Role of Government in an Economy

Question 1

outline the

responsibilities of
government in an economy

Answer 1

Responsibilities of government in an economy:

(a) security of the State;

(b) protection and general welfare of citizens;

(c) job security and severance benefits to workers;

(d) protection of the environment;

(e) maintenance of a safe environment for investors; and,

(f) regulation of business activity in terms of providing clear guidelines as how to set up businesses.

Question 2

describe how government can

influence businesses to protect the
enviro

how government can influence businesses to protect the
environment

Answer 2

Policy or legislation on:

(a) green technology;

(b) reforestation;

(c) proper disposal of waste;

(d) zoning laws; and,

(e) the appropriate use of technology in
production and disposal of wastes.

Question 3

state the

purposes of taxation

Answer 3

Reasons why government charge taxes:

(a) to curb inflation by reducing the supply of money in the economy;

(b) to remove competition from local goods in order to protect infant or fledgling industries by taxing imports at high rates;

c) to lower employment by encouraging persons to buy local produce thus encouraging linkages among sectors;

(d) to achieve greater equality in the distribution of wealth and income by taxing the higher income earners so as to provide social services for the majority of citizens.

Question 4

distinguish between

direct and indirect taxes

Answer 4

Direct taxes refer to those
* taxes where the burden of the taxes and the payments of them fall on the same individual.
* This type of tax is usually applied to income and capital and is
paid by individuals. Examples of direct taxes:

(i) Income tax.

(ii) Corporation tax.

(iii) Capital gains tax.

(iv) Capital transfer tax.

Question 5

distinguish between

direct and indirect taxes

Answer 5

Indirect taxes refer to
* taxes where the burden and payment of the taxes fall on different individuals.
* This type of taxes is levied on goods and services and is usually paid by the manufacturers or importers.
Examples of indirect taxes:

(i) Custom duty.

(ii) Excise duty.

(iii) Purchase tax.

(iv) Stamp duty.

(v) Consumption tax such as GCT, SCT, and Value-Added Tax (VAT)

Question 6

describe the

forms of assistance offered by government to
businesses

Answer 6

Forms of government assistance includes:

(a) lending capital and technical assistance;

(b) training and human resource development;

(c) research and information centres;

(d) subsidies and grants.

Question 7

discuss the

social services provided by government

Answer 7

Social services provided by government:

(a) healthcare;

(b) national insurance;

(c) education;

(d) roads and transportation.