1.
Agricultural policy
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Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving an outcome in the domestic agricultural product markets. Outcomes can involve, for example, a guaranteed supply level, price stability, product quality, product selection, encouraging agricultural growth is therefore an important aspect of agricultural policy in the developing world. Use of animal vaccines can create new viruses that kill people, H5N1 is an example of where this might have already occurred. The spread of H5N1 and its reintroduction to domestic poultry increase the need for good agricultural vaccines. In fact, the cause of the continuing H5N1 pandemic threat may be the way the pathogenicity of H5N1 viruses is masked by co-circulating influenza viruses or bad agricultural vaccines. Dr. Robert Webster explains, If you use a good vaccine you can prevent the transmission within poultry, but if they have been using vaccines now for several years, why is there so much bird flu. There is bad vaccine that stops the disease in the bird but the bird goes on pooping out virus and maintaining it, and I think this is what is going on in China. Either there is not enough vaccine being used or there is substandard vaccine being used and we can’t blame China for substandard vaccines. I think there are substandard vaccines for influenza in poultry all over the world, in response to the same concerns, Reuters reports Hong Kong infectious disease expert Lo Wing-lok indicating that vaccines have to take top priority. Julie Hall, who is in charge of the WHOs outbreak response in China, in the UK, the country worst affected,179,000 cattle were infected and 4.4 million killed as a precaution. The disease can be transmitted to human beings who eat or inhale material from infected carcasses, between 460,000 and 482,000 BSE-infected animals had entered the human food chain before controls on high-risk offal were introduced in 1989. The origin of the disease remains unknown. Another contributory factor was the feeding of infected protein supplements to very young calves instead of milk from their mothers, foot-and-mouth disease is a highly contagious and sometimes fatal viral disease of cattle and pigs. It can also infect deer, goats, sheep, and other bovids with cloven hooves, as well as elephants, rats, humans are affected only very rarely. FMD occurs throughout much of the world, and while some countries have been free of FMD for some time, its wide host range, in 1996, endemic areas included Asia, Africa, and parts of South America. North America, Australia, New Zealand and Japan have been free of FMD for many years, most European countries have been recognized as free, and countries belonging to the European Union have stopped FMD vaccination. The clothes and skin of animal handlers such as farmers, standing water, cows can also catch FMD from the semen of infected bulls
2.
Economic policy
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Economic policy refers to the actions that governments take in the economic field. Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs, almost every aspect of government has an important economic component. Trade policy, which refers to tariffs, trade agreements and the institutions that govern them. Fiscal policy, often tied to Keynesian economics, uses government spending, fiscal stance, The size of the deficit or surplus Tax policy, The taxes used to collect government income. It is concerned with the amount of money in circulation and, consequently, interest rates, sometimes other objectives, like military spending or nationalization are important. These are referred to as the goals, the outcomes which the economic policy aims to achieve. To achieve these goals, governments use policy tools which are under the control of the government and these generally include the interest rate and money supply, tax and government spending, tariffs, exchange rates, labor market regulations, and many other aspects of government. Government and central banks are limited in the number of goals they can achieve in the short term, for instance, there may be pressure on the government to reduce inflation, reduce unemployment, and reduce interest rates while maintaining currency stability. This dilemma can in part be resolved by using microeconomics, supply-side policy to help adjust markets, for instance, unemployment could potentially be reduced by altering laws relating to trade unions or unemployment insurance, as well as by macroeconomic factors like interest rates. For much of the 20th century, governments adopted discretionary policies like demand management designed to correct the business cycle and these typically used fiscal and monetary policy to adjust inflation, output and unemployment. However, following the stagflation of the 1970s, policymakers began to be attracted to policy rules, a discretionary policy is supported because it allows policymakers to respond quickly to events. This makes policy non-credible and ultimately ineffective, a rule-based policy can be more credible, because it is more transparent and easier to anticipate. Examples of rule-based policies are fixed exchange rates, interest rate rules, the stability and growth pact, some policy rules can be imposed by external bodies, for instance the Exchange Rate Mechanism for currency. A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body. For instance, the Federal Reserve Bank, European Central Bank, Bank of England and Reserve Bank of Australia all set interest rates without government interference, another type of non-discretionary policy is a set of policies which are imposed by an international body. This can occur as a result of intervention by the International Monetary Fund, the first economic problem was how to gain the resources it needed to be able to perform the functions of an early government, the military, roads and other projects like building the Pyramids. Early governments generally relied on tax in kind and forced labor for their economic resources, however, with the development of money came the first policy choice. A government could raise money through taxing its citizens, however, it could now also debase the coinage and so increase the money supply
3.
Energy policy
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Energy policy is the manner in which a given entity has decided to address issues of energy development including energy production, distribution and consumption. The attributes of energy policy may include legislation, international treaties, incentives to investment, guidelines for energy conservation, taxation, although research is ongoing, the human dimensions of energy use are of increasing interest to business, utilities, and policymakers. Using the social sciences to gain insights into energy consumer behavior can empower policymakers to make decisions about broad-based climate. This could facilitate more efficient energy use, renewable energy commercialization, a national energy policy comprises a set of measures involving that countrys laws, treaties and agency directives. These policies have been consistent since the 1990s, despite changes in governments. The pace and form of industry liberalization and privatization has been highly controversial, with rapid change of global as well as domestic situation, the policy was updated in 2004. Australias energy policy features a combination of power stations and hydro electricity plants. The Australian government has decided not to nuclear power plants. Catherine Wolfram, Robert Gross, Nathan S. Lewis, and M. V, the Frontiers of Energy, Nature Energy, Vol 1,11 January 2016. Climate and Clean Energy Policy, State Institutions and Economic Implications, fouquet, Roger, and Peter JG Pearson. Seven Centuries of Energy Services, The Price and Use of Light in the United Kingdom, north versus South, Energy transition and energy intensity in Europe over 200 years. American Energy Policy in the 1970s 322 pages, Nye, David E. Consuming power, A social history of American energies Pratt, Joseph A. Exxon, Transforming Energy, 1973-2005 600pp Smil, the role of energy in economic growth. Annals of the New York Academy of Sciences, Energy use and economic development, A comparative analysis of useful work supply in Austria, Japan, the United Kingdom and the US during 100 years of economic growth
4.
Industrial policy
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The government takes measures aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation. A countrys infrastructure is a part of the manufacturing sector that often has a key role in IP. Industrial policies are sector-specific, unlike broader macroeconomic policies, examples of the latter, which are horizontal, economy-wide policies, are tightening credit and taxing capital gains. Traditional examples of industrial policy that involves vertical, sector-specific policies, include protecting textiles from imports, more contemporary industrial policies include measures such as support for linkages between firms and support for upstream technologies. Industrial policies are interventionist measures typical of mixed economy countries, many types of industrial policies contain common elements with other types of interventionist practices such as trade policy and fiscal policy. An example of an industrial policy is import-substitution-industrialization, where trade barriers are temporarily imposed on some key sectors. By selectively protecting certain industries, these industries are given time to learn, once competitive enough, these restrictions are lifted to expose the selected industries to the international market. The traditional arguments for industrial policies go back as far as the 18th century, in the early nineteenth century, for example, it is quite clear that the laissez faire label is an inappropriate one. These early examples are followed by interventionist ISI strategies pursued in Latin American countries such as Brazil, the success of these state-directed industrialization strategies are often attributed to developmental states and strong bureaucracies such as the Japanese MITI. Many of these domestic policy choices, however, are now seen as detrimental to trade and are hence limited by various international agreements such as WTO. Instead, the recent focus for industrial policy has shifted towards the promotion of local business clusters, during the Reagan administration, an economic development initiative called Project Socrates was initiated to address US decline in ability to compete in world markets. President Reagan was satisfied that this objective was fulfilled in the Socrates system, however contemporary industry policy generally accepts globalisation as a given, and focuses less on the decline of older industries, and more on the growth of emergent industries. It often involves government working collaboratively with industry to respond to challenges and opportunities, the main criticism against industrial policy arises from the concept of government failure. Despite existing criticism, there is a consensus in recent development theory that state interventions are often necessary when market failures prevail. Market failures often exist in presence of externalities and natural monopolies and these market failures hinder the emergence of a well-functioning market and corrective industrial policies are required to ensure the allocative efficiency of a free market. Even relatively sceptical economists now recognise that public action can boost certain development factors beyond what market forces on their own would generate, in practice, these interventions are often aimed at regulating networks, public infrastructure, R&D or correcting information asymmetries. While the current debate has shifted away from dismissing industrial policies overall, one key question is which kinds of industrial policy are most effective in promoting economic development. Much debate also surrounds the issue whether government failures are more pervasive
5.
Social policy
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Social policy is a term which is applied to various areas of policy, usually within a governmental or political setting. It can refer to guidelines, principles, legislation and activities that affect the living conditions conducive to human welfare, such as a persons quality of life. Social policy might also be described as actions that affect the well-being of members of a society through shaping the distribution of and access to goods, Social policy often deals with wicked problems. The earliest example of direct intervention by government in human welfare dates back to Umar ibn al-Khattābs rule as the caliph of Islam in the 6th century. He used zakat collections and also other governmental resources to establish pensions, income support, child benefits, Social policy in the 21st century is complex and in each state it is subject to local and national governments, as well as supranational political influence. For example, membership of the European Union is conditional on member states adherence to the Social Chapter of European Union law, Social policy is an academic discipline focusing on the systematic evaluation of societies responses to social need. It was established in the part of the 20th century as a complement to social work studies. One can reasonably argue there is not a clear and comprehensive definition of social policy. This is probably because social policy is more an area of study than a discipline, scholars studied and categorized social security systems on the basis of their modes of intervention. Of course, each state system includes a mixture of these elements. Others emphasize social insurance mechanisms, i. e. Germany, still other focus on social assistance for the poor, i. e. the United Kingdom. Social policy aims to human welfare and to meet human needs for education, health, housing. Moreover, Social Darwinism helped mold Americas ideas of capitalism and the survival of the fittest mentality, the Catholic Churchs social teaching has also been considerably influential to the development of social policy. The programs were in response to the Great Depression affecting the United States in the 1930s, an American education policy proposal from a Republican president is the No Child Left Behind Act. This Act took effect on January 8,2002, and was put in place to raise standards in education so different individuals can have better educational outcomes, the No Child Left Behind Act requires every state to assess students on basic skills to receive federal funding. However, this Act did not create a standard since each state develops their own set of standards. Critics of most all social policies point toward a depiction of a state on the make of a Hobbesian Leviathan. Social Policy & Administration Titmuss, R. M, the three worlds of welfare capitalism
6.
Trade policy
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A commercial policy is a governmental policy governing economic transactions across international borders. These are sometimes agreed by treaty within a customs union, in the case of the European Union, commercial policy has been governed in common since the EU was created in 1957. A common commercial policy is also an aim of Mercosur, commerce minister European Commissioner for Trade Free trade Protectionism Trade policy of Japan Trade policy of the United States
7.
Fiscal policy
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In economics and political science, fiscal policy is the use of government revenue collection and expenditure to influence the economy. According to Keynesian economics, when the government changes the levels of taxation and government spending, it influences aggregate demand, Fiscal policy often attempts to stabilize the economy over the course of the business cycle. Government spending is fully funded by tax revenue and overall the budget outcome has an effect on the level of economic activity. Expansionary fiscal policy involves government spending exceeding tax revenue, and is undertaken during recessions. It is also known as fiscal policy. Contractionary fiscal policy occurs when government spending is lower than tax revenue, therefore, for purposes of the above definitions, government spending and tax revenue are normally replaced by cyclically adjusted government spending and cyclically adjusted tax revenue. Thus, for example, a government budget that is balanced over the course of the cycle is considered to represent a neutral fiscal policy stance. Governments spend money on a variety of things, from the military and police to services like education and healthcare. These pay interest, either for a period or indefinitely. If the interest and capital requirements are too large, a nation may default on its debts, public debt or borrowing refers to the government borrowing from the public. For this to happen, the propensity to save needs to be strictly positive. Another possibility is that the government might decide to increase its own spending – say, the idea is that the additional government spending creates jobs and lowers the unemployment rate. Governments use fiscal policy to influence the level of demand in the economy, in an effort to achieve economic objectives of price stability, full employment. Keynesians argue this method be used in times of recession or low economic activity as an tool for building the framework for strong economic growth. In theory, the deficits would be paid for by an expanded economy during the boom that would follow. Governments can use a surplus to do two things, to slow the pace of strong economic growth, and to stabilize prices when inflation is too high. Keynesian theory posits that removing spending from the economy will reduce levels of demand and contract the economy. But economists still debate the effectiveness of fiscal stimulus, the argument mostly centers on crowding out, whether government borrowing leads to higher interest rates that may offset the stimulative impact of spending
8.
Policy mix
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The policy mix is the combination of a countrys monetary policy and fiscal policy. These two channels influence growth and employment, and are determined by the central bank and the government respectively. Ideally, the mix should aim at maximizing growth and minimizing unemployment. However, the banks and governments are sometimes theorized to have different time horizons. Both can have other objectives and must apply to some constraints, diverting them from these primary objectives, obeying a deficit rule, securing the financial sector, courting popularity, etc. Monetary policy is carried out by the central bank which controls interest rates. The government determines labour market conditions, public investment and public spending, automatic stabilizers and discretionary fiscal policy
9.
Government budget
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The budget is also known as the Annual Financial Statement of the country. This document estimates the anticipated government revenues and government expenditures for the financial year. For example, only certain types of revenue may be imposed and collected and this provoked a wave of public outrage, including fierce denunciations from the Whig peer William Pulteney, who wrote a pamphlet entitled The budget opened, Or an answer to a pamphlet. Concerning the duties on wine and tobacco - the first time the word budget was used in connection with the fiscal policies. Government budgets are of three types, Balanced Budget, when government revenue and expenditure are equal, surplus Budget, when anticipated revenues exceed expenditure. Deficit Budget, when anticipated expenditure is greater than revenues, during the course of a budget cycle, a government may also provide supplementary budget authorizations when additional expenditures become necessary. The two basic elements of any budget are the revenues and expenses, in the case of the government, revenues are derived primarily from taxes. Government budgets have economic, political and technical basis, unlike a pure economic budget, they are not entirely designed to allocate scarce resources for the best economic use. They also have a political basis wherein different interests push and pull in an attempt to obtain benefits, the technical element is the forecast of the likely levels of revenues and expenses. Budget classification is a stone for budget management system. Budget classification provides a framework for decision making and accountability. Budgetary classification should have such qualities, comprehensiveness, unity, internal consistency, randall Wray, Why The Federal Budget Is Not Like a Household Budget Budget Deficits and Net Private Saving Sectoral Balances in State Budget. Indianapolis, Library of Economics and Liberty, seater, John J. Government Debt and Deficits. Indianapolis, Library of Economics and Liberty, list of countries by budget, its reference is the CIAs World factbook, in alphabetic order
10.
Government debt
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Government debt is the debt owed by a central government. By contrast, the government deficit refers to the difference between government receipts and spending in a single year. A central government with its own currency can pay for its spending by creating money ex novo, Governments create debt by issuing securities, government bonds and bills. Less creditworthy countries sometimes borrow directly from an organization or international financial institutions. As the government draws its income from much of the population, Government debt can be categorized as internal debt and external debt. Another common division of government debt is by duration until repayment is due, short term debt is generally considered to be for one year or less, long term is for more than ten years. Medium term debt falls between two boundaries. A broader definition of government debt may consider all government liabilities, including future pension payments and payments for goods and services the government has contracted, during the Early Modern era, European monarchs would often default on their loans or arbitrarily refuse to pay them back. This generally made financiers wary of lending to the king and the finances of countries that were often at war remained extremely volatile. The creation of the first central bank in England—an institution designed to lend to the government—was initially an expedient by William III of England for the financing of his war against France and he engaged a syndicate of city traders and merchants to offer for sale an issue of government debt. This syndicate soon evolved into the Bank of England, eventually financing the wars of the Duke of Marlborough and later Imperial conquests. The establishment of the bank was devised by Charles Montagu, 1st Earl of Halifax, in 1694, the Royal Charter was granted on 27 July through the passage of the Tonnage Act 1694. The founding of the Bank of England revolutionised public finance and put an end to such as the Great Stop of the Exchequer of 1672. From then on, the British Government would never fail to repay its creditors, in the following centuries, other countries in Europe and later around the world adopted similar financial institutions to manage their government debt. 1815, at the end of the Napoleonic Wars, British government debt reached a peak of more than 200% of GDP, a government bond is a bond issued by a national government. Such bonds are most often denominated in the domestic currency. Sovereigns can also issue debt in foreign currencies, almost 70% of all debt in 2000 was denominated in US dollars, Government bonds are sometimes regarded as risk-free bonds, because national governments can if necessary create money de novo to redeem the bond in their own currency at maturity. Although many governments are prohibited by law from creating money directly, central banks may provide finance by buying government bonds, Government debt, synonymous to sovereign debt, can be issued either in domestic or foreign currencies
11.
External debt
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External debt is the total debt a country owes to foreign creditors, complemented by internal debt owed to domestic lenders. The debtors can be the government, corporations or citizens of that country, the debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund and World Bank. Note that the use of gross liability figures greatly distorts the ratio for countries which contain major money centers such as the United Kingdom due to Londons role as a financial capital, contrast with net international investment position. In this definition, the IMF defines the key elements as follows, Outstanding, principal and interest When the cost of borrowing is paid periodically, as commonly occurs, it is known as an interest payment. All other payments of economic value by the debtor to the creditor that reduce the amount outstanding are known as principal payments. However, the definition of external debt does not distinguish between principal payments or interest payments, or payments for both, also, the definition does not specify that the timing of the future payments of principal and/or interest need be known for a liability to be classified as debt. Residence To qualify as external debt, the debt liabilities must be owed by a resident to a nonresident, residence is determined by where the debtor and creditor have their centers of economic interest—typically, where they are ordinarily located—and not by their nationality. Current and not contingent Contingent liabilities are not included in the definition of external debt and these are defined as arrangements under which one or more conditions must be fulfilled before a financial transaction takes place. Generally, external debt is classified into four heads, public and publicly guaranteed debt, private non-guaranteed credits, central bank deposits, however, the exact treatment varies from country to country. External-debt-sustainability analysis is conducted in the context of medium-term scenarios. In these analysis, macroeconomic uncertainties, such as the outlook for the current account, high external debt is believed to be harmful for the economy. There are various indicators for determining a sustainable level of external debt, while each has its own advantage and peculiarity to deal with particular situations, there is no unanimous opinion amongst economists as to a sole indicator. These indicators are primarily in the nature of ratios—i. e, comparison between two heads and the relation thereon and thus facilitate the policy makers in their external debt management exercise. Examples of debt burden indicators include the Debt-to-GDP ratio, foreign debt to exports ratio and this set of indicators also covers the structure of the outstanding debt, including, Share of foreign debt, Short-term debt, and Concessional debt in the total debt stock. A second set of indicators focuses on the short-term liquidity requirements of the country with respect to its service obligations. These indicators are not only useful early-warning signs of service problems. The dynamic ratios show how the debt-burden ratios would change in the absence of repayments or new disbursements, an example of a dynamic ratio is the ratio of the average interest rate on outstanding debt to the growth rate of nominal GDP
12.
Government budget balance
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Budget deficits redirects here, not to be confused with Government debt. A government budget is a financial statement presenting the governments proposed revenues, a positive balance is called a government budget surplus, and a negative balance is a government budget deficit. A budget is prepared for each level of government and takes into account public social security obligations, the government budget balance is further differentiated into the primary balance and the structural balance. The primary budget balance equals the government budget balance before interest payments, the structural budget balances attempts to adjust for the impacts of the real GDP changes in the national economy. The government fiscal balance is one of three major sectoral balances in the economy, the others being the foreign sector and the private sector. The sum of the surpluses or deficits across these three sectors must be zero by definition, the government sector includes federal, state and local governments. For example, the U. S. government budget deficit in 2011 was approximately 10% GDP, offsetting a capital surplus of 4% GDP and a private sector surplus of 6% GDP. Financial journalist Martin Wolf argued that sudden shifts in the sector from deficit to surplus forced the government balance into deficit. The collapse is explained by the shift of the private sector from financial deficit into surplus or, in other words. The sectoral balances derive from the sectoral analysis framework for analysis of national economies developed by British economist Wynne Godley. GDP is the value of all goods and services produced within a country during one year, GDP measures flows rather than stocks. Combining the two perspectives gives C + S + T = Y = C + I + G + and this implies the accounting identity for the three sectoral balances – private domestic, government budget and external, = +. Another way of saying this is that private savings is equal to private investment plus the public deficit plus net exports. In macroeconomics, the Modern Money Theory describes any transactions between the government sector and the non-government sector as a vertical transaction, in any given time period, the government’s budget can be either in deficit or in surplus. A deficit occurs when the government spends more than it taxes, sectoral balances analysis shows that as a matter of accounting, government budget deficits add net financial assets to the private sector. This is because a budget deficit means that a government has deposited more money, a budget surplus means the opposite, in total, the government has removed more money and bonds from private holdings via taxes than it has put back in via spending. Therefore, budget deficits, by definition, are equivalent to adding net financial assets to the private sector and this is represented by the identity, = − N X where NX is net exports. Hence, continual budget deficits are necessary for an economy that wants to avoid deflation
13.
Government revenue
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Government revenue is money received by a government. It is an important tool of the policy of the government and is the opposite factor of government spending
14.
Government spending
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Government spending or expenditure includes all government consumption, investment, and transfer payments. Government acquisition of goods and services intended to create future benefits and these two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product. Government spending can be financed by government borrowing, seigniorage, or taxes, changes in government spending is a major component of fiscal policy used to stabilize the macroeconomic business cycle. For fiscal policy, increases in government spending are expansionary, while decreases are contractionary, john Maynard Keynes was one of the first economists to advocate government deficit spending as part of the fiscal policy response to an economic contraction. According to Keynesian economics, increased government spending raises aggregate demand and increases consumption, acquisition of goods and services is made through production by the government or through purchases of goods and services from market producers. In economic theory or in macroeconomics, investment is the amount purchased per unit of time of goods which are not consumed but are to be used for future production, examples include railroad or factory construction. Infrastructure spending is considered government investment because it will save money in the long run. These payments are considered to be exhaustive because they do not directly absorb resources or create output, in other words, the transfer is made without any exchange of goods or services. Examples of certain transfer payments include welfare, social security, in 2010 the average national government spent $2,376 per citizen, while the average for the worlds 20 largest economies was $16,110 per citizen. Norway and Sweden topped the list with per citizen spending of $40,908, the federal government of the USA spent an average of $11,041 per citizen, ahead of only South Korea, Brazil, Russia, China, and India in the twenty largest world economies. Government spending in the United States of America occurs at levels of government, including primarily federal, state. The Organisation for Economic Co-operation and Development reports that federal, state. This is tracked in National Income and Product Accounts, as of September 2001 the U. S. Congressional Budget Office reported that government spending for 2004 was projected to be $2.293 trillion. There are two types of government spending – discretionary and mandatory, discretionary spending, which accounts for roughly one-third of all Federal spending, includes money for things like the Army, FBI, the Coast Guard, and highway projects. Congress explicitly determines how much to spend on these programs on a basis in annual appropriations bills. Mandatory spending accounts for two-thirds of all federal spending, spending levels in these areas are mostly determined by the number of people who request and qualify for the program benefits as determined by the agencies. In some cases, mandatory spending is influenced by earmarks in multi-year spending bills like highway bills, all government agencies face congressional oversight and most programs are updated and amended by congressional legislation, as well as internal agency rules and regulations
15.
Deficit spending
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Deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit, the opposite of budget surplus. The term may be applied to the budget of a government, private company, Government deficit spending is a central point of controversy in economics, as discussed below. Government deficit spending is a point of controversy in economics. This is derived from Keynesian economics, and gained acceptance during the period between the Great Depression in the 1930s and post-WWII in the 1950s, according to most economists, during recessions, the government can stimulate the economy by intentionally running a deficit. The deficit spending requested by John Meynard Keynes for overcoming crises is the side of his economy theory. As investment equates to real saving, money assets that build up are equivalent to debt capacity, the states deficit enables a correspondent buildup of money assets for the private sector and prevents the breakdown of the economy, preventing private money savings to be run down by private debt. This fallacy seems to stem from an analogy to borrowing by individuals. Current reality is almost the exact opposite and this is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Deficits in excess of a gap growing as a result of the maximum growth in real output might indeed cause problems. Even the analogy itself is faulty, advocates of fiscal conservatism reject Keynesianism by arguing that government should always run a balanced budget, and that deficit spending is always bad policy. Proponents of fiscal conservatism date back to Adam Smith, founder of modern economics, a further argument is that debts must be repaid, and thus it is burdening future generations to run deficits today, for little or no gain. A similar argument is that deficit spending today will require increased taxation in the future, thus burdening future generations. Others argue that because debt is owed by and owed to private individuals, there is no net debt burden of government debt. A related line of argument, associated with the Austrian school of economics, is that government deficits are inflationary, anything other than mild or moderate inflation is generally accepted in economics to be a bad thing. Some Post-Keynesian economists argue that deficit spending is necessary, either to create the money supply or to demand for savings in excess of what can be satisfied by private investment. In a quip, fiat money governments are spend and tax, not tax, Chartalists argue that nations are fundamentally different from households. Governments in a money system which only have debt in their own currency can issue other liabilities, their fiat money. They cannot go bankrupt involuntarily because this money is what is used in their economy to settle debts
16.
Tax policy
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Tax policy is the choice by a government as to what taxes to levy, in what amounts, and on whom. It has both microeconomic and macroeconomic aspects, the macroeconomic aspects concern the overall quantity of taxes to collect, which can inversely affect the level of economic activity, this is one component of fiscal policy. The microeconomic aspects concern issues of fairness and allocative efficiency, policymakers debate the nature of the tax structure they plan to implement and how they might affect individuals and businesses. The reason for such focus is economic efficiency as advisor to the Stuart King of England Richard Petty had noted that the government does not want to kill the goose that lays the golden egg, paradigmatic efficient taxes are those that are either nondistortionary or lump sum. However, economists define distortion only according to the substitution effect, one must also consider the income effect, which for tax policy purposes often needs to be assumed to cancel out in the aggregate. The efficiency loss is depicted on the curve and supply curve diagrams as the area inside Harbergers Triangle. The implementation of tax policy has always been a tricky business, a more recent American example is President George H. W. Bushs famous tax policy quote, Read my lips, no new taxes. Tax incidence Tax law Mirrlees, James, Adam, Stuart, Besley, Tim, et al
17.
Discount window
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The term originated with the practice of sending a bank representative to a reserve bank teller window when a bank needed to borrow money. The interest rate charged on loans by a central bank is called the discount rate, base rate, or repo rate. It is also not the thing as the federal funds rate or its equivalents in other currencies. In recent years, the discount rate has been approximately a point above the federal funds rate. Because of this, it is a relatively unimportant factor in the control of the supply and is only taken advantage of at large volume during emergencies. In the United States, there are several different rates charged to institutions borrowing at the Discount Window. In 2006, these were, the primary credit rate, the secondary rate. The Federal Reserve does not publish information regarding institutions eligibility for primary or secondary credit, primary and secondary credit is normally offered on a secured overnight basis, while seasonal credit is extended up to nine months. The primary credit is normally set 100 basis points above the federal funds target, the seasonal credit rate is set from an averaging of the effective fed funds rate and 90-day certificate of deposit rates. Institutions must provide acceptable collateral to secure the loan, the flood of funds released into the banking system reduced the immediate need for banks to rely on payments from other banks to make the payments they themselves owed others. This kept liquidity alive in the economy despite interruptions of communications, on August 17,2007, the Board of Governors of the Federal Reserve announced a temporary change to primary credit lending terms. The discount rate was cut by 50 bp—to 5. 75% from 6. 25%—and the term of loans was extended overnight to up to thirty days. This reduced the spread of the primary credit rate over the fed funds rate from 100 basis points to 50 basis points, the maximum term of loans was extended from thirty days to ninety days. Less than a year before the term was only overnight, the primary credit rate was also reduced to 3. 25% from 3. 50%, which cut the spread of the primary credit rate over the fed funds rate to 25 basis points from 50 basis points. With the bankruptcy of Lehman Brothers again the volume of borrowing requests increased dramatically, banks lend not directly to each other, but to the central bank and, on the other side, borrow not directly from each other, but from the central bank. In the eurozone the discount window is called Standing Facilities, which are used to manage overnight liquidity, qualifying counterparties can use the Standing Facilities to increase the amount of cash they have available for overnight settlements using the Marginal Lending Facility. Conversely, excess funds can be deposited within the European Central Bank System, counterparties must have collateral for the funds they receive from the Marginal Lending Facility and will be charged the overnight rate set by the ECBS. Excess capital can be deposited with the Deposit facility and they will earn interest at the rate offered by the ECBS
18.
Gold reserve
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It has been estimated that all the gold mined by the end of 2011 totaled 171,300 tonnes. At a price of US$1,500 per troy ounce, reached on 12 April 2013, the total value of all gold ever mined would exceed US$8.2 trillion at that valuation. However, there are varying estimates of the amount of gold mined to date. Another reason is that countries are not particularly open about how much gold they are mining. In addition, it is difficult to account for gold output in illegal mining activities, during most of history, a nations gold reserves were considered its key financial asset and a major prize of war. A typical view was expressed in a memorandum by the British Chief of the Imperial General Staff from October 1939. The transport of many hundreds of tons of bullion presents a difficult problem, the ideal would of course be to have the gold transferred to this country or to the United States of America. The gold reserves of Belgium and Holland amount to about £70 million, note, H. M. Treasury has particularly requested that this information, which is highly confidential should in no circumstances be divulged. At present this gold is believed to be stored at Brussels and The Hague respectively, the Belgian government rushed to ship the gold to a safe place, Dakar, the capital of Senegal, then part of the French colonial empire. After the Germans occupied Belgium and France in 1940, they demanded the Belgian gold reserve back, in 1941, Vichy French officials arranged the transport of 4,944 boxes with 198 tons of gold to officials of the German Reichsbank. Since early 2011, the holdings of the IMF have been constant at 90.5 million troy ounces. The IMF regularly maintains statistics of national assets as reported by various countries and these data are used by the World Gold Council to periodically rank and report the gold holdings of countries and official organizations. On 17 July 2015, China announced that it increased its reserves by about 57 percent from 1,054 to 1,658 metric tons. The gold listed for each of the countries in the table may not be stored in the country listed. Gold leasing by central banks could place into doubt the reported gold holdings in the table below
19.
Interest rate
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An interest rate, is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed. The total interest on an amount lent or borrowed depends on the sum, the interest rate, the compounding frequency. It is defined as the proportion of an amount loaned which a lender charges as interest to the borrower and it is the rate a bank or other lender charges to borrow its money, or the rate a bank pays its savers for keeping money in an account. Annual interest rate is the rate over a period of one year, other interest rates apply over different periods, such as a month or a day, but they are usually annualised. A company borrows capital from a bank to buy assets for its business, in return, the bank charges the company interest. Base rate usually refers to the rate offered on overnight deposits by the central bank or other monetary authority. Annual percentage rate and effective annual rate or annual equivalent rate are used to help consumers compare products with different payment structures on a common basis, a discount rate is applied to calculate present value. Interest rate targets are a tool of monetary policy and are taken into account when dealing with variables like investment, inflation. The central banks of countries tend to reduce interest rates when they wish to increase investment. In the past two centuries, interest rates have been variously set either by national governments or central banks, during an attempt to tackle spiraling hyperinflation in 2007, the Central Bank of Zimbabwe increased interest rates for borrowing to 800%. Possibly before modern capital markets, there have been some accounts that savings deposits could achieve a return of at least 25%. Political short-term gain, Lowering interest rates can give the economy a short-run boost, under normal conditions, most economists think a cut in interest rates will only give a short term gain in economic activity that will soon be offset by inflation. The quick boost can influence elections, Most economists advocate independent central banks to limit the influence of politics on interest rates. Deferred consumption, When money is loaned the lender delays spending the money on consumption goods, since according to time preference theory people prefer goods now to goods later, in a free market there will be a positive interest rate. Inflationary expectations, Most economies generally exhibit inflation, meaning a given amount of money buys fewer goods in the future than it will now, the borrower needs to compensate the lender for this. Alternative investments, The lender has a choice between using his money in different investments, if he chooses one, he forgoes the returns from all the others. Different investments effectively compete for funds, risks of investment, There is always a risk that the borrower will go bankrupt, abscond, die, or otherwise default on the loan. This means that a lender generally charges a premium to ensure that, across his investments
20.
Central bank
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A central bank, reserve bank, or monetary authority is an institution that manages a states currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries, Central banks in most developed nations are institutionally designed to be independent from political interference. Still, limited control by the executive and legislative bodies usually exists, prior to the 17th century most money was commodity money, typically gold or silver. However, promises to pay were widely circulated and accepted as value at least five hundred years earlier in both Europe and Asia. The Song dynasty was the first to issue generally circulating paper currency, in 1455, in an effort to control inflation, the succeeding Ming Dynasty ended the use of paper money and closed much of Chinese trade. The Bank of Amsterdam, established in the Dutch Republic in 1609, is considered to be the forerunner to modern central banks. The Wisselbanks innovations helped lay the foundations for the birth and development of the banking system that now plays a vital role in the worlds economy. Along with a number of local banks, it performed many functions of a central banking system. Lucien Gillard calls it the European guilder, and Adam Smith devotes many pages to explaining how the bank guilder works, the model of the Wisselbank as a state bank was adapted throughout Europe, including the Bank of Sweden and the Bank of England. Established by Dutch-Latvian Johan Palmstruch in 1668, Sveriges Riksbank is often considered by many as the worlds oldest central bank, the lenders would give the government cash and also issue notes against the government bonds, which could be lent again. A Royal Charter was granted on 27 July through the passage of the Tonnage Act 1694, the bank was given exclusive possession of the governments balances, and was the only limited-liability corporation allowed to issue banknotes. The £1. 2M was raised in 12 days, half of this was used to rebuild the Navy and these modern central banking functions evolved slowly through the 18th and 19th centuries. The currency crisis of 1797, caused by panicked depositors withdrawing from the Bank led to the government suspending convertibility of notes into specie payment. The bank was accused by the bullionists of causing the exchange rate to fall from over issuing banknotes. Nevertheless, it was clear that the Bank was being treated as an organ of the state, henry Thornton, a merchant banker and monetary theorist has been described as the father of the modern central bank. An opponent of the real bills doctrine, he was a defender of the bullionist position, thorntons process of monetary expansion anticipated the theories of Knut Wicksell regarding the cumulative process which restates the Quantity Theory in a theoretically coherent form. Until the mid-nineteenth century, commercial banks were able to issue their own banknotes, many consider the origins of the central bank to lie with the passage of the Bank Charter Act of 1844. Under this law, authorisation to issue new banknotes was restricted to the Bank of England, at the same time, the Bank of England was restricted to issue new banknotes only if they were 100% backed by gold or up to £14 million in government debt
21.
Currency board
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A currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a bank to be subordinated to the exchange rate target. A currency board only earns profit from interests on foreign reserves and these foreign reserves exist because local notes have been issued in exchange, or because commercial banks must, by regulation, deposit a minimum reserve at the Currency Board. Is the revenue on minimum reserves A currency board has no powers to affect monetary policy. Governments cannot print money, and can only tax or borrow to meet their spending commitments, a currency board does not act as a lender of last resort to commercial banks, and does not regulate reserve requirements. A currency board does not attempt to manipulate interest rates by establishing a discount rate like a central bank, the peg with the foreign currency tends to keep interest rates and inflation very closely aligned to those in the country against whose currency the peg is fixed. The currency board in question no longer issue fiat money. The surplus on the balance of payments of that country is reflected by higher deposits local banks hold at the bank as well as higher deposits of the exporting firms at their local banks. The virtue of this system is that questions of currency stability no longer apply, typically, currency boards have advantages for small, open economies which would find independent monetary policy difficult to sustain. They can also form a credible commitment to low inflation, more than 70 countries have had currency boards. Currency boards were most widespread in the early and mid 20th century, hong Kong operates a currency board, as does Bulgaria. Estonia had a currency fixed to the Deutsche Mark from 1992 to 1999 when it switched to fixing to the Euro at par. The peg to the Euro was upheld until January 2011 with Estonias adoption of the Euro and this policy is seen as a mainstay of that countrys subsequent economic success. Argentina abandoned its currency board in January 2002 after a severe recession, to some, this emphasised the fact that currency boards are not irrevocable, and hence may be abandoned in the face of speculation by foreign exchange traders. However, Argentinas system was not a currency board, as it did not strictly follow currency board rules - a fact which many see as the true cause of its collapse. They argue that Argentinas monetary system was an inconsistent mixture of currency board and it is also thought that the misunderstanding of the workings of the system by economists and policymakers contributed to the Argentine governments decision to devalue the peso in January 2002. The economy fell deeper into depression before a recovery later in the year. The British Overseas Territories of Gibraltar, the Falkland Islands and St. Helena continue to operate currency boards, a gold standard is a special case of a currency board where the value of the national currency is linked to the value of gold instead of a foreign currency
22.
Monetary base
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The monetary base should not be confused with the money supply which consists of the total currency circulating in the public plus the non-bank deposits with commercial banks. Open market operations are monetary policy tools which directly expand or contract the monetary base, the monetary base and monetary policy are typically controlled by the same national institution, usually either the finance ministry or the central bank. These institutions change the base through open market transactions, the buying and selling of government bonds. Typically, they can also influence banking activities by manipulating interest rates, as of 8 June 2016, the monetary base in the United States was USD3,869,723,000,000. Money creation Monetary reform Brunner, Karl, high-powered money and the monetary base. In Newman, Peter K. Eatwell, John, Palgrave, Robert Harry Inglis, Milgate, the New Palgrave Dictionary of Economics. In Newman, Peter K. Eatwell, John, Palgrave, Robert Harry Inglis, Milgate, the New Palgrave Dictionary of Economics. Determinants and Effects of Changes in the Stock of Money, 1875-1960, cambridge, Massachusetts, National Bureau of Economic Research. Aggregate Reserves Of Depository Institutions And The Monetary Base
23.
Currency union
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A currency union involves two or more states sharing the same currency without them necessarily having any further integration. Note, Every customs and monetary union and economic and monetary union also has a currency union. Zimbabwe is theoretically in a union with four blocs as the South African rand, Botswana pula, British pound and US dollar freely circulate. Between Republic of Ireland and United Kingdom between 1928 and 1979 using the Irish Pound. and Di Bartolomeo, G. and Tirelli, ‘Monetary conservatism and fiscal coordination in a monetary union’, in, ‘Economics Letters’,94, 56-63. Indianapolis, Library of Economics and Liberty, African monetary union inches closer United States of Southern Africa. South Africa proposes adoption of the rand as provisional SADC common currency
24.
Money supply
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In economics, the money supply is the total amount of monetary assets available in an economy at a specific time. There are several ways to define money, but standard measures usually include currency in circulation, Money supply data are recorded and published, usually by the government or the central bank of the country. Public and private sector analysts have long monitored changes in money supply because of the belief that it affects the level, inflation, the exchange rate. That relation between money and prices is historically associated with the quantity theory of money, there is strong empirical evidence of a direct relation between money-supply growth and long-term price inflation, at least for rapid increases in the amount of money in the economy. For example, a such as Zimbabwe which saw extremely rapid increases in its money supply also saw extremely rapid increases in prices. This is one reason for the reliance on monetary policy as a means of controlling inflation, the nature of this causal chain is the subject of contention. Some heterodox economists argue that the supply is endogenous and that the sources of inflation must be found in the distributional structure of the economy. In addition, those economists seeing the central control over the money supply as feeble say that there are two weak links between the growth of the money supply and the inflation rate. First, in the aftermath of a recession, when resources are underutilized. Second, if the velocity of money changes, an increase in the supply could have either no effect. See also European Central Bank for other approaches and a global perspective. Money is used as a medium of exchange, a unit of account and its different functions are associated with different empirical measures of the money supply. There is no single measure of the money supply. Instead, there are measures, classified along a spectrum or continuum between narrow and broad monetary aggregates. Narrow measures include only the most liquid assets, the ones most easily used to spend, broader measures add less liquid types of assets. This continuum corresponds to the way that different types of money are more or less controlled by monetary policy, narrow measures include those more directly affected and controlled by monetary policy, whereas broader measures are less closely related to monetary-policy actions. It is a matter of debate as to whether narrower or broader versions of the money supply have a more predictable link to nominal GDP. The different types of money are typically classified as Ms, the Ms usually range from M0 to M3 but which Ms are actually focused on in policy formulation depends on the countrys central bank
25.
Commercial policy
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A commercial policy is a governmental policy governing economic transactions across international borders. These are sometimes agreed by treaty within a customs union, in the case of the European Union, commercial policy has been governed in common since the EU was created in 1957. A common commercial policy is also an aim of Mercosur, commerce minister European Commissioner for Trade Free trade Protectionism Trade policy of Japan Trade policy of the United States
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Balance of trade
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The balance of trade, commercial balance, or net exports, is the difference between the monetary value of a nations exports and imports over a certain period. Sometimes a distinction is made between a balance of trade for goods versus one for services, generally trade surplus is seen as positive economic indicator, however in exceptional circumstances a trade deficit is due to government forex policy to achieve other macroeconomic goals. The balance of trade part of the current account, which includes other transactions such as income from the net international investment position as well as international aid. If the current account is in surplus, the net international asset position increases correspondingly. Equally, a deficit decreases the net asset position. The trade balance is identical to the difference between a countrys output and its domestic demand, measuring the balance of trade can be problematic because of problems with recording and collecting data. This cannot be true, because all transactions involve an equal credit or debit in the account of each nation, the discrepancy is widely believed to be explained by transactions intended to launder money or evade taxes, smuggling and other visibility problems. Especially for developing countries, the statistics are likely to be inaccurate. In export-led growth, the balance of trade will shift towards exports during an economic expansion, however, with domestic demand led growth the trade balance will shift towards imports at the same stage in the business cycle. Monetary balance of trade is different from physical balance of trade, developed countries usually import a lot of raw materials from developing countries. Typically, these materials are transformed into finished products. Financial trade balance statistics conceal material flow, most developed countries have a large physical trade deficit, because they consume more raw materials than they produce. Many civil society organisations claim this imbalance is predatory and campaign for ecological debt repayment. S debt that has funded the consumption, the U. S. has a trade surplus with nations such as Australia. The issue of trade deficits can be complex, Trade deficits generated in tradeable goods such as manufactured goods or software may impact domestic employment to different degrees than trade deficits in raw materials. Economies such as Japan and Germany which have savings surpluses, typically run trade surpluses, china, a high-growth economy, has tended to run trade surpluses. A higher savings rate generally corresponds to a trade surplus, correspondingly, the U. S. with its lower savings rate has tended to run high trade deficits, especially with Asian nations. The economist Paul Craig Roberts notes that the comparative advantage principles developed by David Ricardo do not hold where the factors of production are internationally mobile. In 2010, economist Ian Fletcher wrote Free Trade Doesnt Work, What Should Replace It and Why, small trade deficits are generally not considered to be harmful to either the importing or exporting economy
27.
Free trade
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Free trade is one of the most debated topics in economics of the 19th, 20th, and 21st century. Arguments over free trade can be divided into economic, moral, the World Trade Organization was created to open up markets and promote international trade based on the Free Trade paradigm. The WTO creates and monitors agreements to reduce trade barriers, and arbitrates in disputes over foreign market access and its definition of Free Trade is trade on a level playing field, so that the unlimited exchange of goods between countries is not necessarily Free. Therefore, any import restriction makes the domestic society as a whole worse off than it would be with unlimited imports, the artificial handicap of a foreign subsidy seems much less just to local production than advantages deriving from geography, natural resources, or native skill. Electorates often prefer fairplay to Utilitarian considerations, if trade barriers are already low, the threat of a trade war of tit-for-tat tariff increases may reduce the temptation for either partner in bilateral trade to raise import barriers. It would tend to decrease the power and revenue flowing to government bureaucrats. In the history of trade, two types of arguments have been advanced in favor of allowing purchases from abroad, and free trade in the broader sense. One set of arguments for free trade could be classified as moral arguments listed below, another set of arguments is essentially economic, that free trade will make society more prosperous. These are mostly technical arguments from the discipline of economics, starting especially with Smiths The Wealth of Nations, the 18th and 19th century intellectuals who backed free trade rarely did so under the rubric of increasing material wealth. In many cases this was given as the least important reason for free trade, rather, they argued that international society would be improved by increased commerce. Some of these, and later, sociopolitical arguments are listed here, adam Smith thought that protectionism against free trade was a scam on the public on behalf of producers, carried out in the name of nationalism. Even if overall economic interests had not been harmed by tariffs, classical economic analysis shows that free trade increases the global level of output because free trade permits specialization among countries. Specialization allows nations to devote their resources to the production of the particular goods. The benefits of specialization, coupled with economies of scale, increase the production possibility frontier. An increase in the production possibility frontier indicates that the absolute quantity of goods. Not only are the quantity of goods and services higher. Free trade policies are often associated with general laissez-faire economic politics and parties, voluntary exchange, by virtue of its voluntary nature, is assumed to be beneficial to the parties involved—why else would they engage in the exchange. Thus, the restriction of voluntary exchange restricts commerce and ultimately the accumulation of wealth in the absence of real-world externalities such as infant industry protection, here is the production possibilities frontier for a fictional country, Country A
28.
Protectionism
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Protectionist policies protect the producers, businesses and workers of the import-competing sector in a country from foreign competitors. According to proponents, these policies can counteract unfair trade practices, protectionists may favor the policy in order to decrease the trade deficit, maintain employment in certain sectors, or favor the growth of certain industries. In recent years, protectionism has become closely aligned with the anti-globalization movement, There is a broad consensus among economists that the impact of protectionism on economic growth is largely negative, although the impact on specific industries and groups of people may be positive. The doctrine of protectionism contrasts with the doctrine of free trade, a variety of policies have been used to achieve protectionist goals. Tariff rates usually vary according to the type of goods imported, import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported, to favour local producers. Tariffs may also be imposed on exports, and in an economy with floating exchange rates, however, since export tariffs are often perceived as hurting local industries, while import tariffs are perceived as helping local industries, export tariffs are seldom implemented. Import quotas, To reduce the quantity and therefore increase the price of imported goods. The economic effects of a quota is similar to that of a tariff. Economists often suggest that import licenses be auctioned to the highest bidder, administrative barriers, Countries are sometimes accused of using their various administrative rules as a way to introduce barriers to imports. Anti-dumping legislation, Supporters of anti-dumping laws argue that they prevent dumping of cheaper foreign goods that would cause local firms to close down, however, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters. Direct subsidies, Government subsidies are given to local firms that cannot compete well against imports. These subsidies are purported to protect jobs, and to help local firms adjust to the world markets. Export subsidies, Export subsidies are often used by governments to increase exports, Export subsidies have the opposite effect of export tariffs because exporters get payment, which is a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, and in a country with floating exchange rates, have similar to import subsidies. Exchange rate control, A government may intervene in the exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, international patent systems, There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Peter Drahos explains that States realized that patent systems could be used to cloak protectionist strategies, There were also reputational advantages for states to be seen to be sticking to intellectual property systems. In the modern trade arena many other initiatives besides tariffs have been called protectionist, for example, some commentators, such as Jagdish Bhagwati, see developed countries efforts in imposing their own labor or environmental standards as protectionism
29.
Tariff
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A tariff is a tax on imports or exports. In other languages and very occasionally in English, tariff or its equivalent may also be used to any list of prices. A customs duty or due is the tax levied on the import or export of goods in international trade. In economic sense, a duty is also a kind of consumption tax, a duty levied on goods being imported is referred to as an import duty. Similarly, a duty levied on exports is called an export duty, a tariff, which is actually a list of commodities along with the leviable rate of customs duty, is popularly referred to as a customs duty. This is no longer the case, Customs duty is calculated on the determination of the assessable value in case of those items for which the duty is levied ad valorem. This is often the transaction value unless a customs officer determines assessable value in accordance with the Harmonized System, However, for certain items like petroleum and alcohol, customs duty is realized at a specific rate applied to the volume of the import or export consignments. For the purpose of assessment of duty, products are given an identification code that has come to be known as the Harmonized System code. This code was developed by the World Customs Organization based in Brussels, a Harmonized System code may be from four to ten digits. For example,17.03 is the HS code for molasses from the extraction or refining of sugar, However, within 17.03, the number 17.03.90 stands for Molasses. Introduction of Harmonized System code in 1990s has largely replaced the Standard International Trade Classification, in drawing up the national tariff, the revenue departments often specifies the rate of customs duty with reference to the HS code of the product. A Customs authority in each country is responsible for collecting taxes on the import into or export of goods out of the country, Evasion of customs duties takes place mainly in two ways. In one, the trader under-declares the value so that the value is lower than actual. In a similar vein, a trader can evade customs duty by understatement of quantity or volume of the product of trade, a trader may also evade duty by misrepresenting traded goods, categorizing goods as items which attract lower customs duties. The Evasion of customs duty may take place with or without the collaboration of customs officials, Evasion of customs duty does not necessarily constitute smuggling. Many countries allow a traveler to bring goods into the country duty-free and these goods may be bought at ports and airports or sometimes within one country without attracting the usual government taxes and then brought into another country duty-free. Some countries impose allowances which limit the number or value of items that one person can bring into the country. These restrictions often apply to tobacco, wine, spirits, cosmetics, gifts, often foreign diplomats and UN officials are entitled to duty-free goods
30.
Trade bloc
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Surges of trade bloc formation were seen in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all commerce was conducted within regional trade blocs. Economist Jeffrey J. Advocates of worldwide free trade are generally opposed to trading blocs, scholars and economists continue to debate whether regional trade blocs are leading to a more fragmented world economy or encouraging the extension of the existing global multilateral trading system. Trade blocs can be stand-alone agreements between states or part of a regional organization. There are five major advantages of trade agreements, foreign direct investment, economies of scale, competition, trade effects. Foreign Direct Investment, An increase in direct investment results from trade blocs. Larger markets are created, resulting in costs to manufacture products locally. Economies of Scale, The larger markets created via trading blocs permit economies of scale, the average cost of production is decreased because mass production is allowed. Competition, Trade blocs bring manufacturers in countries closer together. Accordingly, the increased competition promotes greater efficiency within firms, Trade Effects Trade blocs eliminate tariffs, thus driving the cost of imports down. As a result, demand changes and consumers make purchases based on the lowest prices, market Efficiency, The increased consumption experienced with changes in demand combines with a greater amount of products being manufactured to result in an efficient market. The disadvantages, on the hand, include, regionalism vs. multinationalism, loss of sovereignty, concessions. Regionalism vs. Multinationalism, Trading blocs bear an inherent bias in favor of their participating countries, for example, NAFTA, a free trade agreement between the United States, Canada and Mexico, has contributed to an increased flow of trade among these three countries. Trade among NAFTA partners has risen to more than 80 percent of Mexican and Canadian trade and more than a third of U. S. trade, according to a 2009 report by the Council on Foreign Relations. However, regional economies establish tariffs and quotas that protect intra-regional trade from outside forces, loss of Sovereignty, A trading bloc, particularly when it is coupled with a political union, is likely to lead to at least partial loss of sovereignty for its participants. Concessions, No country wants to let foreign firms gain domestic market share at the expense of local companies without getting something in return, any country that wants to join a trading bloc must be prepared to make concessions. Interdependence, Because trading blocs increase trade among participating countries, the countries become increasingly dependent on each other, regional integration Continental organization Continental union
31.
Trade creation
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Trade creation is an economic term related to international economics in which trade flows are redirected due to the formation of a free trade area or a customs union. The issue was brought into discussion by Jacob Viner, together with the trade diversion effect. In the former case after the formation of union, the cost of the goods considered is decreased. In practice, both creation and diversion effects take place due to formation of economic union. When a customs union is formed, the member nations establish a trade area amongst themselves. The result is an increase in trade among nations in the good or service of each nations comparative advantage. In other words, increase in trade causes greater revenues, the creation of trade is important to the nation entering the customs union in that increased specialization may hurt other industries. Arguments for protectionism, such as the infant industry argument, national defense, outsourcing, however, customs unions are typically formed with friendly nations, eliminating the national defense argument. Trade diversion Regional Integration and Cooperation in Sub-Saharan Africa, Are Formal Trade Agreements the Right Strategy, - this Harvard Institute for International Development discussion paper from 1997 argues that here is little reason to expect significant economic gains from formal trade agreements at this time. Such agreements, in and of themselves, are unlikely to yield appreciable benefits unless they are preceded by decisions within member countries to more general open trade strategies. It summarizes the conclusion of empirical research that there has been little, if any, many possible reasons are listed for the lack of trade creation evidence, given that developed nation customs unions do seem to have stimulated increased trade and economic growth. The dynamics of trade creation and diversion effects under international economic integration, current Research Journal of Economic Theory,2009, vol. - An article proposes to use similarity between dynamics of gas and liquid moving under pressure difference, and the dynamics of trade flows moved under price difference and this allowed to use Navier-Stokes equation applied for the dynamics of gas and liquid towards the dynamics of inter-regional trade flows. An input of the method to analysis of the trade flows lies in direct linking of price and output dynamics, while Jacob Viners analysis was classically static consideration
32.
Trade diversion
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When a country applies the same tariff to all nations, it will always import from the most efficient producer, since the more efficient nation will provide the goods at a lower price. With the establishment of a bilateral or regional trade agreement. In other words, this would cause a trade diversion, the term was coined by Jacob Viner in The Customs Union Issue in 1950. In its literal meaning the term was however incomplete, as it failed to capture all welfare effects of discriminatory tariff liberalization, economists have however dealt with this incompleteness in two ways. Either they stretched the meaning to cover all welfare effects. Viners article became and still is the foundation of the theory of economic integration. It considered only two states comparing their trade flows with the rest of the world after they abolish customs tariffs on inner border of their union, opposite to economically efficient trade creation effect, the trade diversion flow is cost-inefficient compared with the rest of the world. Balance between trade creation and trade diversion effects due to the creation of economic union makes the union either economically efficient or inefficient. It is based on the fact that unification of states usually applies mergers of more than 1 sector in economy leading to the creation of trade creation or diversion effects. Diverted trade may hurt the non-member nation economically and politically, and it is widely believed by economists that trade diversion is harmful to consumers. The dynamics of trade diversion was described by Ravshanbek Dalimov in 2009 and he used similarity of trade flows to the flux of gas or liquid stimulated by the pressure difference, while the flows of trade flows are stimulated by the price difference. This allowed use of Navier-Stokes equations for the dynamics of trade flows. An example of trade diversion is the UKs import of lamb, before Britain joined the EU, most lamb imports came from New Zealand, the cheapest lamb producer. Trade was diverted from New Zealand and created between France and the UK, current Research Journal of Economic Theory,2009, vol. An article proposes to use similarity between dynamics of gas and liquid moving under pressure difference, and the dynamics of trade flows moved under price difference and this allowed to use Navier-Stoxes equation applied for the dynamics of gas and liquid towards the dynamics of trade flows
33.
Non-tax revenue
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Non-tax revenue or non-tax receipts are government revenue not generated from taxes. The war reparations paid by the defeated Central Powers after the First World War offer a well-known example, an example are contracts for resource extraction collected privately under license from state-owned lands Fines collected and assets forfeitured as a penalty. Examples include parking fines, court costs levied on criminal offenders Fees for the granting or issuance of permits or licenses, user fees collected in exchange for the use of many public services and facilities. Tolls charged for the use of roads are an example Donations
34.
Tax revenue
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Tax revenue is the income that is gained by governments through taxation. For example, in the UK, the Driver and Vehicle Licensing Agency collects vehicle excise duty, tax revenues on purchases come in two forms, tax itself is a percentage of the price added to the purchase, while duties are a fixed amount added to the purchase price. In order to calculate the tax raised from these sales. The effect of a change in taxation level on total tax revenue depends on the good being investigated, and in particular on its price elasticity of demand. Where goods have a low elasticity of demand, an increase in tax or duty will lead to a decrease in demand—not enough to offset the higher tax raised from each unit. Overall tax revenue will therefore rise, conversely, for price-elastic goods, an increase in tax rate or duty would lead to a fall in tax revenue. The Laffer curve theorises that, even for goods, there will be a tax revenue maximising point. A limiting factor in determining the government budget is the capacity to tax, per capita income is the most often used measure of relative fiscal capacity. But this measure fails to base tax capacity computation on other important tax bases like the sales and property tax, a representative tax system should assess the level of personal income, the value of retail sales and the value of property to compute fiscal capacity. To do so the tax rate for each base is computed by dividing the total revenue derived by the total value of the base. Thus, as an example, income taxes collected would be divided by total income to yield a rate of taxation, a state or communitys standing on these various bases may affect its ability to attract new industry. The resulting rates, high or low in comparison, can become targets for change, the mission of revenue administration is to provide prudent and innovative revenue, investment and risk management and to regulate the use of government capital. It is not always the case, however, that new developments, especially if not properly planned, economic development traditionally focuses on such things as job generation, the provision of affordable housing, and the creation of retail centers. Tax base expansion focuses primarily on maintaining and enhancing real estate values within the municipality, municipalities tend to pursue economic development with religious fervor and often do not think strategically about the overall real estate impacts of their economic development initiatives. Yet the existing tax base in almost every municipality throughout the United States is an important source of revenue for funding municipal, in addition to being responsible for managing the tax base, a community should also be responsible for helping to ensure economic prosperity for its citizens. Good tax base management may lead to better economic development, because investors. Instead of offering incentives to attract business, they may be willing to pay to come to a community because it’s a good place to live, work, shop, list of countries by tax revenue as percentage of GDP
35.
Discretionary spending
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In public finance, discretionary spending is government spending implemented through an appropriations bill. This spending is an part of fiscal policy, in contrast to entitlement programs for which funding is mandatory. In the United States, discretionary spending refers to spending set on a basis by decision of Congress. Such spending is usually authorized by Congress in another act, provisions of an appropriations act that authorize spending are earmarks. When an authorization act also appropriates funds, it is called mandatory spending
36.
Mandatory spending
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In United States fiscal policy, mandatory spending is spending on certain programs that are required by existing law. In the United States, mandatory spending refers to budget authority and ensuing outlays provided in other than appropriations acts. In fiscal year 2014, mandatory spending accounted for about 60 percent of the federal budget, the two largest mandatory spending programs are Medicare and Social Security, which together account for nearly 40 percent of the federal budget. Prior to the Great Depression, nearly all federal expenditures were discretionary, however, following the passage of the Social Security Act in 1935, an increasing percentage of the federal budget was devoted to mandatory spending. In 1947, Social Security accounted for just under five percent of the federal budget, by 1962,13 percent of the federal budget and half of all mandatory spending was committed to Social Security. In 1965 Congress created Medicare, a government administered health insurance program for senior citizens, in the 10 years following the creation of Medicare, mandatory spending increased from 30 percent to over 50 percent of the federal budget. Though the rate of increase has slowed, mandatory spending composed about 60 percent of the federal budget in FY2012. In FY2014, Social Security, Medicare, and Medicaid were the largest individual mandatory expenditures, various income security programs, such as SNAP, unemployment compensation, and earned income and child tax credits, accounted for an additional 18 percent of mandatory spending. According to the Congressional Budget Office, mandatory spending will increase from $2.2 trillion in 2014 to $3.6 trillion by 2023. Though averaging about 10.2 percent of GDP since 1973, mandatory spending is projected to increase to about 14 percent of GDP by 2023
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Balanced budget
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A balanced budget refers to a budget in which revenues are equal to expenditures. Thus, neither a budget nor a budget surplus exists. More generally, it refers to a budget that has no budget deficit, balanced budgets and the associated topic of budget deficits are a contentious point within academic economics and within politics. Most economists agree that a balanced budget decreases interest rates, increases savings and investment, shrinks trade deficits, however, it should be noted that Keynesian economics does not advocate for fiscal stimulus when the existing government debt is already significant. Budget deficits are argued to be necessary by some within Post-Keynesian economics, budget deficits can usually be calculated by subtracting the total planned expenditure from the total available budget. This will then either a budget deficit or a budget surplus. In the United States, the fiscal conservatism movement believes that balanced budgets are an important goal, every state other than Vermont has a balanced budget amendment, providing some form of ban on deficits, while the Oregon kicker bans surpluses of greater than 2% of revenue. The Colorado Taxpayer Bill of Rights also bans surpluses, and requires the state to refund taxpayers in event of a budget surplus, today the goal is 1% over the business cycle, as the retirement pension is no longer considered a government expenditure. In 2015 George Osborne, the Chancellor of the Exchequer, announced that he intended to implement a law whereby the government must deliver a budget surplus if the economy is growing, the government increases its expenditures, balancing it by an increase in taxes. Since only part of the money away from households would have actually been used in the economy. Therefore, the money which would have saved by households is instead injected into the economy. In general, a change in the budget will change aggregate demand by an amount equal to the change in spending
