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LOGO

CHAPTER 8 : GOVERNMENT POLICIES

1. FISCAL POLICIES a) Govt revenue b) Govt expenditures 2. MONETARY POLICIES a) Monetary instruments b) Types of MP

Govt Revenue
SOURCES

Revenue

Borrowing

Issuing

Others

Bonds Local Tax Non Tax Foreign

Shares Aids from other countries

Non rev

Use govt A Trade surplus

Direct

Indirect

Govt Revenue
1) Direct Taxes
taxes that are collected from the people or organizations eg : indv income taxes, Companies income tax, Petroleum income tax, Stamp duties, real property gains tax

2) Indirect Taxes
imposed on rights, privileges, and activities. eg : Export duties, Import duties, Excise duties, Sales tax, Service tax 3)

Non Taxes
other than taxes eg : Licence and permits, Petroleum royalty, Interest and returns on investment, services fees and fines and penalty.

4) Non Rev
eg : refunds of expenditure, interdepartmental credit, refunds overpayment, erroneous payment, reimbursement & contribution from govt dept, statutory bodies @ govt owned enterprise

Proportional vs Progressive vs Regressive T important feature of tax systems is the percentage of the tax burden as it relates to Y or C. to describe the way the rate progresses from low to high, from high to low, or proportionally.
a) progressive tax tax imposed so that the effective tax rate as the amount to which the rate is applied b) regressive tax tax rate as the amount to which the rate is applied c) proportional tax effective tax rate is fixed as the amount to which the rate is applied

Govt Expenditures
EXPENDITURE

OPERATING For maintaining services, facilities & dept Social services Emoluments

DEVELOPMENT To boost up eco growth General admin Economic services Security

Supplies and services

Other grants and transfers

Pension and gratuities Debt service charges

Subsidies

Other expenditure

Asset acquisition

Dev Expenditure
1) Social services
a) b) c) d) a) b) c) d) e) a) b) c) d) Education Health Housing Social and community services public services Statistics Royal Customs and Excise Inland Revenue Departments Ministry of Foreign Affairs. Agriculture and rural development Trade and industry Transport Public utilities

2) General admin

3) Economic services

4) Defense & security

a) For strengthening armed forces b) Replacement & modernization of facilities & infra

Fiscal Policy
A. Obj of FP
To maintain the stability of the economy Solve macroecon problems Reach efficient econ ie FE & high growth (steady rate & stable P)

B. Tools
Govt exp development and operating Tax rev

C. Types of FP
Expansionary FP @ Deficit budget Contractionary FP @ Surplus budget Balanced budget

Monetary Policy
Aimed at stabilizing the economy w/out inflation & deflation Implemented thru BNM by regulating Ms & IR Obj of policy
a) Maintain the stability of general P in econ b) Maintain the stability of IR & financial mkts c) Achieve steady rate of econ growth & national income d) Achieve FE & efficiency in the use of resources e) Maintain stability of forex mkt & favourable BOP

Tools Of Monetary Policies

1) Quantitative tools
OMO buying & selling govt securities Discount window by or the discount rate Reserve requirement by or rate of reserve Funding extend the maturity date of govt securities e) Special deposits a) b) c) d)

2) Qualitative tools
a) Selective credit control control types of loan given b) Moral suasion discourage heavy borrowing c) Special directives new instructions