2. The economic function of the government
*Government refers to the people who form
the supreme administrative body of a
country.
Objectives:
Educate its people
Maintain a good national defense
Keeps crime and death rates down
Build schools and roads for the entire
nation.
Provide public goods
Redistribute income
Ensure economic stability
3. Most importantly, the
government guides the
overall pace of economic
activity, attempting to
maintain steady
growth, high levels of
employment, and price
stability
4. The financial power of the government
The government could always borrow money
when facing temporary cash problems.
The government could always charge heavier
taxes for permanent cash problems.
6. A fiscal tool
Fiscal policy is a set of government policies
related to tax rates and spending.
Two main instruments:
spending (expenditure)
Taxation (revenue collection)
Changes in the level and composition of taxation
and government spending can impact the
following variables in the economy:
Aggregate demand and the level of economic
activity;
The pattern of resource allocation;
The distribution of income.
7. Tax rates, being an instrument of fiscal policy, could and should
be moved up or down depending on the dictates of the
economic cycle. It assumes the burden of tuning fiscal policy
and government financial operations to the needs of the
economic cycle.
The main task and prime consideration for the movement of tax
rates is the regulation of total spending so as to achieve
maximum employment without price inflation and reserve
depletion.
8. A balance budget is when there is either a surplus or
deficit, or when the income equal spending.
9. Deficit spending - spending exceeds income.
Budget surplus - income exceeds spending.
These two are the starting point of all considerations from
which either government spending must be reduced or tax
rates must be raised.
*A surplus or a deficit is taken as a consequence after the
government spending has been examined in light of the
needs for public services and after tax rates have been made
to regulate total spending in the economy.
10. The national Debt
Cost to incurring a debt.
These are real costs;
resources
manpower
machines
materials
which could have been put into use
somewhere if the government did not
use them.
12. The price of debt mismanagement
Debt mismanagement can be
counted in the following.
• The loss of goods that could
have been produced and
enjoyed
• The frustration of the
unemployed as well as the sad
vision of unused machines.
• The loss of private investment
initiative and the loss of the
moral fiber from want of
movement, commitment and
hard work.
13. Servicing the national debt
For this issues not only has a profound impact on the lives
of millions of Filipino, but also cuts across our ties as a nation face
to face the rest of the world. Ultimately the debt problem
requires a concerted, global solution, and we must do our share
appropriately and proportional to the gravity of our situation.
14. A moratorium
Moratorium is a legal suspension of debt payments over a
specified period of time in order to provide people with time to
stabilize their finances before dealing with debt problems.
This will influence our country in two ways:
In indirect way, it could destabilize
In a direct way, our trade the international financial
credits will be cut and system, causes the crisis to spread
shortages will spread and there will be a general
economy-wide. contraction in the world economy.
A debt moratorium must be considered only as a
last resort. It can be enacted only if it is in solidarity with
other countries in a similar situation. And the rights of
both debtor and creditor nations must be respected.
15. Moraturium
Such action may be
imposed by a government, or
taken voluntarily by a private mortgage
business, usually in times of
economic crisis such as an
earthquake or flood, in order to
provide people with time to
stabilize their finances
before dealing with
potential problems such as a
mortgage default and
foreclosure.
