Hardest Things Flashcards
Crowding out
Crowding out refers to the negative impact that government spending can have on private investment.
The theory of crowding out suggests that when the government increases its spending, it will increase the demand for goods and services,
which can lead to higher interest rates and inflation.
This, in turn, can make borrowing more expensive for private investors
reducing their ability to invest in new projects and businesses.
As a result, private investment may decrease or “crowd out” as the government spending increases.
Why is transfer pricing controversial
It can be used to manipulate taxable income and avoid paying taxes
Allows a multinational company to charge a price or fee for its goods or services to another part of the same company
Leads to profits being shifted to countries with lower corporation taxes
What is the trickle down effect
If high income earners gain an increase in salary, then everyone in the economy will benefit as their increased income and wealth filter through to all sections in society.
Austerity measures
Strict economic policies implemented by a gov to reduce gov spending and public debt
Improve the financial health of the gov
Golden rule
The government should borrow only to invest, not to fund current spending .
Gov borrowing should make investments for long term benefits
Current spending should be funded by tax revenues
MNC?
Multinational corporation
A company that has business operations in at least one country other than its home country
How do economic growth and development differ
Economic growth means an increase in real national income / national output. Economic development means an improvement in the quality of life and living standards, e.g. measures of literacy, life-expectancy and health care. Ceteris paribus, we would expect economic growth to enable more economic development.
