1.
Reserve Bank of India: Working and Functions
–
Reserve Bank of India is Indias central bank. It also works for economic growth of the country. The Reserve Bank of India was established in 1935 with the provision of Reserve Bank of India Act,1934, though privately owned initially, in 1949 it was nationalized and since then fully owned by Government of India. Reserve bank of India is the body who is authorized to issue currency in India. While coins and one rupee notes are minted by GoI, the RBI works as an agent of GoI for distributing and handling of coins, RBI also works to prevent counterfeiting of currency by regularly upgrading security features of currency. For printing currency, RBI has four facilities at Dewas, Nasik, Mysore, the RBI is authorized to issue notes up to value of Rupees ten thousands and coin up to one thousands. New notes of Rupees 500 and 2000 have been issued on 8th Nov 2016, the old mahatma gandhi series note of Rupees 1000 and 500 are considered illegal and just paper from midnight on 8 November 2016. Earlier 5000 notes have been discarded by RBI, cash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per week per account from 10 to 13 November 2016. This limit was increased to ₹24,000 per week from 14 November and it was announced that this facility would be available until 30 December 2016. Initially, the limit was fixed at ₹4,000 per person from 8 to 13 November 2016 and this limit was increased to ₹4,500 per person from 14 to 17 November 2016. The limit was reduced to ₹2,000 per person from 18 November 2016, all exchange of banknotes was abruptly stopped from 25 November 2016. Initially, all ATMs were dispensing banknotes of only ₹50 and ₹100 denominations, international airports were also instructed to facilitate an exchange of notes amounting to a total value of ₹5,000 for foreign tourists and out-bound passengers. Under the revised guidelines issued on 17 November 2016, families were allowed to withdraw ₹250,000 for wedding expenses from one account provided it was KYC compliant. The rules were changed for farmers who are permitted to withdraw ₹25,000 per week from their accounts against crop loan. ATMs were running out of cash after a few hours of being functional, several people were reported to have died from standing in queues for hours to exchange their old banknotes. Deaths were also attributed to lack of help due to refusal of old banknotes by hospitals. As of 15 November 2016, the death toll was 25. In an interview, Chief Minister of Delhi Arvind Kejriwal lashed out at a BBC reporter who asked him to justify his 19 November claim that 55 deaths were linked to demonetisation
Reserve Bank of India: Working and Functions
–
RBI-Tower in
Mumbai
2.
Mumbai
–
Mumbai is the capital city of the Indian state of Maharashtra. It is the most populous city in India and the ninth most populous agglomeration in the world, Mumbai lies on the west coast of India and has a deep natural harbour. In 2008, Mumbai was named a world city. It is also the wealthiest city in India, and has the highest GDP of any city in South, West, Mumbai has the highest number of billionaires and millionaires among all cities in India. The seven islands that came to constitute Mumbai were home to communities of fishing colonies, during the mid-18th century, Bombay was reshaped by the Hornby Vellard project, which undertook reclamation of the area between the seven islands from the sea. Along with construction of roads and railways, the reclamation project, completed in 1845. Bombay in the 19th century was characterised by economic and educational development, during the early 20th century it became a strong base for the Indian independence movement. Upon Indias independence in 1947 the city was incorporated into Bombay State, in 1960, following the Samyukta Maharashtra movement, a new state of Maharashtra was created with Bombay as the capital. Mumbai is the financial, commercial and entertainment capital of India and it is also home to some of Indias premier scientific and nuclear institutes like BARC, NPCL, IREL, TIFR, AERB, AECI, and the Department of Atomic Energy. The city also houses Indias Hindi and Marathi film and television industry, Mumbais business opportunities, as well as its potential to offer a higher standard of living, attract migrants from all over India, making the city a melting pot of many communities and cultures. The oldest known names for the city are Kakamuchee and Galajunkja, in 1508, Portuguese writer Gaspar Correia used the name Bombaim, in his Lendas da Índia. This name possibly originated as the Old Portuguese phrase bom baim, meaning good little bay, in 1516, Portuguese explorer Duarte Barbosa used the name Tana-Maiambu, Tana appears to refer to the adjoining town of Thane and Maiambu to Mumbadevi. Other variations recorded in the 16th and the 17th centuries include, Mombayn, Bombay, Bombain, Bombaym, Monbaym, Mombaim, Mombaym, Bambaye, Bombaiim, Bombeye, Boon Bay, and Bon Bahia. After the English gained possession of the city in the 17th century, Ali Muhammad Khan, imperial diwan or revenue minister of the Gujarat province, in the Mirat-i-Ahmedi referred to the city as Manbai. By the late 20th century, the city was referred to as Mumbai or Mambai in the Indian statewise official languages of Marathi, Konkani, Gujarati, Kannada and Sindhi, the Government of India officially changed the English name to Mumbai in November 1995. According to Slate magazine, they argued that Bombay was a corrupted English version of Mumbai, Slate also said The push to rename Bombay was part of a larger movement to strengthen Marathi identity in the Maharashtra region. A resident of Mumbai is called mumbaikar in the Marathi language, the term has been in use for quite some time but it gained popularity after the official name change to Mumbai. Mumbai is built on what was once an archipelago of seven islands, Bombay Island, Parel, Mazagaon, Mahim, Colaba, Worli and it is not exactly known when these islands were first inhabited
Mumbai
–
Clockwise from top:
Cuffe Parade skyline,
Taj Mahal Palace Hotel,
Chhatrapati Shivaji Terminus,
Bandra–Worli Sea Link, and the
Gateway of India.
Mumbai
–
The temple of local Hindu goddess
Mumbadevi, from whom the city of Mumbai derives its name
Mumbai
–
Kanheri Caves served as a centre of Buddhism in Western India during ancient times
3.
Maharashtra
–
Maharashtra is a state in the western region of India and is Indias second-most populous state and third-largest state by area. It is the wealthiest Indian state and it is also the worlds second-most populous sub-national entity. It has over 112 million inhabitants and its capital, Mumbai, has a population of approximately 18 million, Nagpur is Maharashtras second capital as well as its winter capital. Maharashtras business opportunities along with its potential to offer a standard of living attract migrants from all over India. Ancient and medieval Maharashtra included the empires of the Satavahana dynasty, Rashtrakuta dynasty, Western Chalukyas, Mughals, the major rivers of the state are Godavari, and Krishna. The Narmada and Tapti Rivers flow near the border between Maharashtra and Madhya Pradesh and Gujarat, Maharashtra is the second most urbanised state in India. The state has several popular Hindu places of pilgrimage including Pandharpur, Dehu and Alandi, other places that attract pilgrims from other parts of India and beyond include Hazur Sahib Gurudwara at Nanded, Sai Baba shrine at Shirdi and Dikshabhumi at Nagpur. Maharashtra is the wealthiest and one of the most developed states in India, as of 2011, the state had a per capita income of ₹1.0035 lakh, more than the national average of ₹0.73 lakh. Its GDP per capita crossed the ₹1.20 lakh threshold for the first time in 2013, however, as of 2014, the GDP per capita reduced to ₹1.03 lakh Agriculture and industries are the largest parts of the states economy. Major industries include chemical products, electrical and non-electrical machinery, textiles, petroleum, Jai Maharashtra The modern Marathi language developed from the Maharashtri Prakrit, and the word Mahratta is found in the Jain Maharashtri literature. The terms Maharashtra, Maharashtri, Marathi and Maratha may have derived from the same root, however, their exact etymology is uncertain. But the Marathas as a people do not seem to be mentioned before the thirteenth or fourteenth century, the most widely accepted theory among the linguistic scholars is that the words Maratha and Maharashtra ultimately derived from a combination of Maha and rashtrika. The word rashtrika is a Sanskritized form of Ratta, the name of a tribe or dynasty of petty chiefs ruling in the Deccan region. Another theory is that the term is derived from Maha and ratha / rathi, an alternative theory states that the term derives from the word Maha and Rashtra. However, this theory has not found acceptance among scholars who believe it to be the Sanskritised interpretation of later writers. Maharashtra was ruled by the Maurya Empire in the 4th and 3rd centuries BCE, around 230 BCE Maharashtra came under the rule of the Satavahana dynasty for 400 years. The greatest ruler of the Satavahana Dynasty was Gautamiputra Satakarni, in 90 CE Vedishri, son of the Satavahana king Satakarni, the Lord of Dakshinapatha, wielder of the unchecked wheel of Sovereignty, made Junnar, thirty miles north of Pune, the capital of his kingdom. The state was ruled by Western Satraps, Gupta Empire, Gurjara-Pratihara, Vakataka, Kadambas, Chalukya Empire, Rashtrakuta Dynasty, and Western Chalukya before finally
Maharashtra
–
Trimurti sculpture of
Lord Dattatreya from
Elephanta Caves, an
UNESCO World Heritage Site in Maharashtra
Maharashtra
–
Ajanta Caves in
Aurangabad, Maharashtra
Maharashtra
–
Late Harappa figure from
Daimabad hoard,
Indus Valley Civilization
Maharashtra
–
Bronze statue of
Shivaji Maharaj in the collection of the Shri Bhavani Museum of
Aundh, Maharashtra.
4.
India
–
India, officially the Republic of India, is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and it is bounded by the Indian Ocean on the south, the Arabian Sea on the southwest, and the Bay of Bengal on the southeast. It shares land borders with Pakistan to the west, China, Nepal, and Bhutan to the northeast, in the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives. Indias Andaman and Nicobar Islands share a border with Thailand. The Indian subcontinent was home to the urban Indus Valley Civilisation of the 3rd millennium BCE, in the following millennium, the oldest scriptures associated with Hinduism began to be composed. Social stratification, based on caste, emerged in the first millennium BCE, early political consolidations took place under the Maurya and Gupta empires, the later peninsular Middle Kingdoms influenced cultures as far as southeast Asia. In the medieval era, Judaism, Zoroastrianism, Christianity, and Islam arrived, much of the north fell to the Delhi sultanate, the south was united under the Vijayanagara Empire. The economy expanded in the 17th century in the Mughal empire, in the mid-18th century, the subcontinent came under British East India Company rule, and in the mid-19th under British crown rule. A nationalist movement emerged in the late 19th century, which later, under Mahatma Gandhi, was noted for nonviolent resistance, in 2015, the Indian economy was the worlds seventh largest by nominal GDP and third largest by purchasing power parity. Following market-based economic reforms in 1991, India became one of the major economies and is considered a newly industrialised country. However, it continues to face the challenges of poverty, corruption, malnutrition, a nuclear weapons state and regional power, it has the third largest standing army in the world and ranks sixth in military expenditure among nations. India is a constitutional republic governed under a parliamentary system. It is a pluralistic, multilingual and multi-ethnic society and is home to a diversity of wildlife in a variety of protected habitats. The name India is derived from Indus, which originates from the Old Persian word Hindu, the latter term stems from the Sanskrit word Sindhu, which was the historical local appellation for the Indus River. The ancient Greeks referred to the Indians as Indoi, which translates as The people of the Indus, the geographical term Bharat, which is recognised by the Constitution of India as an official name for the country, is used by many Indian languages in its variations. Scholars believe it to be named after the Vedic tribe of Bharatas in the second millennium B. C. E and it is also traditionally associated with the rule of the legendary emperor Bharata. Gaṇarājya is the Sanskrit/Hindi term for republic dating back to the ancient times, hindustan is a Persian name for India dating back to the 3rd century B. C. E. It was introduced into India by the Mughals and widely used since then and its meaning varied, referring to a region that encompassed northern India and Pakistan or India in its entirety
India
–
Flag
India
–
The granite
tower of
Brihadeeswarar Temple in
Thanjavur was completed in 1010 CE by
Raja Raja Chola I.
India
–
Writing the will and testament of the Mughal king court in Persian, 1590–1595
5.
Geographic coordinate system
–
A geographic coordinate system is a coordinate system used in geography that enables every location on Earth to be specified by a set of numbers, letters or symbols. The coordinates are chosen such that one of the numbers represents a vertical position. A common choice of coordinates is latitude, longitude and elevation, to specify a location on a two-dimensional map requires a map projection. The invention of a coordinate system is generally credited to Eratosthenes of Cyrene. Ptolemy credited him with the adoption of longitude and latitude. Ptolemys 2nd-century Geography used the prime meridian but measured latitude from the equator instead. Mathematical cartography resumed in Europe following Maximus Planudes recovery of Ptolemys text a little before 1300, in 1884, the United States hosted the International Meridian Conference, attended by representatives from twenty-five nations. Twenty-two of them agreed to adopt the longitude of the Royal Observatory in Greenwich, the Dominican Republic voted against the motion, while France and Brazil abstained. France adopted Greenwich Mean Time in place of local determinations by the Paris Observatory in 1911, the latitude of a point on Earths surface is the angle between the equatorial plane and the straight line that passes through that point and through the center of the Earth. Lines joining points of the same latitude trace circles on the surface of Earth called parallels, as they are parallel to the equator, the north pole is 90° N, the south pole is 90° S. The 0° parallel of latitude is designated the equator, the plane of all geographic coordinate systems. The equator divides the globe into Northern and Southern Hemispheres, the longitude of a point on Earths surface is the angle east or west of a reference meridian to another meridian that passes through that point. All meridians are halves of great ellipses, which converge at the north and south poles, the prime meridian determines the proper Eastern and Western Hemispheres, although maps often divide these hemispheres further west in order to keep the Old World on a single side. The antipodal meridian of Greenwich is both 180°W and 180°E, the combination of these two components specifies the position of any location on the surface of Earth, without consideration of altitude or depth. The grid formed by lines of latitude and longitude is known as a graticule, the origin/zero point of this system is located in the Gulf of Guinea about 625 km south of Tema, Ghana. To completely specify a location of a feature on, in, or above Earth. Earth is not a sphere, but a shape approximating a biaxial ellipsoid. It is nearly spherical, but has an equatorial bulge making the radius at the equator about 0. 3% larger than the radius measured through the poles, the shorter axis approximately coincides with the axis of rotation
Geographic coordinate system
–
Longitude lines are perpendicular and latitude lines are parallel to the equator.
6.
Governor of Reserve Bank of India
–
The Governor of the Reserve Bank of India is the chief executive of Indias central bank and the ex-officio chairperson of its Central Board of Directors. Indian Rupee currency notes, issued by the Reserve Bank of India, since its establishment in 1935 by the British colonial government, the RBI has been headed by 24 governors. The term of office typically runs for 3 years, the inaugural officeholder was the British banker Osborne Smith, while C. D. Deshmukh was the first Indian governor. The position is held by Urjit Patel, who took over from Raghuram Rajan on 4 September 2016. Official RBI sites Governors Page Reserve Bank of India – About Us, List of Governors
Governor of Reserve Bank of India
–
Incumbent
Raghuram Rajan since 4 September 2013
Governor of Reserve Bank of India
–
RBI seal
Governor of Reserve Bank of India
–
Dr. Manmohan Singh, RBI governor for two years in the 1980s, went on to serve a five-year term as finance minister and a ten-year term as prime minister.
7.
Republic of India
–
India, officially the Republic of India, is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and it is bounded by the Indian Ocean on the south, the Arabian Sea on the southwest, and the Bay of Bengal on the southeast. It shares land borders with Pakistan to the west, China, Nepal, and Bhutan to the northeast, in the Indian Ocean, India is in the vicinity of Sri Lanka and the Maldives. Indias Andaman and Nicobar Islands share a border with Thailand. The Indian subcontinent was home to the urban Indus Valley Civilisation of the 3rd millennium BCE, in the following millennium, the oldest scriptures associated with Hinduism began to be composed. Social stratification, based on caste, emerged in the first millennium BCE, early political consolidations took place under the Maurya and Gupta empires, the later peninsular Middle Kingdoms influenced cultures as far as southeast Asia. In the medieval era, Judaism, Zoroastrianism, Christianity, and Islam arrived, much of the north fell to the Delhi sultanate, the south was united under the Vijayanagara Empire. The economy expanded in the 17th century in the Mughal empire, in the mid-18th century, the subcontinent came under British East India Company rule, and in the mid-19th under British crown rule. A nationalist movement emerged in the late 19th century, which later, under Mahatma Gandhi, was noted for nonviolent resistance, in 2015, the Indian economy was the worlds seventh largest by nominal GDP and third largest by purchasing power parity. Following market-based economic reforms in 1991, India became one of the major economies and is considered a newly industrialised country. However, it continues to face the challenges of poverty, corruption, malnutrition, a nuclear weapons state and regional power, it has the third largest standing army in the world and ranks sixth in military expenditure among nations. India is a constitutional republic governed under a parliamentary system. It is a pluralistic, multilingual and multi-ethnic society and is home to a diversity of wildlife in a variety of protected habitats. The name India is derived from Indus, which originates from the Old Persian word Hindu, the latter term stems from the Sanskrit word Sindhu, which was the historical local appellation for the Indus River. The ancient Greeks referred to the Indians as Indoi, which translates as The people of the Indus, the geographical term Bharat, which is recognised by the Constitution of India as an official name for the country, is used by many Indian languages in its variations. Scholars believe it to be named after the Vedic tribe of Bharatas in the second millennium B. C. E and it is also traditionally associated with the rule of the legendary emperor Bharata. Gaṇarājya is the Sanskrit/Hindi term for republic dating back to the ancient times, hindustan is a Persian name for India dating back to the 3rd century B. C. E. It was introduced into India by the Mughals and widely used since then and its meaning varied, referring to a region that encompassed northern India and Pakistan or India in its entirety
Republic of India
–
Flag
Republic of India
–
The granite
tower of
Brihadeeswarar Temple in
Thanjavur was completed in 1010 CE by
Raja Raja Chola I.
Republic of India
–
Writing the will and testament of the Mughal king court in Persian, 1590–1595
8.
Indian Rupee
–
The Indian rupee, is the official currency of the Republic of India. The rupee is subdivided into 100 paise, though as of 2011,25 paise is no more a legal tender, the issuance of the currency is controlled by the Reserve Bank of India. The Reserve Bank manages currency in India and derives its role in management on the basis of the Reserve Bank of India Act,1934. The rupee is named after the coin, rupiya, first issued by Sultan Sher Shah Suri in the 16th century. In 2010, a new symbol ₹, was officially adopted and it was derived from the combination of the Devanagari consonant र and the Latin capital letter R without its vertical bar. The parallel lines at the top are said to make an allusion to the tricolour Indian flag, the first series of coins with the new rupee symbol started in circulation on 8 July 2011. On 8 November 2016 the Government of India announced the demonetisation of ₹500 and ₹1000 banknotes with effect from midnight of the same day, a newly redesigned series of ₹500 banknote, in addition to a new denomination of ₹2000 banknote is in circulation since 10 November 2016. The new redesigned series is expected to be enlarged with banknotes in the denominations of ₹1000, ₹100. The word rupee was derived from the Sanskrit word रूप्यकम् or rupaya, the modern Indian rupee has a direct lineage from the rupiya, the silver coin, issued by Sher Shah Suri, continued by the Mughal rulers. Rūpa means to form or shape, example, Rūpyarūpa, rūpya — wrought silver, however, in the region of Bengal, the term taka has always been used to refer to currency. In the 14th century, Ibn Battuta noticed that people in the Bengal Sultanate referred to gold, today, the currency of Bangladesh is officially known as taka. The word taka in Bengali is also used generically to mean any money, currency. Thus, colloquially, a person speaking in Bengali may use taka to refer to money regardless of what currency it is denominated in, thus, in the states of West Bengal and Tripura the Indian rupee is officially known টাকা. Whereas, in the states of Assam and Odisha, the Indian rupee is known by names derived from the Sanskrit word ṭaṅka, টকা in Assamese. During his five-year rule from 1540 to 1545, Sultan Sher Shah Suri issued a coin of silver, weighing 178 grains, the silver coin remained in use during the Mughal period, Maratha era as well as in British India. Among the earliest issues of paper rupees include, the Bank of Hindustan, the General Bank of Bengal and Bihar, historically, the rupee was a silver coin. This had severe consequences in the century when the strongest economies in the world were on the gold standard. The discovery of large quantities of silver in the United States and several European colonies resulted in a decline in the value of relative to gold
Indian Rupee
–
Silver punch mark coin of the
Maurya empire, known as Rūpyarūpa, 3rd century BCE.
Indian Rupee
–
Indian rupee
Indian Rupee
–
Rupiya issued by
Sher Shah Suri, 1540–1545 CE
Indian Rupee
–
One-rupee banknote
9.
United States dollar
–
The United States dollar is the official currency of the United States and its insular territories per the United States Constitution. It is divided into 100 smaller cent units, the circulating paper money consists of Federal Reserve Notes that are denominated in United States dollars. The U. S. dollar was originally commodity money of silver as enacted by the Coinage Act of 1792 which determined the dollar to be 371 4/16 grain pure or 416 grain standard silver, the currency most used in international transactions, it is the worlds primary reserve currency. Several countries use it as their currency, and in many others it is the de facto currency. Besides the United States, it is used as the sole currency in two British Overseas Territories in the Caribbean, the British Virgin Islands and Turks and Caicos Islands. A few countries use the Federal Reserve Notes for paper money, while the country mints its own coins, or also accepts U. S. coins that can be used as payment in U. S. dollars. After Nixon shock of 1971, USD became fiat currency, Article I, Section 8 of the U. S. Constitution provides that the Congress has the power To coin money, laws implementing this power are currently codified at 31 U. S. C. Section 5112 prescribes the forms in which the United States dollars should be issued and these coins are both designated in Section 5112 as legal tender in payment of debts. The Sacagawea dollar is one example of the copper alloy dollar, the pure silver dollar is known as the American Silver Eagle. Section 5112 also provides for the minting and issuance of other coins and these other coins are more fully described in Coins of the United States dollar. The Constitution provides that a regular Statement and Account of the Receipts and that provision of the Constitution is made specific by Section 331 of Title 31 of the United States Code. The sums of money reported in the Statements are currently being expressed in U. S. dollars, the U. S. dollar may therefore be described as the unit of account of the United States. The word dollar is one of the words in the first paragraph of Section 9 of Article I of the Constitution, there, dollars is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales. In 1792 the U. S. Congress passed a Coinage Act, Section 20 of the act provided, That the money of account of the United States shall be expressed in dollars, or units. And that all accounts in the offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation. In other words, this act designated the United States dollar as the unit of currency of the United States, unlike the Spanish milled dollar the U. S. dollar is based upon a decimal system of values. Both one-dollar coins and notes are produced today, although the form is significantly more common
United States dollar
–
Series of 1917
$1 United States bill
United States dollar
–
Federal Reserve Notes
United States dollar
–
Spanish silver real or
peso of 1768
United States dollar
–
Obverse of rare 1934 $500 Federal Reserve Note, featuring a portrait of President
William McKinley.
10.
Public finance
–
Public finance is the study of the role of the government in the economy. The purview of public finance is considered to be threefold, governmental effects on efficient allocation of resources, distribution of income, the proper role of government provides a starting point for the analysis of public finance. In theory, under circumstances, private markets will allocate goods. If private markets were able to provide efficient outcomes and if the distribution of income were socially acceptable, in many cases, however, conditions for private market efficiency are violated. For example, if people can enjoy the same good at the same time. National defense is one example of consumption, or of a public good. Market failure occurs when private markets do not allocate goods or services efficiently, the existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services. Externalities, public goods, informational advantages, strong economies of scale, Public provision via a government or a voluntary association, however, is subject to other inefficiencies, termed government failure. Under broad assumptions, government decisions about the efficient scope and level of activities can be separated from decisions about the design of taxation systems. In practice, government budgeting or public budgeting is substantially more complicated, Government can pay for spending by borrowing, although borrowing is a method of distributing tax burdens through time rather than a replacement for taxes. A deficit is the difference between government spending and revenues, the accumulation of deficits over time is the total public debt. Deficit finance allows governments to smooth tax burdens over time, deficits can also narrow the options of successor governments. Public finance is closely connected to issues of distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently, the public choice approach to public finance seeks to explain how self-interested voters, politicians, and bureaucrats actually operate, rather than how they should operate. Collection of sufficient resources from the economy in an appropriate manner along with allocating, resource generation, resource allocation and expenditure management are the essential components of a public financial management system. Public Finance Management basically deals with all aspects of resource mobilization, just as managing finances is a critical function of management in any organization, similarly public finance management is an essential part of the governance process. Public finance management includes resource mobilization, prioritization of programmes, the process, efficient management of resources. Rising aspirations of people are placing more demands on financial resources, at the same time, the emphasis of the citizenry is on value for money, thus making public finance management increasingly vital
Public finance
–
Public finance
Public finance
–
Figure 1: General Government (IMF Government Finance Statistics Manual 2001 (Washington, 2001) pp.13
11.
Agricultural policy
–
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
Agricultural policy
–
Agriculture
Agricultural policy
–
Public finance
12.
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
Economic policy
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Public finance
13.
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
Energy policy
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Fields
14.
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
Industrial policy
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Public finance
15.
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
Social policy
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Hans von Aachen, Allegory or The Triumph of Justice (1598)
Social policy
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U.S. Secretary of State William Jennings Bryan was the first major U.S. political figure to incorporate formal social policy into official government decisions, a champion of
social justice. Bryan is pictured in 1908.
Social policy
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Social Security Administration headquarters is in Woodlawn, Maryland.
Social policy
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Lady Justice depicts justice as equipped with three symbols: a sword symbolizing the court's coercive power; a human scale weighing competing claims in each hand; and a blindfold indicating impartiality.
16.
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
Trade policy
17.
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
Fiscal policy
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Public finance
18.
Monetary policy
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Further goals of a monetary policy are usually to contribute to economic growth and stability, to lower unemployment, and to maintain predictable exchange rates with other currencies. Monetary economics provides insight into how to craft an optimal monetary policy, since the 1970s, monetary policy has generally been formed separately from fiscal policy, which refers to taxation, government spending, and associated borrowing. Monetary policy is referred to as either being expansionary or contractionary, expansionary policy is when a monetary authority uses its tools to stimulate the economy. An expansionary policy increases the supply of money in the economy more rapidly than usual. It is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding, also, this increases the aggregate demand, which boosts growth as measured by gross domestic product. Expansionary monetary policy usually diminishes the value of the currency, thereby decreasing the exchange rate, the opposite of expansionary monetary policy is contractionary monetary policy, which slows the rate of growth in the money supply or even shrinks it. This slows economic growth to prevent inflation, monetary policy is associated with interest rates and availability of credit. Instruments of monetary policy have included short-term interest rates and bank reserves through the monetary base, for many centuries there were only two forms of monetary policy, Decisions about coinage, Decisions to print paper money to create credit. Interest rates, while now thought of as part of monetary authority, were not generally coordinated with the forms of monetary policy during this time. Monetary policy was seen as a decision, and was generally in the hands of the authority with seigniorage. With the advent of larger trading networks came the ability to set the price between gold and silver, and the price of the currency to foreign currencies. This official price could be enforced by law, even if it varied from the market price, paper money called jiaozi originated from promissory notes in 7th century China. Jiaozi did not replace metallic currency, and were used alongside the copper coins, the successive Yuan Dynasty was the first government to use paper currency as the predominant circulating medium. In the later course of the dynasty, facing shortages of specie to fund war and their rule in China, they began printing paper money without restrictions. The goal of policy was to maintain the value of the coinage, print notes which would trade at par to specie. To accomplish this end, central banks as part of the standard began setting the interest rates that they charged. The maintenance of a standard required almost monthly adjustments of interest rates. The gold standard might be regarded as a case of fixed exchange rate policy
Monetary policy
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Public finance
19.
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
Policy mix
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Public finance
20.
Government budget
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A budget is a quantitative expression of a financial plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and it expresses strategic plans of business units, organizations, activities or events in measurable terms. A budget is the sum of money allocated for a particular purpose, a budget is a quantified financial plan for a forthcoming accounting period. A budget is an important concept in microeconomics, which uses a line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms and it also helps to co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include, To control resources To communicate plans to various responsibility center managers, to motivate managers to strive to achieve budget goals. Tools enable the actual operation of the business to be measured against the forecast. Lastly, tools establish the cost constraint for a project, program, on the other hand, if the figures diverge wildly from the budget, this sends an out of control signal, and the share price could suffer. Campaign planners incur two types of cost in any campaign, the first is the cost of human resource necessary to plan, the second type of expense that campaign planners incur is the hard cost of the campaign itself. A budget is a tool for an event director to predict with a reasonable accuracy whether the event will result in a profit. A budget can also be used as a pricing tool, there are two basic approaches or philosophies, when it comes to budgeting. One approach is telling you on mathematical models, and the other on people, the first school of thought believes that financial models, if properly constructed, can be used to predict the future. The focus is on variables, inputs and outputs, drivers, investments of time and money are devoted to perfecting these models, which are typically held in some type of financial spreadsheet application. The other school of thought holds that it’s not about models, no matter how sophisticated models can get, the best information comes from the people in the business. The focus is therefore in engaging the managers in the more fully in the budget process. The companies that adhere to this approach have their managers develop their own budgets, while many companies would say that they do both, in reality the investment of time and money falls squarely in one approach or the other. The budget of a government is a summary or plan of the revenues and expenditures of that government. There are three types of government budget, the operating or current budget, the capital or investment budget, the budget is prepared by the Treasury team led by the Chancellor of the Exchequer and is presented to Parliament by the Chancellor of the Exchequer on Budget Day
Government budget
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Brooklyn Museum - Comme Sisyphe - Honoré Daumier
Government budget
21.
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
Government debt
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Public finance
Government debt
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The sealing of the Bank of England Charter (1694)
Government debt
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A new way to pay the National Debt,
James Gillray, 1786.
King George III, with William Pitt handing him another moneybag.
Government debt
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Government debt as a percent of GDP by IMF
22.
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
External debt
23.
Government budget deficit
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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
Government budget deficit
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Public finance
24.
Fiscal union
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Fiscal union is the integration of the fiscal policy of nations or states. Under fiscal union decisions about the collection and expenditure of taxes are taken by common institutions and it is often proposed that the European Union should adopt a form of fiscal union. Most member states of the EU participate in economic and monetary union, based on the euro currency, therefore, although the European Union has a monetary union, it does not have a fiscal union. Control over fiscal policy is considered central to national sovereignty, however the EU has certain limited fiscal powers. It has a role in deciding the level of VAT and tariffs on external trade and it also spends a budget of many billions of euros. There is furthermore a Stability and Growth Pact among members of the Eurozone intended to co-ordinate the fiscal policies of member states, under the SGP, member states report their economic plans to the European Commission and explain how they are to achieve medium-term budgetary objectives. Then the Commission evaluates these plans and the report is sent to the Economic, finally, the Council of Economic and Finance Ministers decides by qualified majority whether to accept the Commissions recommendation to the member state or to rewrite the text. However, under the SGP, no countries have ever been fined for not meeting the objectives, therefore, after the Eurozone crisis, some people in Europe felt the need for a new union with more powerful fiscal influence among member states. On 2 March 2012, all members of the European Union, except the Czech Republic and the United Kingdom, signed the European Fiscal Compact, the treaty is designed to implement stricter caps on government spending and borrowing, including automatic sanctions for countries breaking the rules. The results of the treaty on the Eurozone economy, are yet to be known, with the crisis of the euro area deepening, more and more attention has been put by scholars on completing the fiscal side of the monetary union. Fiscal policies in the Eurozone Fiscal federalism European Integration
Fiscal union
25.
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
Government revenue
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Public finance
26.
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
Government spending
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Public finance
Government spending
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Chart showing how the
United States Congress has spent the federal tax revenue, 2010-2014.
27.
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
Deficit spending
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Public finance
28.
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
Tax policy
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Taxation
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