Government sectors Flashcards
List what the public sector comprises of
Central govt
Local govt
Public companies
Central govt
Run by the prime minister and all the cabinet ministers
Local govt
Run by elected councilors (regional corporations)
Public companies
Owned by the govt. eg. The National Gas company of trinidad and tobago (NGC)
T and TEC - Trinidad and Tobago Electricity Commission
List the 2 types of govt sepnding
Current Expenditure
Capital Expenditure
Current Expenditures
This refers to day-to-day expenses
eg. salaries of civil servants, expenses on medicine for public hospitals, transfer payments
Capital Expenditures
This refers to govt investment for long term benefits eg. spending on highways, airports, pipelines
List reasons for govt spending
- To provide merit goods
- To provide public goods
- To redistribute income and wealth
- To control economic activities
To provide merit goods
If left to the market, there will be an underproduction of merit goods, hence the gov steps in, eg. education, medical facilities
To provide public goods
Public goods are non-excludable. Because of this, the govt has to provide them since private firms don’t want to because it is unprofitable
To redistribute income and wealth
Imposing progressive taxes will help reduce the gap between low income and high income groups. The govt may also have programs such as welfare assistance for the underprivileged people of society. In these countries, those in need of financial assistance receive it from the govt. Additionally, the govt may spend on projects that generate employment for the unemployed
eg. Unemployment Relief Program (URP)
To control economic activities
Govt spending has a wide impact on the economy since it affects employment, output, prices and the country’s national income. Hence, the govt can control the economy by manipulating its spending. This is called fiscal policy
