FINANCIAL RELATIONS

Question 1

Financial relations =

Answer 1

flow of resources between public institution and private entity which is not justified by market transaction

Question 2

Why do government finance business?

Answer 2

To compensate them for positive externalizes
To induce firms to produce public services
compensate useful firms for taking risk
to preserve production capacity
To attract firms to specific area
Encouraging investment in an industry
Protecting firms from external competitor

Question 3

What are hidden subsidies?

Answer 3

indirect economic benefits provided by the government to specific industries or businesses, often without direct financial payments
-tax breaks and exemptions
- regulatory advantages
-infrastructure support
-R&D support
- risk assumption

Question 4

What are the issues of hidden subsidies?

Answer 4

Excessive price paid
Inappropriate reduction of taxes
Formally subsidizing consumer
Control and influence on market transaction

Question 5

What are the solutions of hidden subisidies?

Answer 5

Transparency of financial relations
Clear role of state owned enterprise
Obligation to serve
Elimination of hidden taxes and charges

Question 6

What are multiple goals of public purchasing?

Answer 6

• Best value for public funds
• Transparency and accountability
• Competition and fairness
• Policy objectives
• Economic development and job creation
• Quality and performance
• Risk management