GOVERNMENT AND ECONOMY

Question 1

What is government spending?

Answer 1

Government spending is the spending activities carried out by the government of a country. It is also known as Government expenditure and describes money that a government spends.

Question 2

What are some essential services that governments typically provide?

Answer 2

Essential services that government provides include national defence, provision of education, health, public roads, policing, internal and external securities, and possibly provision of social securities – unemployment benefits, pension schemes.

Question 3

: At what levels of government does spending occur?

Answer 3

Spending occurs at every level of government, from local city councils to federal organizations.

Question 4

What are the different types of government spending?

Answer 4

There are several different types of government spending, including the purchase and provision of goods and services, investments, and money transfers.

Question 5

What is government final consumption?

Answer 5

Government final consumption refers to the type of government spending involved in the creation and implementations of goods and services in a free market economy where not all basic needs are met by the private sector

Question 6

Give some examples of government final consumption.

Answer 6

Examples of government final consumption include the creation and maintenance of the military, police, emergency, and firefighting organizations, as well as programs such as health care, food stamps, and housing assistance for disabled or severely low-income citizens. Public education and public transportation infrastructure are also main categories.

Question 7

What is attributed to the rapid increase in Nigerian government spending since the 1970s?

Answer 7

The rapid increase in every category of Nigerian government spending since the 70s can primarily be attributed to the discovery of crude oil and the upsurge in the prices of crude petroleum.

Question 8

What are some reasons for the increase in government spending over time in most African countries?

Answer 8

Defence: Increased expenditures due to the need for a strong military, purchase of armaments, and wars/frictions

Population: Increasing population requires more amenities, schools, and hospitals

Development projects: Post-independence projects like airports and hospitals involve huge costs

Depreciation and devaluation of currency: This leads to higher prices of goods and services

Interest on debt: Increasing public debt and its servicing increase government expenditure
.

Question 9

How does the government finance its spending through rents, royalties, and profits?

Answer 9

This includes revenue from mining rights, rent from the use of government properties, profits from all government businesses, etc..

Question 10

How does taxation finance government spending?

Answer 10

The government finances its spending through various taxes levied on its citizens and corporate organizations.

Question 11

What are some examples of fines, fees, and special charges that finance government spending?

Answer 11

These include fines on defaulters, traffic offences, etc., and income derived from fees such as motor vehicle licenses, water rate, toll gate, etc.

Question 12

What are the different forms of loans used to finance government spending?

Answer 12

Short-term loans: Obtained through the sale of treasury bills and Certificates to the public

Medium and long-term loans: Include long term stocks sold also to the public

Foreign loans: Obtained from the International Monetary Fund, World Bank, Paris Club, etc.
.

Question 13

What was the prevailing belief about public spending until the 19th century?

Answer 13

Until the 19th century, laissez faire philosophies believed that money left in private hands could bring better returns, thus public spending was limited

Question 14

What was John Maynard Keynes’ argument regarding public spending in the 20th century?

Answer 14

John Maynard Keynes argued the role of public spending in determining levels of income and distribution in the economy.

Question 15

what does government spending (or government expenditure) include?

Answer 15

Government spending includes all government consumption and investment but excludes transfer payments.

Question 16

What do government final consumption expenditure and gross capital formation together constitute?

Answer 16

Together, they constitute one of the major components of gross domestic product

Question 17

What is government revenue?

Answer 17

Government revenue is the income available to fund the activities of a government. It is also defined as money received by a government and is an important tool of the fiscal policy.

Question 18

What are some responsibilities that government revenue funds?

Answer 18

Government revenue funds responsibilities such as operating various departments, maintaining armed forces, investing in development, and the alleviation of poverty.

Question 19

How do many governments directly tax citizens to generate revenue?

Answer 19

Many governments tax citizens directly, based on each household’s individual income

Question 20

What are some examples of indirect taxes that generate government revenue?

Answer 20

Examples of indirect taxes include those on government services, financial transactions, and commercial activities.

Question 21

What are some sources of revenue for governments with high-valued mineral deposits?

Answer 21

These governments rely primarily on natural resources and monopolize the extraction of these resources to generate income.

Question 22

What are some items that governments directly tax citizens on?

Answer 22

Governments directly tax citizens on items such as income, everyday purchases, and business profits.

Question 23

What are some sources of revenues earned by the government?

Answer 23

Sources include taxes levied on incomes and wealth accumulation of individuals and corporations and on goods and services produced, exported and imported, and non-taxable sources such as government-owned corporations’ incomes, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions.

Question 24

What is a tax?

Answer 24

A tax is a compulsory levy imposed by the government on individuals and business firms as it relates to incomes, consumption, and production of goods and services.

Question 25

Name some items on which taxes are levied.

Answer 25

Taxes are levied on personal income (salaries, business profits, interest income, dividends, royalties), company profits, petroleum profits, capital gains

Question 26

What are some reasons why governments levy taxes?

Answer 26

Revenue Generation: To raise money to finance government expenditure Re-distribute income: To achieve greater equality in wealth and income distribution Exercise Control of the Economy: To regulate inflation and deflation and achieve full employment Modifying the Influence of the Price System: By protecting infant industries and improving trade terms To Discourage ‘Certain’ Consumption: Imposing heavy taxes on socially undesirable goods Promote Economic Growth and Development: Granting tax holidays and concessions To Promote Balance of Payment: By imposing duties to restrict imports .

Question 27

What are the two main types of taxes?

Answer 27

The two main types of taxes are direct and indirect.

Question 28

What is a direct tax?

Answer 28

A direct tax is a tax levied directly on the incomes of individuals and business firms. The incidence of tax falls directly on the payer.

Question 29

Give examples of direct taxes.

Answer 29

Examples include income tax, corporation or company tax, property tax, capital gains tax, poll tax, estate duty, motor vehicle duties, stamp duties, land tax, mineral-rights duties, Petroleum income tax, and capital transfer tax.

Question 30

What is income tax?

Answer 30

Income tax is levied on individual’s incomes, usually at a standard rate, with personal allowances deducted before tax is levied on the taxable income. It is based on the Pay As You Earn (PAYE) system.

Question 31

What are the forms of direct taxes?

Answer 31

Forms of direct taxes include progressive tax, regressive tax, and proportional (neutral) tax.

Question 32

What is corporation or company tax?

Answer 32

This is a tax levied on the profit of the company after all expenses have been deducted. The incidence can sometimes be shifted to consumers

Question 33

What is a progressive tax?

Answer 33

In a progressive tax system, the tax rate increases as the size of income increases

Question 34

What is a regressive tax?

Answer 34

In a regressive tax system, the tax rate reduces as the size of income increase

Question 35

What is a proportional (neutral) tax?

Answer 35

A proportional tax has a constant rate, and the tax levied is proportional to the tax base or income.

Question 36

What are some advantages of direct taxes?

Answer 36

Advantages include high yield, convenience (PAYE), certainty, equity, and redistribution of income.

Question 37

What are some disadvantages of direct taxes?

Answer 37

Disadvantages include acting as a disincentive to work, encouraging tax avoidance, potentially reducing efficiency, repelling foreign capital, reducing plough back profits, and reducing savings.

Question 38

What are indirect taxes?

Answer 38

Indirect taxes are taxes levied on goods and services indirectly by the government, collected through intermediaries, and the burden is usually shifted to the consumer in the final price.

Question 39

What are the two types of indirect taxes mentioned?

Answer 39

The two types mentioned are specific (fixed sum) and ad valorem (percentage of value

Question 40

Give examples of taxes under indirect tax.

Answer 40

Examples include custom duties (export and import duties), excise duties, and purchase tax

Question 41

What are some advantages of indirect taxes?

Answer 41

Advantages include convenience for consumers, reducing the need for high direct taxes, certain and immediate yield (on inelastic goods), not disturbing initiative, being used to discourage consumption, and acting as an automatic stabilizer.

Question 42

What are some disadvantages of indirect taxes?

Answer 42

Disadvantages include double taxation, potentially discouraging domestic production, possibly creating inefficient industries, and potentially having an inflationary influence.

Question 43

What are some key differences between direct and indirect taxes?

Answer 43

Differences include: * Direct taxes on some groups are difficult to compute and collect, unlike indirect taxes The incidence of tax can be shifted more readily under indirect tax People are more sensitive to increases in direct taxes Indirect taxes are more effective as a fiscal tool Indirect taxes involve little administrative costs than direct fees .

Question 44

What are some attributes or principles of a good tax system?

Answer 44

Attributes include; economic principle (not worsening payer's situation), production of revenue (cost of collection < yield), certainty, equity, convenience, neutrality, adjustability/flexibility, not harming enterprise, consistency with government policy, and acceptability

Question 45

What is tax evasion?

Answer 45

Tax evasion is a deliberate attempt by a tax payer not to pay tax, which is a criminal act

Question 46

What is tax avoidance?

Answer 46

Tax avoidance is an intentional act of exploiting loopholes in tax regulations to pay lower tax

Question 47

What is tax incidence?

Answer 47

Tax incidence refers to the bearer of the burden of the tax.

Question 48

What is a budget?

Answer 48

A budget is a document that explicitly describes the spending decisions of the government vis-à-vis the projected revenue and the source. It is a financial statement of the sources and uses (i.e., Revenue and expenditure) of the government, and a financial plan of projected expenditures and revenues for a fiscal period.

Question 49

What is budget balance?

Answer 49

Budget balance is the difference between total government expenditure and government revenue (taxes). It can be written as T - G = 0 where T is revenue and G is expenditure.

Question 50

What are the four characteristics of a budget mentioned in the source?

Answer 50

The four characteristics are Equilibrium (balance between revenue and expenditures), Comprehensiveness (takes care of all facets of the economy), Unity (all fiscal operations are spelt out), and Periodicity (usually annual in Nigeria).

Question 51

What are the three types of budget balance a government can operate?

Answer 51

A government can operate a surplus budget (revenue > expenditure), a deficit budget (expenditure > revenue), or a balanced budget (revenue = expenditure)

Question 52

What is recurrent expenditure?

Answer 52

Recurrent expenditures are costs known as running costs that the government undertakes in its day-to-day activities, such as wages and salaries, national debt interest.

Question 53

What is recurrent revenue?

Answer 53

Recurrent revenues are receipts of monies from fines, taxes, fees, etc. by the government

Question 54

What is capital expenditure?

Answer 54

Capital expenditures are expenditures on capital projects such as the provision of hospitals, roads, defence, social and community services.

Question 55

What are capital receipts?

Answer 55

Capital receipts are loans, aids, grants, etc. made to the government by foreign governments or international organizations, or extended by other arms of government.

Question 56

What is a budget surplus?

Answer 56

A budget surplus is a situation in which income exceeds expenditures, commonly used for government financial situations (individuals refer to "savings").

Question 57

What is a budget deficit?

Answer 57

A budget deficit is a state of financial health in which expenditures exceed revenue, commonly used for government spending.

Question 58

What is a balanced budget?

Answer 58

A balanced budget is a situation in financial planning where total revenues are equal to or greater than total expenses.

Question 59

What are some ways countries can counter budget deficits?

Answer 59

Countries can counter budget deficits by promoting economic growth, reducing government spending, and increasing taxes.

Question 60

There are four characteristics of budget. They are:

Answer 60

i. Equilibrium: ii. Comprehensiveness: iii. Unity: iv. Periodicity: