Role of the Government in the Economy

Slides:



Advertisements
Similar presentations
ROLE OF THE GOVERNMENT.
Advertisements

4.5 Government Economic Policy
How can Supply-Side Policies be used to achieve Economic Growth? To see more of our products visit our website at Andrew Threadgould.
Irish Evaluation Network David Doyle, Department of Finance.
GCSE Business Studies The External Business Environment Revision Unit 3 Part 3b to
An Overview of Financial and Multinational Financial Management Corporate Finance Dr. A. DeMaskey.
GHANA’S AGENDA FOR SHARED GROWTH AND DEVELOPMENT,
Supply Side policies AS Economics.
Governmental Opportunities and Constraints
Introduction to Financial Institutions and Markets Financial System- implies a set of Complex and closely connected institutions, markets, transactions,
Working and living in rural areas: People, Places and Policy Helen Mc Henry, Policy Analyst.
Stakeholder Objectives
Unemployment AS economics presentation on the measurement and causes of unemployment.
From Sam Fairnie.  Our core principles  Support an end to "economic rationalism", privatisation and National Competition Policy;  Recognise the right.
Fiscal Policy & Aggregate Demand
Part E – IMPACT OF MULTINATIONAL BUSINESSES ON HOST COUNTRIES AS (3.2): Demonstrate understanding of strategic response to external factors by a.
How The Macro economy Works
Macroeconomic Goals and Instruments
© Edco Positive Economics Chapter 24. © Edco Positive Economics Economic Objectives/ Aims of the Government Achieve full employment Control.
GHSGT Review Economics. Unit 1 – Fundamental Concepts of Economics.
© Edco Positive Economics Chapter 23. © Edco Positive Economics How Does the Government Intervene in the Economy? Collect taxes Pay social.
Business, Government & Workers Mr Poole Business.
IGCSE®/O Level Economics
INTERNATIONAL FINANCE Lecture 6. Balance of Payment (Accounting of transactions) – Current Account – Capital Account Current Account (Purchase Summary)
Circular Flow Model and Economic Activity
External Influences The Macro-Economy. External Influences – The Macro-Economy The Macro-economy: – The production and exchange process of the whole economy.
A2 External Influences Government policies affecting business.
Essay Skills 2 nd attempt!. Olde Edexcel Essay style! Feb 2010 UNIT 6 paper. 1. (a) Assess the impact on the world economy of the growth of regional trade.
Government Intervention. What do we need to know… What is government intervention Arguments for and against government invention Main economic objectives.
EXTERNAL INFLUENCES These are factors that the business can not control (External constraints) PESTEL Analysis is a part of the external analysis that.
Introduction to Supply-side Policies Demand-side policies have one major weakness: they are not effective at promoting long-run economic growth. PL SRAS.
W!se Unit 5 Investing. What is Investing?  Putting money to work earning more money for the future.
An Overview of Financial and Multinational Financial Management.
Economic Influences on Decision Making
Lesson 1 Exploring the World of Business and Economics
Role of the state in the macroeconomy: public expenditure
Introduction to Business (MRK 151)
Potential macroeconomic essay questions
External Influences The Macro-Economy.
2.5, 2.6 Monetary and Supply-side Policies
Quality of government expenditure
Introduction to Financial Institutions and Markets
3.4 Managing the Economy Fiscal Policy
Next topic: Policies for Growth and Development
Next topic: Policies for Growth and Development
What is debt. What is a deficit
BUSINESS ENVIRONMENT AND LAW
Handout 6: Organisational objectives
Fiscal Policy: Spending & Taxing
KNOWLEDGE PERSPECTIVE ON ECONOMIC POLICY IN EU ACCESSION COUNTRIES
The Influence of Monetary and Fiscal Policy on Aggregate Demand
The Role of the Government
MONETARY POLICY Definition:
Slide Deck 15B: Ontario’s Expenditures and Revenues
Economics - Notes for Teachers
Why Study Money, Banking, and Financial Markets?
Integrated Bilateral Agreement (IBA) 2018 to 2028
Role of the state.
Business, The Economy and Government
Fiscal Policy: Spending & Taxing
An Explanation of the Measurement and Control of National Income
Economic Development and Growth
THE GOVERNMENT AND THE ECONOMY
The National Budget.
Chapter 21 The U.S. Economy and the World
Government Finances and Taxation
Federal Budget Significance of a Government Budget p. 455
CHAPTER 1 CHAPTER 1: INTRODUCTION TO PUBLIC FINANCE (INDIVIDUALS AND GOVERNMENT) Prepared by Professor: Mr. SOEM Pheakkdey, (BA, MFI, and MPS) Telephone:
Presentation transcript:

Role of the Government in the Economy

Instruments of Government Economic Policy Fiscal policy Monetary policy Direct intervention Price and incomes policy Economic planning Exchange rate policy

Summary of Government Economic Aims Full employment Control inflation Equilibrium on the balance of payments Control government finances Just social policy Provision of infrastructure Achievement of economic growth Regional development

Some Conflicts Between Government Economic Aims Full employment versus control of inflation To achieve full employment the government increases expenditure and lowers interest rates. These two actions would actually fuel inflation. Similarly, to control inflation the government would increase interest rates, decrease expenditure and increase direct taxes. These actions would be counter-productive to the creation of employment. Control of government finances versus full employment As an aid to employment the government usually undertakes measures that necessitate increased expenditure without increasing taxes. These actions have a detrimental affect on government finances.

Some Conflicts Between Government Economic Aims Full employment versus balance of payments equilibrium The creation of employment results in the increasing of the general level of income in the economy. As Ireland has a high MPM, this will automatically cause an increase in imports, which could result in a disimprovement in our balance of trade. Provision of infrastructure versus control of government finances Expenditure on the infrastructure is normally financed – apart from EU funds – by government borrowings. This expenditure does not always bring a direct or immediate return to the government, thus increasing the burden of the national debt, requiring extra servicing of the debt and thereby increasing current expenditure.

Some Conflicts Between Government Economic Aims Economic growth versus just social policy To achieve a just social policy the government may impose high taxes on the high-income earners and transfer this income to those on social welfare. These high-income earners are usually the wealth creators in the economy. These high taxes could force these people out of the economy and so seriously stunt the effort to achieve economic growth. Some people would also argue that the welfare payments might act as a disincentive to get people back onto the workforce.

Privatisation Privatisation is the sale of government owned companies to the private sector.

Advantages of Privatisation The sale of these companies can raise money for the government, which can be used to reduce the national debt. Many of these semi-state companies are loss-making enterprises supported from taxation. Their sale would reduce the need for taxation or the money could be spent providing other services. Some semi-state companies’ activities are restricted by the Act which set them up. This restricts their expansion and thus their profitability. By selling the semi-state company a new set of Memorandum of Association and Articles of Association can be drawn up allowing the business to expand. Privatisation gives Irish people the opportunity to invest in major Irish companies. The government can discriminate in favour of investors seeking small numbers of shares and against large institutional investors. Employees are often given shares in the company being privatised. This affords them a chance to earn capital gains on the stock exchange, if the company is successful.

Disadvantages of Privatisation The government will succeed only in selling profitable or potentially profitable semi-state bodies, which will leave it supporting the loss-making bodies. The new companies could fall into foreign control and decisions could be made that are not in the national interest. The new company could discontinue the provision of services that the semi-state body deemed socially desirable, but which are unprofitable. The privatised company may reduce staffing levels, thus creating more unemployment and causing an extra burden on government resource (in the form of more unemployment benefits). If the new privatised firm is still a monopoly, it could restrict production to increase prices to the consumers.

The National Development Plan 2007–2013 The National Development Plan (NDP) has identified five prioritised areas of investment during the life of the plan. Economic infrastructure Aims to invest in: Transport – €32,914m to be invested Energy – €8,526m Environmental Services – €5,772m Communications and Broadband Programme – €435m Government Buildings Infrastructure – €1,413m

The National Development Plan 2007–2013 Enterprise, science and innovation (about €20 billion) Aims to: attract high-quality foreign direct investment develop our own indigenous (native) companies establish Irish companies capable of becoming world leaders in given industries modernise the agriculture sector, develop the tourism industry and support the rural economy.

The National Development Plan 2007–2013 Human capital (total €25,796m) Aims to: Ensure access for everybody in our society to the highest standards of education. Meet the labour skills requirement of the future. Develop the third level education sector. Particular attention to be given to post-graduate studies.

The National Development Plan 2007–2013 Social infrastructure (Total €33,612m) Aims to: Have a fair and equitable redistribution of the wealth created by our economic success. Invest €21 billion in housing to include the provision of 100,000 new social and affordable units. Invest €5 billion in health infrastructure. Invest €2.3 billion to modernised prison infrastructure, provide a new criminal courts complex and improve Garda infrastructure.

The National Development Plan 2007–2013 Social inclusion (Total €49,636m) Aims to: Invest €12 billion on a Children’s Programmes dealing with childcare services, child protection and recreational facilities. Invest over €4 billion on Working Age Education Support programmes. Invest €9.7 billion to help older people live independently at home and to provide quality residential care facilities for those who can no longer do so. Invest €19 billion on programmes and services for people with disabilities. Provide extra funding for the RAPID (Revitalising Areas by Planning, Investment and Development) programme.

Transport 21 Transport 21 is a government capital investment programme of €34 billion over the period 2006 to 2015. Its stated aim is to provide finance to: Complete the development of the inter-urban motorway network by 2010. Bring about improvements in the rest of the national road network, particularly in the regions identified in the National Spatial Strategy. Complete the safety programme on the national rail network. Bring about a radical improvement in the level and quality of rail services. Transform the public transport system in the Greater Dublin Area; Develop the public transport system in the provincial cities; Improve regional and rural public transport services; Fund essential capital works at the six existing regional airports; Improve accessibility to public transport for people with mobility, sensory and cognitive impairments.