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Economics G12 > Public Sector > Flashcards

Public Sector Flashcards

1
Q

What is the composition of the government

A

Central Level
Provincial
Local
Public Corporations

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2
Q

What are three necessities of the public sector

A

Supply Public goods
To conserve resources
Manage the economy

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3
Q

What are the 5 objectives of the government

A

Ensure job creation
Price stability
Economic growth
Stability of the exchange rate
Economic equity

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4
Q

What are the 6 problems of public sector provisioning

A

Accountability
Efficiency
Assessing of needs
Pricing policy
Semi state enterprises
Privatisation

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5
Q

What is the problem of accountability

A

State enterprises are not directly accountable to taxpayers
State officials do not always act on behalf of the public and may act in their own interest

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6
Q

Why is Assessing of needs an issue

A

It is difficult for government enterprises to determine the needs of the population - This is why public goods and services are sometimes over or under supplied

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7
Q

What is the issue with pricing policy

A

The state does not operate within the market system of supply and demand
Prices can be overvalued or undervalued

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8
Q

What are the 3 issues with Semi State Enterprises

A

May become monopolies
Can face large losses and place a burden on the government
Some function inefficiently which can harm the economy

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9
Q

What is privatisation

A

The transfer of functions, activities and ownership from the public sector to the private sector

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10
Q

What are the 4 aims of privatisation

A

Reduce the relative size of the public sector
Stimulate the growth of the private sector
Improve overall efficiency and performance of the economy
Broadan the economic base of the economy so that tax levels can be reduced

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11
Q

What are the 7 advantages of privatisation

A

Provide additional funds to the government
Broaden the tax base and increase government income
Improve the efficiency of the economy
Attract foreign investment
Reduce pressure on government’s budget
Promote BEE
Reduce personal income tax and government debt

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12
Q

What are the 3 disadvantages of privatisation

A

Public monopolies are replaced by private ones
People lose jobs
Ownership of assets are transferred

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13
Q

What is nationalisation

A

The opposite of privatisation - Transfers from private sector to public

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14
Q

What is regulation

A

Deliberate actions to put laws, regulations and prescriptions in place to regulate economic activities

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15
Q

What is deregulation

A

The deliberate action by government to remove all unnecessary restrictions

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16
Q

What are the 5 macro-economic objectives of the government

A

Economic Growth
Full Employment
Exchange Rate Stability
Price Stability
Economic Justice

17
Q

Read through descriptions of Macro-Economic objectives

A
18
Q

What is the budget

A

A document with expected income and projected expenditures

19
Q

What is the financial year of the government

A

1 April to 31 March

20
Q

What is the main source of income for the government

A

Income Tax

21
Q

What is the importance of the budget

A

Long Term planning - Departments need to know the extent of their future involvement
Dominant role of the government - Certain sectors need to know in advance to adapt capacity

22
Q

What are the 3 considerations when setting up the budget

A

Financial - Whether taxes will be increased or decreased
Economic - Needs to know requirements of economy. Taxes and spending must meet these
Political - Political parties use budget to implement their policy

23
Q

What are the 3 different types of budgets

A

Medium Term Budget Policy Statements - Delivered at end of October. Any changes that occurred since February
Medium Term Expenditure Framework - 3-year rolling expenditure and revenue projections
Conditional Grants - To promote spending on National Priorities

24
Q

What are the 3 rules that apply to Discretion

A

Deficit Rule - Shortages on the budget should not be more than 3% of GDP
Borrowing Rule - Borrowing must only be used for capital expenditure. Current expenditure should be financed by current income
Debt Rule - Public debt and guarantees should not exceed 60% of nominal GDP

25
Q

What is Fiscal Policy

A

Any attempt by the state to influence the economy with changes in government expenditure and taxes to achieve economic and social goals

26
Q

What are the 3 characteristics of Fiscal Policy

A

It is goal bound
It is demand biased
It is cyclical

27
Q

What are the 2 instruments of fiscal policy

A

Taxation and government spending

28
Q

What are the 2 formats of government spending

A

Functional
Economic

29
Q

What are the 7 reasons for governments imposing tax

A

Raise income to cover expenditure
Discourage the use of demerit goods
Convert external cost into private cost
Prevent pollution
Discourage imports
Redistribute income
Influence the level of aggregate supply and demand

30
Q

How does the government go about maintaining balance in the budget

A

Deficit - Loans are made to balance
Surplus - Money is used to pay off state debt

31
Q

What are the 3 types of taxation

A

Progressive - Higher income groups pay more than lower
Regressive - Lower income groups pay more than higher
Proportional - Everybody pays the same rate. Spending on social goods supplement the income of poor more

32
Q

How does taxation serve as a disincentive

A

Direct taxation reduces incentive to work, save, invest and take risk
High and progressive income tax rates discourage people to enter the labour market, accept promotions and work long hours

33
Q

Look at Laffer curve pg 43 and reasons pg 44

A
34
Q

What is public sector failure

A

When the public sector fails to manage an economy and the resources under its control optimally

35
Q

What are the key features of ineffectiveness when the public sector fails

A

Missing targets
Incompetence in using monetary and fiscal policy

36
Q

What are the inefficiencies of public sector failure

A

Wasting resources

37
Q

What are the 7 reasons for public sector failure

A

Management failures
Apathy
Lack of motivation
Bureaucracy
Politicians
Serious structural weaknesses in the economy / Privatisation
Special interest groups

38
Q

What are the 4 effects of public sector failure

A

Allocation of resources
Economic Instability
Distribution of income
Social Instability

39
Q

READ THROUGH PAGE 45!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

A

Economics G12 (14 decks)

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