Budget

What are the macro economic effects of the calculate design Movements and shifts of the curve 7. Conclusion 9 8. References O 5. 2 . 6. 2 The first farewell of the assignment discusses the economic tenets and criteria for a assessing a good cypher suggestion for any country. Section 3 discusses macroeconomic objectives of a budget, region of political science and how it intervenes, tools available to disposal and the practical considerations (lags in the effects of fiscal policy) The next part of the assignment the team selected the 2009 South African budget device and listed all revenue and expenditure proposal 2.What is a budget proposal Bedpan describes a budget as a blueprint for the nation, expressing the objectives and aspirations for the present and future for by the party in power. Mohr describes the budget is an instrument of the fiscal policy and determines the level and composition of giving medication spending(G) and appraiseation(T). The Keynesian school of t hought proposes that fiscal policy to be the most instrumental policy to make up ones mind total spending or aggregate demand (AD).He lists the four functions of the budget as Used to patch up priorities Serves to estimate specific public programmed, reviewing the states activities annually used to increase economic growth and impact on development A system of accountability and controls over government officials and agencies, setting limits on their activities and safeguarding against corruption pliant four groups of people involved in the national budget of South Africa and their roles in brief with wish to the budget are listed in the table below The cabinet Controls the most critical decisions on the tryst of public funds Civil servants Play put uping roles by providing information to politicians responsible for decision do Members of parliamentActs as the defender of the public interest through its constitutional right to question reasons and feasibility Of all(prenom inal) aspect Of the budget The public Through organizations like Noose, interest groups, community based organizations and other bodies yield the voice of all members not directly involved in the budget process 3. Assessing government budget proposal 3. 1 Economic principles and criteria of good budgets The first step in determining economic principle and criteria for good budgets involves identifying what the budget proposal should achieve in terms of macroeconomic objectives. Mohr et al lists the following as the main macroeconomic objectives that can be used to judge a good performance of the sparing Economic growth Full employment Price stability Balance of giftments (or external stability) Equitable statistical distribution of income Efficiency T.Manuel in delivering his 2009 South African figure speech , emphasized the following five principles defend the poor Sustaining employment growth and expanding training opportunities Building economic capacity and promoting invest ment Addressing the barriers to competitiveness that limit an equitable sharing of opportunities And maintaining a sustainable debt level that would not constrain our development tomorrow Mohr recognizes that the unblock market system allocates resources in the best possible way. However he also acknowledges that at generation market failure occurs where the market system does not achieve efficient allocation Of resources.The market systems failures occurs in the following cases Monopoly and imperfect competition Public goods Externalities Asymmetric information Common property resources Moors summary of governments role is summarized on the table below Role Aim Allocation function Correcting market failure and achieving a more efficient allocation of resources Distributive function Achieving more acceptable distribution of income Stabilization Promoting macroeconomic stability 3. 2. 1 How does government intervene The table below shows the five intervention options and examples o f each that the government can use to achieve the above roles Intervention Examples Public provision of goods and services through willpower or financing National Defense, hospitals, Eskimo, prisons Becoming a market participant Through price stability, income redistribution, politics spendingTransfer kick inments to change income distribution Taxation Personal Income Tax Regulation Labor laws, competition policy, anti-tobacco laws 3. Practical considerations Lags in the effects of fiscal policy Recognition lags Implementation lags Response lags (603,608) Therefore a good budget takes into cognoscente the macroeconomic objectives, address issues relating to market failures and takes steps address the needs of society and the scarce available resources. A good budget should also take into considerations the effects of lags in typefaces policy. 4. 2009 South African Budget proposal The group selected the 2009 South African Budget proposal. The budget speech was delivered by the Fin ance minister Mr.. misgiving Manuel on the 1 lath February 2009.The table below is a list the budget revenue and expenditure proposals Budget revenue proposals Budget expenditure proposals Taxes on income and profits Source National Treasury 2009 Budget check over Statistical Table 2 and Table 3 5. Theory on economic principle of uprightness As stated in the preceding section, tax is one Of the instrumental tool available to government to achieve its roles of allocation and distributive unctions mainly through taxation. The criteria for a good tax proposal is that it must meet the following conditions Neutrality Equity Administrative simplicity We now focus our attention and evaluate tax relief with reference to the criteria of equity.Case and Fair refers to equity as fairness. Under this principle tax loading is distributed fairly. Two theories of equity or fairness exists. These are 15, 16, 17 Benefits-received principles Ability-to pay principle 381 Under the benefits-recei ved principle, taxpayers should change to overborne in proportion to the benefits they receive from public expenditures. This theory of fairness does not receive popular support as it is not possible to determine the value that taxpayers receive from public expenditures. The other theory of taxation, ability-to pay principle states that taxpayers should bear tax burdens in line with their ability to pay taxes. 5. 1.Discuss vertical and horizontal equity. 17 In terms of tax revenue collected by government, horizontal equity relates to the concept of tax neutrality. It defines that the tax system should not criminate between similar things or people, or unduly strain behavior . Len other words, the people with a similar ability to pay taxes should pay the same or similar amounts. Vertical equity usually refers to the idea that people with a greater ability to pay taxes should pay more. However, to those that believe in a flat tax, the idea of vertical equity could mean that the loa ded should not be punished for their success by paying higher taxes than others.