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measurement of inflationthe rate of inflation is measured using the retail price index a retail price index aims to measure the change in the
meaningthe word inflation has at least four meanings a persistent rise in the general level of prices or alternatively a persistent falls in the
liquidity and the multiple contraction of depositsmany of the instruments of monetary policy depend upon limiting liquidity which has a multiple
interest rates decreasing the rate of interest may not encourage investment but increasing the interest rate tends to lock up liquidity in the
monetary policy the problems concerning the ability of monetary policy to influence the economy as for instance the doubts about the ability of lower
problems of prices and incomes policyi confrontationthe imposition of the prices and incomes policy voluntary or statutory risks the possibility of
the neo-classical viewthe neo-classical view is that market forces are the best directors of the economy positive attempts by the government it
difficulties in using fiscal policythere are several problems involved in implementing fiscal policy they includetheoretical problemsmonetarists
policy conflictsin their attempts to achieve the policy objectives governments often face what are called conflict of objectives these arise
direct intervention the government can also intervene directly in the economy to see that its wishes are carried out this can be achieved
monetary policiesthis is the direction of the economy through the variables of money supply and the price of money expanding the supply of money
public sector borrowing requirement psbrpublic sector borrowing requirement psbr is the amount which the government needs to borrow in any one year
burden of the national debtthe extent of the burden on a nation of public debt depends in the first place on whether it is an external or an internal
national debttaxation does not often raise sufficient revenue for the government expenditure so governments resort to borrowing this
types of public debtpublic debts can be classified according to the purpose for which the money was borrowed
public expenditurethe accounts of the central government are centered on two funds the consolidated fund which handles the revenues form taxation and
economic effects of taxationa a deterrent to workheavy direct taxation especially when closely linked to current earnings can act as a serious
digressive taxa tax is called digressive when the higher incomes do not make a due contribution or when the burden imposed on them is relatively
regressive taxa tax is said to be regressive when its burden falls more heavily on the poor than on the rich no civilized government imposes
proportional taxis where whatever the size of income the same rate or same percentage is charged examples are commodity taxes like customs excise
disadvantagesthe effect on incentiveshigh progressive tax makes work and extra effort become less valuablethe effect on the willingness to accept
advantagesa it is more equitable the broader shoulders are asked to carry the heavier
progressive taxa progressive income tax system is one where the higher the income the greater the proportion paid in taxes this is effected by
advantagesa they are less costly to administer because the producers and sellers themselves deposit them with the governmentb if levied on goods with
indirect taxesthese are imposed on an individual mostly producers or traders but they can be passed on to be borne by others usually the final