Please enable JavaScript.

Coggle requires JavaScript to display documents.

(GOVERNMENT's ROLE IN ECONOMY, TAXATION SYSTEM, LEVELS OF GOVERNMENT,…

- - - - expansionary
        
        Designed to reduce unemployment and stimulate/increase output
        
        Usually used to combat a recession.
        
        to avoid recessions becoming depressions
        
        Government reduces taxes
        
        Government increases its spending
      - contractionary
        
        Designed to stabilize prices and reduce output
        
        Usually used to combat an inflation
        
        to avoid expansions becoming inflationary
        
        Government increases taxes
        
        Government decreases its spending
      - countercyclical / stabilization
      - LIMITATION
        
        Decision Lag
        Period that passes while an appropriate response is formulated and implemented
        
        Recognition Lag
        Amount of time it takes policy makers to realize a policy is needed
        
        Impact Lag
        The time that elapses between implementing the policy and its having an effect on the economy
    - - Contractionary
        
        When inflation is occuring (expansion), you must decrease money supply
        
        When the central bank sells bonds to commercial banks, it reduces cash reserves and decreases money supply
      - Expansionary
        
        In a recession (contraction), increase money supply
        
        When the central bank buy bonds from commercial banks, it increases cash reserves (시중에 있는 현금) and increases money supply
      - TOOLS for Monetary Policy
        
        OMO -- Open Market Operations
        
        Is the buying and selling of bonds by the central bank (Bank Negara)
        
        DR - Discount rate
        
        RRR -- Reserve Ratio Requirement
        
        The reserve requirement (or cash reserve ratio) sets the minimum amount of reserves (cash) that must be held by a commercial bank.
  - - - When Government spends more than it earns, Spending > Revenue
    - - When Government earns more than it spends, Revenue > Spending
  - - - Income tax
      - Corporate Tax
      - Property Tax
      - capital gains tax
    - - Import duties
        
        duty (indirect tax) is paid by the importing business of a good when it enters the country (pays to the government)
        
        cost of the duty is typically hidden in the price that the consumer pays.
      - excise tax / sin tax
        
        ex. cigarettes, alcohol, gambling
        
        IN ORDER TO reduce the amount they are used
      - Sales tax
      - value added tax (VAT)
      - goods and services tax (GST)