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Halah Ka Flashcards

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1
Q

is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government
institutions. This guide provides an overview of how public finances are managed, the various components of public finance, and how to understand what all the numbers mean easily. A country’s financial position can be evaluated much
like a business’ financial statements.

A

Public finance

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2
Q

is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government
institutions. This guide provides an overview of how public finances are managed, the various components of public finance, and how to understand what all the numbers mean easily. A country’s financial position can be evaluated much
like a business’ financial statements.

A

Public finance

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3
Q

is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government
institutions. This guide provides an overview of how public finances are managed, the various components of public finance, and how to understand what all the numbers mean easily. A country’s financial position can be evaluated much
like a business’ financial statements.

A

Public finance

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4
Q

is the main revenue source for governments. Examples of taxes collected by governments include sales tax, income tax (a type of progressive tax), estate tax, and property tax. Other types of revenue in this category include duties and tariffs on imports and revenue
from any type of public services that are not free.

A

Tax collection

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5
Q

is the main revenue source for governments. Examples of taxes collected by governments include sales tax, income tax (a type of progressive tax), estate tax, and property tax. Other types of revenue in this category include duties and tariffs on imports and revenue
from any type of public services that are not free.

A

Tax collection

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6
Q

budget

A

is a plan of what the government intends to have as expenditures in a fiscal year.

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7
Q

are everything that a government actually spends money on, such as social programs, education, and infrastructure. Much of the government’s spending is a form of income or wealth redistribution, which is aimed at benefiting society as a whole. The actual expenditures may be greater than or less than the budget.

A

Expenditures

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8
Q

If the government spends more then it collects in revenue there is a deficit in that year. If the
government has less expenditures than it collects in taxes, there is a surplus.

A

Deficit/Surplus

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9
Q

If the government has a deficit (spending is greater than revenue), it will fund the difference by
borrowing money and issuing national debt. The U.S. Treasury is responsible for issuing debt, and when there is a deficit, the Office of Debt Management (ODM) will make the decision to sell government
securities to investors.

A

National Debt

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10
Q

This is a source of cash for
the government.

A

Total government revenue or tax collection

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11
Q

are a use of cash, and to the extent that they are greater than revenue, there is a deficit.
The difference between revenue and expenditures is the deficit (or surplus) funded by the national debt.

A

Expenditures

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12
Q

a list of some of the most common revenues and expenditures in the world of public finance.

A

Revenue / Taxes
Income tax (personal, corporate)
Property tax
Sales tax
Value added tax (VAT)
Import duties
Estate tax

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13
Q

List of Expenses

A

Health care
Employment Insurance
Pensions
Education
Defense (military)
Infrastructure

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14
Q

is a branch of economics that focuses on the role of government in the economy. It deals
with how the government raises revenue (through taxation and other means) and allocates spending to
influence the distribution of resources, address inequalities, and ensure economic stability. is essential for the functioning of modern economies, especially in promoting public goods, managing externalities, and stabilizing the economy through fiscal policy.

A

Public finance

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15
Q

Why it Matters: ensures that resources are used efficiently
to meet the needs of the population and support sustainable economic growth.

A

Effective public finance management

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16
Q

This includes all sources of income that the government collects,
primarily through taxes (income tax, sales tax, property tax, etc.) and non-tax revenue (fees,fines, and profits from government-owned enterprises).

A

Government Revenue

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17
Q

When government spending exceeds revenue, it borrows to cover the deficit, leading to public debt. Managing this debt sustainably is a critical part of public finance.

A

Public Debt

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18
Q

The use of government spending and tax policies to influence economic conditions,
including aggregate demand, employment, inflation, and economic growth.

A

Fiscal Policy:

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19
Q

The use of government spending and tax policies to influence economic conditions,
including aggregate demand, employment, inflation, and economic growth.

A

Fiscal Policy

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20
Q

represents how money, goods, services, and resources move throughan economy. It illustrates the interactions between households and firms, and in more complex models, the government and foreign sector.

A

The circular flow model

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21
Q

Basic components of circular flow model

A

Households: Supply factors of production (labor, capital, land) and receive income.
Firms: Produce goods and services, pay households income for factors of production.
Government: (in expanded models) Collects taxes and provides public goods.
Foreign Sector: (in open models) Includes exports and imports.

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22
Q

Basic components of circular flow model

A

Households: Supply factors of production (labor, capital, land) and receive income.
Firms: Produce goods and services, pay households income for factors of production.
Government: (in expanded models) Collects taxes and provides public goods.
Foreign Sector: (in open models) Includes exports and imports.

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23
Q

Where goods and services are sold by firms and bought by households.

A

Product Market:

24
Q

Where factors of production (land, labor, capital) are sold by
households and bought by firms.

A

Factor Market (Resource Market)

25
Q

Where factors of production (land, labor, capital) are sold by
households and bought by firms.

A

Factor Market (Resource Market)

26
Q

Households receive income by selling their labor and resources in the factor market.

A

Income

27
Q

Households spend this income in the product market to buy goods and services from
firms.

A

Spending

28
Q

Firms use the money earned from households to pay for the factors of
production.

A

Firm Revenues

29
Q

One of the most common roles of the state in the economy is as a regulator. Governments create and
enforce laws that govern economic activity, from business practices to labor relations and environmental
standards. The goal of regulation is often to correct market failures, promote fair competition, and
protect public welfare. For example, anti-monopoly laws prevent the creation of monopolies that can
lead to higher prices and stifled innovation. Environmental regulations ensure that companies do not exploit natural resources at the expense of future generations.
In addition, states regulate financial markets to ensure stability and to prevent crises like the 2008 global
financial meltdown. Through regulatory bodies such as central banks, governments control monetary policy by adjusting interest rates and influencing money supply. By doing so, they attempt to control
inflation, reduce unemployment, and maintain overall economic stability.

A

Regulatory Role

30
Q

Governments collect taxes and allocate resources through public spending to reduce income inequality and provide
basic services such as healthcare, education, and social security. Progressive taxation, where higher
earners pay a larger proportion of their income in taxes, is often used to fund welfare programs aimed at
reducing poverty and addressing social disparities. is not only an economic function but also a political and social one. It can
help maintain social order by ensuring that marginalized or less fortunate populations are supported
through unemployment benefits, pensions, or housing programs. This role is most pronounced in
welfare states, where the government assumes a significant responsibility in providing for its citizens’ well-being.

A

Redistribution of Wealth

31
Q

In some economies, the state goes beyond regulation and redistribution to actively participate in production and ownership of key industries. This is particularly true in socialist or command economies,
where the government owns and controls large portions of the economy, such as energy, transportation, and healthcare sectors. In these models, the state is seen as a means of organizing economic activity in a way that prioritizes social welfare over private profit.

A

Direct Involvement in Production

32
Q

is the process through which government-owned businesses, assets, or services are
transferred to private ownership and control. This can include the sale of public enterprises, contracting
out government services to private companies, or deregulating industries to encourage private sector participation. is often to improve efficiency, reduce government expenditure, and
increase competitiveness in the economy.

A

Privatization

33
Q

Methods of Privatization

A

Public Offering or Stock Market Sale.
Private sale or Auction
Public-Private Partnerships (PPP)
Management or Employee buyouts

34
Q

This method involves selling shares of a state-owned company to private investors via a stock market. This
approach is often used for large, profitable enterprises like utilities or telecommunications companies. The
government may sell a portion of the company while retaining some ownership, or it may fully divest its
stake.
Example: The privatization of British Telecom (BT) in the 1980s under Prime Minister Margaret Thatcher is
a famous case where the government sold shares of the state-owned telecom company to the public through the stock market.

A

Public Offering or Stock Market Sale

35
Q

In a private sale, the government sells a state-owned enterprise directly to one or more private investors, often through an auction process. This method is typically used for smaller or less profitable enterprises where a public offering might not generate enough interest.
Example: The sale of state-owned steel companies or airlines to private investors is a common form of this
method, often negotiated with specific corporations or private equity groups.

A

Private Sale or Auction

36
Q

In a PPP, the government retains ownership of the asset but allows private firms to manage and operate
it under a long-term contract. This is common in infrastructure projects, such as highways, airports, or
hospitals, where the government lacks the capital or expertise to manage the project alone.
Example: In many countries, toll roads are often built and operated by private companies under a PPP
model, while ownership remains with the state.

A

Public-Private Partnerships (PPP)

37
Q

In this method, the management team or employees of a state-owned enterprise purchase the company.
This is often facilitated by government loans or subsidies to allow the employees to take control of the enterprise.
Example: In some Eastern European countries during the 1990s, employees of previously state-owned
firms were given the opportunity to buy shares in the company during the transition from a centrally
planned to a market economy.

A

Management or Employee Buyouts

38
Q

While not strictly selling state assets, privatization can also involve deregulating industries that were
previously state-controlled, allowing private companies to enter and compete. This form of privatization
is common in sectors like telecommunications, energy, and air transport, where the government reduces its monopoly power and encourages private participation.
Example: The deregulation of the airline industry in the United States in the late 1970s allowed private
companies to compete more freely, leading to lower prices and more choices for consumers.

A

Liberalization and Deregulation

39
Q

While not strictly selling state assets, privatization can also involve deregulating industries that were
previously state-controlled, allowing private companies to enter and compete. This form of privatization
is common in sectors like telecommunications, energy, and air transport, where the government reduces its monopoly power and encourages private participation.
Example: The deregulation of the airline industry in the United States in the late 1970s allowed private
companies to compete more freely, leading to lower prices and more choices for consumers.

A

Liberalization and Deregulation

40
Q

Rationale for Privatization
Governments choose to privatize for several reasons, including:

A

Efficiency
Reducing Government Debt and Expenditure
Attracting Investment and Innovation
Fostering Competition

41
Q

Private companies are generally perceived to be more efficient than government entities due to market
competition and profit incentives. By privatizing, governments hope to reduce inefficiencies, increase
productivity, and offer better services to the public.

A

Efficiency

42
Q

Privatization can provide governments with immediate revenue through the sale of state-owned assets,
which can help reduce budget deficits or fund other public services. It can also reduce the financial burden on the government, as private companies take over the costs of maintaining and operating these businesses.

A

Reducing Government Debt and Expenditure

43
Q

Privatized companies often have better access to capital markets and are more incentivized to innovate
and improve their services. This can lead to more investment in industries such as telecommunications,
energy, and transportation, which are critical to national economic growth.
d. Fostering Competition

A

Attracting Investment and Innovation

44
Q

By privatizing sectors that were previously dominated by government monopolies, privatization encourages competition. This competition can lead to lower prices, improved services, and more consumer choice.

A

Fostering Competition

45
Q

Positive Impacts

A

Improved Efficiency
Increased Investment:
Reduced Fiscal Burden
Market Competition:

46
Q

Negative Impacts

A

Job Losses
Inequality
Loss of Public Control
Monopolies
Impact on Quality of Services

47
Q

this is a positive impact where Private companies are typically more profit-driven and efficient, leading to better resource allocation and improved service quality.

A

Improved Efficiency

48
Q

Privatization can attract private capital and expertise, particularly in sectors that require significant infrastructure development.

A

Increased Investment

49
Q

Governments can reduce their debt and budget deficits by selling state-
owned assets and by eliminating the need to subsidize unprofitable state enterprises.

A

Reduced Fiscal Burden:

50
Q

In sectors where privatization fosters competition, consumers benefit from
lower prices, better service, and more options.

A

Market Competition

51
Q

Privatization can lead to layoffs as private firms often streamline operations to increase
efficiency. This can result in significant social and political backlash, particularly in industries that employ large numbers of people.

A

Job Losses

52
Q

If privatization is not properly managed, it can exacerbate inequality by benefitting wealthy investors or corporations at the expense of the general public. For example, basic services
like water, electricity, or healthcare might become more expensive or less accessible to low-income households.

A

Inequality

53
Q

Some argue that certain sectors-such as healthcare, education, or essential utilities-are too important to be left to the private sector, as private companies may prioritize profit over public interest. This can lead to reduced service quality or higher costs for essential services.

A

Loss of Public Control

54
Q

If privatization is not accompanied by adequate regulation, it can create private monopolies, where a single company dominates the market. This can lead to higher prices and reduced service quality, essentially replicating the problems of state-owned monopolies under private ownership.

A

Monopolies

55
Q

In sectors like healthcare, education, and utilities, there is concern that privatization may lead to a decline
in the quality of services if private companies prioritize cost-cutting and profit maximization. In these cases,
governments often need to regulate or contractually oblige private companies to maintain certain
standards.

A

Impact on Quality of Services

Public Finance (1 decks)

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