macro econs (pink book) policies

Question 1

Fiscal policy definition

Answer 1

deliberate management of government spending and taxation designed to influence the level of economic activity to achieve the economic goals of the government

govt changes the level/type of taxes, the extent and composition of spending and the degree and form of government borrowing to achieve the econ goals

Question 2

micro goals

Answer 2

to achieve a more efficient allocation of resources
to achieve a more equitable distribution of income

Question 3

Sources of tax

Answer 3

1. taxation
   - compulsory payments made by individuals or firms in the private sector to the government without any services rendered in return
   - transfer of funds from the private sector to the govt
2. sale of goods and services
   - state enterprises: fees from postal, telecommunication, public utilities, etc
   - sale of govt bonds
   - licence fees and fines (eg. marriage licence, hawker licence, fines, etc.)

Question 4

Types of tax

Answer 4

1. Direct taxes
   - tax on income/wealth and paid directly to the tax department
   - burden of such taxes borne by the person/company paying the taxes
   - impact and incidence of direct taxes are usually on the same party and is not easily shifted
   - in sg, it is the personal income tax and corporate tax (affects the after tax profits and hence the willingness and ability of firms to acquire more fixed capital assets including machines)
2. Indirect taxes
   - tax on expenditure or production of goods and services
   - though the producer is legally liable to pay the taxes, it is often the consumer who bears part of the burden of the tax
   - impact and incidence of indirect tax may not be the same (depends on PED/PES)
   - in sg, it is GST (affects COP and GPL)