Topic 4 Role of Government
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Transcript of Topic 4 Role of Government
Topic 4: Role of GovernmentSophian bin Sout
Part 1: Economic Function
Economic Function
Providing legal and social FRAMEWORK
Sets legal status of business enterprise, ensure
rights to private ownership and allows the making
and enforcement on contracts.
Creating BUSINESS ENVIRONMENT
Healthy business environment has to be created in
the market to promote the competition
Economic Function
Redistribute & Reallocate INCOME & WEALTH
Government to reallocate the income and wealth in
a fair way trough a variety of policies and
programmes.
Increase the allocation of RESOURCES
Country’s economics resources should be utilised
efficiency to increase output.
Economic Function
Creating a stable ECONOMIC INVIRONTMENT
Stable economic environment is important to
encourage investment. Peaceful environment and
political stability are important to the
livelihood of the citizen.
Controlling the PRICE
Inflation affect the economics growth and also
reduce the purchasing power of the consumers.
Government control by monitoring the price
movement.
Economic Function
Increasing Government WELFARE ACTIVITIES
Responsible of providing public facilities for the
low income consumers. Government to subsidise the
medical costs so the publics has to pay only low
charges.
Part 2: National Budget
Surplus Budget
Deficit Budget
Which estimated
revenue of
government during
the year is
greater than
anticipated
expenditure
Government
expenditures
exceed government
tax revenue in a
given year.
(running a budget
deficit)
Government Expenditure and Revenue
National Income
Balanced
Budget
Government Expenditure
Surplus
Budget
Deficit
Budget
Part 3: Sources of Government Revenue
Revenue
Tax
Revenue
Non Tax
Revenue
TaxDirect Taxes Indirect Taxes
Direct Taxes
Personal Income Taxes
Company Income Taxes
Petroleum Income Taxes
Indirect Taxes
- Collected mainly by the
Royal Customs and Excise
Department.
- Where part or all of the
burden tax can be
transferred to another
party
- Examples: export duty,
import duty, excise duty,
sales tax and service tax
Revenue
Non Tax
- Revenue from non-tax source
- Revenue from government service, fees for
issue of license and permit, sales on
government asset, rental of government
property, interest and returns on
government investment, fines, fees and
penalties, contributions from foreign
governments and international agencies
and cash royalty from petroleum and gas
Part 4: Government Expenditure
Operating or Management Expenditure
Operating or management expenditure is a current expenditure for the purpose of government administration.
Include government spending in various government departments to maintain services such as payment of government salaries and purchase of office equipment and motor vehicles for government use.
Government Development Expenditure
Development expenditure is the investment expenditure by the government which involves expansion in the physical capital of a country for example government expenditure in development project that are able to increase economic growth such as construction of road, school and hospitals.
Part 5: National Debt
Internal Sources
1. Borrowing from citizen through the sale of securities, bond and saving certificates to citizens.
2. Borrowing from financial institution such as insurance companies by investing their resources in the purchase of government securities
3. Loans from the central bank, where he central bank purchase government securities, bond and debentures from the government.
4. Loan from commercial banks, where the commercial banks invest a part of their deposits in government bond and securities to fulfil the liquidity requirement.
External Sources
1. International money markets, such as some foreign exchange banks in Paris, London and New York, which have big deposits to lend any government requesting loans.
2. Currency loans from foreign governments, such as the USA, UK, Germany and Japan, for the supply of needed goods. The loan are documented in contracts.
3. Loan from international monetary financial institutions, such as the International Monetary Fund (IMF).
Break Quiz
Quiz 1: List the advantages and disadvantages of National Debt, Domestic Loan and Foreign Loan
Advantages Disadvantages
National Debt
Domestic Loan
Foreign Loan
Part 6: Government Policy
Fiscal Policy
Objectives Types
Monetary Policy
Objesctive Types
Instrument of Monetary Policy (Quantitative)
Min. Liquidity
Req.
Need for statutory reserves
OMOinstrument Discount Operation
Interest RateFunding
Instrument of Monetary Policy (Qualitative)
Instruments
Moral Persuasion
Selective Credit
Controls
The END