own investment portfolios.

As of now, all profits from both companies go to the Treasury Department, per changes made last year to the terms of the conservatorship. In the original terms, Treasury received a 10 percent dividend from Fannie and Freddie. But Fannie and Freddie are now required to fork over all of their earnings forever to Treasury, a windfall that suddenly reduced the budget deficit.

A group of investors led by the hedge fund Perry Capital challenged this arrangement in a U.S. District Court lawsuit filed last month, claiming that they deserve a share of the proceeds after taxpayers have been repaid.

Because Fannie and Freddie are now generating cash, it would in theory be possible for the government to use these profits to create a capital cushion that prevents the need for a future taxpayer bailout.

By keeping the two companies under government control, taxpayers would benefit from the sale of about $200 billion worth of equity, investors in Fannie, Freddie, and other real estate assets explained in the background. The profits would be enough to create a capital cushion to insulate against a future downturn, without having to seek capital in the private market that could push mortgage interest rates higher.

But this requires Obama and GOP lawmakers to save Fannie and Freddie, precisely what they have vowed not to do. Obama wants a government insurance fund to replace them, while Republican congressmen favor an end to any Washington involvement with guarantees.

House Financial Services Committee Chairman Jeb Hensarling (R-TX) would eliminate almost all federal involvement in the mortgage market. His policy assumes that the rusty tin standard of 30-year, fixed-rate mortgages would soon fade away, as more homebuyers would settle for variable-rate mortgages. Interest rates on a 30-year, fixed mortgage currently average 4.4 percent, a figure that could instead swing violently over time depending on inflation and the Federal Reserve. When the Fed attempted to tamp down inflation between 1980 and 1982, rates soared above 16 percent with the government backstop in place.

Obama would like to preserve the 30-year, fixed-rate mortgage. He has endorsed adopting a more limited government backstop as outlined in a bipartisan Senate bill co-sponsored by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner.

The Corker-Warner bill would also unwind Fannie and Freddie, bringing their dominance to an end. In their place would be private financial institutions that would pay into a government insurance fund. Mark Zandi, the chief economist for Moody's Analytics, estimated that the plan would cause mortgage rates to increase by as much as 1.25 percent in the near-term. This estimate assumes a 20 percent down payment and a credit score of 750, slightly above the current U.S. average.

But of course, lawmakers have not discussed the potential tradeoffs in the early stages of mortgage reform. Unless voters have a clearer picture of the consequences, some say it could produce the same kind of boondoggle caused by Obamacare in 2010.

I don't think there has been much of a sales job to the public on what a new mortgage finance system looks like, said Brian Gardner, senior vice president of Washington research at the investment bank Keefe, Bruyette & Woods. I don't think you shove this down the throat of the electorate, as we saw with the health care overhaul.

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ECON 104 Chapter Notes - Chapter 1: Justin Trudeau, Direct Tax, Indirect Tax

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