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inflation, b) deflation c) recession d) economic stagnation
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What is the role of deficit financing on economic growth?
Deficit financingDeficit financing is the practice of a network or channel paying the studio that creates a show a license fee in exchange for the right to air the show. A major broadcast network will ask a program producer to share in the financial risk when considering adopting a new program to its schedule; at least for the first season of the series. The deficit is essentially the network not paying the full total of the cost to create a pilot program or of the cost of creating episodes of a new program. Deficit financing also helps to minimize the substantial risks and costs of developing programs for the networks and gives studios initial benefits as well. The studio bears the difference between production costs and licensing fees, but recoups significantly more money if the show is sold in syndication. If the network orders enough episodes of a show, the studio can then sell the series to other markets. Deficit financing minimizes risks and costs of developing programs for networks. [6]The impact of deficit financing on pricesIndia resorted to deficit financing, then largely financed through Reserve Bank's books either by printing more money or use of its foreign exchange reserves, right from the early years of planned economic development. However, our planners did not factor in the impact of deficit financing on inflation. But with large foreign exchange reserves, they were confident of the government's ability to manage the supply-side of the economy.For much of the 1950s, the Bank was part of this consensus. Although the impact of deficit financing on prices had aroused concern already in 1951-52 , price stability did not return as a major cause of worry at the Bank until the mid-50 s. Besides, the Bank recognised the need for any plan to go beyond what available resources dictated, even if some part of the additional investment had to be financed through additions to money supply.Ironically, despite the first plan document, highlighting the important role of the central bank, the Reserve Bank also took a rather modest and self-effacing view about its own part in the planning process during these years, insisting that while it was entitled to be consulted by the government regarding the dimensions of the plan effort, the final decisions rested with the latter.One of the volumes of RBI's history notes that the central bank was not given sufficient time to consider the first Five-Year Plan, the plan document arriving in Bombay only towards the close of October 1952. Any contribution the Bank made to the first plan document appears to have been cosmetic , rather than substantial, with the Governor B Rama Rau, for instance, choosing merely to object to the plan document's suggestion that 'real democracy' implied the 'equality of incomes' .But in the mid-50 s, the central bank started warning the government about the impact of deficit financing on inflation. In the last 15 years, with India adopting a more market-driven approach todevelopment, and even the concept of deficit now not including monetisation, the central bank still continues to warn the government over the dangers of high fiscal deficit on the conduct of monetary policy.Government deficits: good or bad? Whether government deficits are good or bad cannot be decided without examining the specifics. Just as with borrowing by individuals or businesses, it can be good or bad. If the government borrows (runs a deficit) to deal with a severe recession (or depression), to help self-defense, or spends on public investment (in infrastructure, education, basic research, or public health), the vast majority of economists would agree that the deficit is bearable, beneficial, and even necessary. If, on the other hand, the deficit finances wasteful expenditure or current consumption, most would recommend tax cuts to stimulate private investment, transfer cuts, and/or cuts in government purchases to balance the budget.DEFICIT FINANCING AND DEVELOPING COUNTRIES :-In the developing countries capital resources are inadequate for financing the economic development. The rate of taxes can not be increased because the rate of saving and consumption will fall. The rate of saving is already very low in the less developing countries due to low per capita income. So government adopts the deficit financing policy to break the vicious circle of poverty. The main reasons for using this policy are as under :1. To Cover the Gap :-When the Govt. is unable to fill the gap between the total receipts and total expenditure by imposing taxes then Govt. adopts the policy of deficit financing. By adopting this way Govt. can avoid the displeasure of the people.2. Low Savings :-In the under developed countries normally rate of savings is 10% to 14% of the GNP which is very low. As such the Govt. of these countries is compelled to use this policy as an instruments for economic development.3. Rapid Growth of Population :-In the less developed countries population growth is very high. To met the needs of the people and to speed up the economic development Govt. is using the deficit financing policy.4. Lack of Banking Facilities :-Savings are mobilized by the financing institutions. But in the underdeveloped countries there is a shortage of these institutions particularly in rural areas. So resources are not mobilized to the desired extent and Govt. is helpless to use this policy.ADVANTAGES OF DEFICIT FINANCING :-Following are the important advantages of deficit financing :1. High level of employment is ensured by the policy of deficit financing.2. Utilized and underutilized resources can be build up with the help of this policy.3. Additional resources can be mobilized for the economic development by using this policy.4. Social and economic over heads can be build up by adopting the policy of deficit financing.EFFECTS OF DEFICIT FINANCING :-When the government expenditure financed by the created money, it leads to inflation in the country. The classical economists say that in a capitalistic economy there is always a tendency for the economy to operate at the level of full employment.When there is full employment and we use this policy the inflation rate will rise.But Prof. Keynes is not agree with them. He says that "When there is large scale of unemployment and the resources of the country are not being fully utilized deficit financing policy is very helpful in improving the economic condition without inflation."Today this policy is commonly used in the all countries. The poor countries are using this policy to utilize their unemployed resources. These countries are using the deficit financing for the construction of roads, railways, canals and factories.There is a time gap between the pumping of money into the hands of the people and the establishment of scheme of development.If the extra demand is increased due to the created money, is matched by the extra supply of goods then prices will not rise. If the time period between input and output is long the prices will rise for the particular time period and economy will face the inflationary pressure. On the other hand if the time is shorter between the consumption and completion of development schemes, then inflationary pressure will be slow.One thing should be noted that the relation between prices and created money may be different. A 100% rise in the money supply may create only 10% rise in the price of the commodity.The rising of prices due to the deficit financing depends upon various factors such as time period, consumption, savings and habits of the people.For example if people hold or save all the created money then there will be no inflationary pressure.HOW TO REDUCE THE INFLATIONARY PRESSURE OF DEFICIT FINANCING :-Deficit financing is very useful weapon for ensuring the high level of employment in the advanced countries. They increase the effective demand and adopt various measures to reduce the inflationary pressure. Following are the important measures which can be adopted to control inflation :1. Formulation of Import and Export Policy :-A country should frame its import and export policy in such a manner that the supply of an essential goods may not fall.2. Proper Allocation Of Resources :-The rise in price due to deficit financing can be controlled by proper allocation of resources. Developing countries should prepare effective plans and resources of the country may not be wasted in unproductive projects.3. Fiscal Policy :-The inflationary pressure can be controlled, if a government increases the rate of taxes on luxuries and introduces the compulsory saving schemes.4. Monetary Policy :-An effective monitory policy can be adopted to reduce the inflationary pressure. Most of developing countries are also using these weapons against the inflationary pressure to reduce the inflation.5. Supply of Commodities :-Inflationary pressure can be controlled by providing the basic goods to the consumer at fixed rates through the utility stores.
What is the economic effect that results from the government running a budget deficit?
Demand increases, pushing producers to increase supply. (Old answer, by earlier user) A budget deficit put simply means, the government is or has been spending beyond its resources with currently running a deficit with primarily ending up borrowing domestically or internationally or even resorting to higher taxes. Its true spending beyond its means causes increased demand which may cause a demand pull inflation if supplies don't adjust. Further the borrowing causes a burden and it also has its interest payments. If the economy cannot sustain the borrowing then it may lead to defaults and causing the economy to a depression and investment flowing out and may also depreciate the country's currency.
A country that persistently runs a current account surplus is living below its means while if it runs a persistent deficit it is living beyond its means Discuss?
A current account surplus signifies that the country is exporting more than importing or it is supplying more to the world than it takes from other countries. The current account surplus country is NOT consuming all its production, hence living below its means. On the other hand, a country running a persistent deficit in its current account is a net importer and paying more than it is producing, hence living beyond its means. Arun Goel
Effects of balance of payment deficit to a developing nation?
Pros:Partial auto-correction: If some of the deficit is due to strong consumer demand, the deficit will partially-self correct when the economic cycle turns and there is a slowdown in spendingInvestment and the supply-side: Some of the deficit may be due to increased imports of new capital and technology which will have a beneficial effect on productivity and competitiveness of producers in home and overseas marketsCapital inflows balance the books: Providing a country has a stable economy and credible economic policies, it should be possible for the current account deficit to be financed by inflows of capital without the need for a sharp jump in interest rates. The UK has run an average annual current account deficit of £10 billion from 1992-2004 and yet the economy has also enjoyed one of the longest sustained periods of growth and falling unemployment during that time Cons:Structural weaknesses: The trade / current account deficit may be a symptom of a wider structural economic problem i.e. a loss of competitiveness in overseas markets, insufficient investment in new capital or a shift in comparative advantage towards other countries.An unbalanced economy - too much consumption: A large deficit in trade is a sign of an 'unbalanced economy' typically the consequences of a high level of consumer demand contrasted with a weaker industrial sector. Eventually these "macroeconomic imbalances" have to be addressed. Consumers cannot carry on spending beyond their means for the danger is that rising demand for imports will be accompanied by a surge in household debt.Potential loss of output and employment: A widening trade deficit may result in lost output and employment because it represents a net leakage from the circular flow of income and spending. Workers who lose their jobs in export industries, or whose jobs are lost because of a rise in import penetration, may find it difficult to find new employment.Potential problems in financing a current account deficit: Countries cannot always rely on inflows of financial capital into an economy to finance a current account deficit. Foreign investors may eventually take fright, lose confidence and take their money out. Or, they may require higher interest rates to persuade them to keep investing in an economy. Higher interest rates then have the effect of depressing domestic consumption and investment. The current situation in the United States is very interesting in this respect. Such is the size of the current account deficit that the USA must rely on huge capital inflows each year and eventually investors in other countries may decide to put their money elsewhere - this would put severe downward pressure on the US dollar (see below)Downward pressure on the exchange rate: A large deficit in trade in goods and services represents an excess supply of the currency in the foreign exchange market and can lead to a sharp fall in the exchange rate. This would then threaten an increase in imported inflation and might also cause a rise in interest rates from the central bank. A declining currency would help stimulate exports but the rise in inflation and interest rates would have a negative effect on demand, output and employment.
How large should the money supply be?
The money supply should never grow beyond the potential demand. Growing beyond has a tendency to cause inflation and other economic pressures.
What are some benefits on automobile financing?
Automobile financing allows one to go beyond a budget range when purchasing a car. Another benefit is that one does not have to pay the full amount at one time.
What is the difference between deficit and public dept?
The annual deficit is the amount of money the government is losing every year: basically, how much it spends beyond what it makes. The national debt is the sum of all the annual deficits combined.
Its gravity is beyond science its value is beyond any currency its definition is beyond words it certainly be considered theonly cancer that is the answer. Not a person place or thing. What is it?
Sausage rolls
The total amount that a nation's government owes is called?
Debt. The amount the government spends, above and beyond incoming revenue is called a deficit. The accumulated annual deficit spending plus interest is the debt.
How do you use 'beyond' in a sentence?
"Beyond" can be used to indicate something that is further than a specified point or limit. For example, "She walked beyond the boundary of the park" or "His success went beyond his wildest dreams."
Was their a drought in the Nile River?
Most certainly in the areas of the river and beyond in Egypt and Sudan.
What is the role of deficit financing on economic growth?
Deficit financingDeficit financing is the practice of a network or channel paying the studio that creates a show a license fee in exchange for the right to air the show. A major broadcast network will ask a program producer to share in the financial risk when considering adopting a new program to its schedule; at least for the first season of the series. The deficit is essentially the network not paying the full total of the cost to create a pilot program or of the cost of creating episodes of a new program. Deficit financing also helps to minimize the substantial risks and costs of developing programs for the networks and gives studios initial benefits as well. The studio bears the difference between production costs and licensing fees, but recoups significantly more money if the show is sold in syndication. If the network orders enough episodes of a show, the studio can then sell the series to other markets. Deficit financing minimizes risks and costs of developing programs for networks. [6]The impact of deficit financing on pricesIndia resorted to deficit financing, then largely financed through Reserve Bank's books either by printing more money or use of its foreign exchange reserves, right from the early years of planned economic development. However, our planners did not factor in the impact of deficit financing on inflation. But with large foreign exchange reserves, they were confident of the government's ability to manage the supply-side of the economy.For much of the 1950s, the Bank was part of this consensus. Although the impact of deficit financing on prices had aroused concern already in 1951-52 , price stability did not return as a major cause of worry at the Bank until the mid-50 s. Besides, the Bank recognised the need for any plan to go beyond what available resources dictated, even if some part of the additional investment had to be financed through additions to money supply.Ironically, despite the first plan document, highlighting the important role of the central bank, the Reserve Bank also took a rather modest and self-effacing view about its own part in the planning process during these years, insisting that while it was entitled to be consulted by the government regarding the dimensions of the plan effort, the final decisions rested with the latter.One of the volumes of RBI's history notes that the central bank was not given sufficient time to consider the first Five-Year Plan, the plan document arriving in Bombay only towards the close of October 1952. Any contribution the Bank made to the first plan document appears to have been cosmetic , rather than substantial, with the Governor B Rama Rau, for instance, choosing merely to object to the plan document's suggestion that 'real democracy' implied the 'equality of incomes' .But in the mid-50 s, the central bank started warning the government about the impact of deficit financing on inflation. In the last 15 years, with India adopting a more market-driven approach todevelopment, and even the concept of deficit now not including monetisation, the central bank still continues to warn the government over the dangers of high fiscal deficit on the conduct of monetary policy.Government deficits: good or bad? Whether government deficits are good or bad cannot be decided without examining the specifics. Just as with borrowing by individuals or businesses, it can be good or bad. If the government borrows (runs a deficit) to deal with a severe recession (or depression), to help self-defense, or spends on public investment (in infrastructure, education, basic research, or public health), the vast majority of economists would agree that the deficit is bearable, beneficial, and even necessary. If, on the other hand, the deficit finances wasteful expenditure or current consumption, most would recommend tax cuts to stimulate private investment, transfer cuts, and/or cuts in government purchases to balance the budget.DEFICIT FINANCING AND DEVELOPING COUNTRIES :-In the developing countries capital resources are inadequate for financing the economic development. The rate of taxes can not be increased because the rate of saving and consumption will fall. The rate of saving is already very low in the less developing countries due to low per capita income. So government adopts the deficit financing policy to break the vicious circle of poverty. The main reasons for using this policy are as under :1. To Cover the Gap :-When the Govt. is unable to fill the gap between the total receipts and total expenditure by imposing taxes then Govt. adopts the policy of deficit financing. By adopting this way Govt. can avoid the displeasure of the people.2. Low Savings :-In the under developed countries normally rate of savings is 10% to 14% of the GNP which is very low. As such the Govt. of these countries is compelled to use this policy as an instruments for economic development.3. Rapid Growth of Population :-In the less developed countries population growth is very high. To met the needs of the people and to speed up the economic development Govt. is using the deficit financing policy.4. Lack of Banking Facilities :-Savings are mobilized by the financing institutions. But in the underdeveloped countries there is a shortage of these institutions particularly in rural areas. So resources are not mobilized to the desired extent and Govt. is helpless to use this policy.ADVANTAGES OF DEFICIT FINANCING :-Following are the important advantages of deficit financing :1. High level of employment is ensured by the policy of deficit financing.2. Utilized and underutilized resources can be build up with the help of this policy.3. Additional resources can be mobilized for the economic development by using this policy.4. Social and economic over heads can be build up by adopting the policy of deficit financing.EFFECTS OF DEFICIT FINANCING :-When the government expenditure financed by the created money, it leads to inflation in the country. The classical economists say that in a capitalistic economy there is always a tendency for the economy to operate at the level of full employment.When there is full employment and we use this policy the inflation rate will rise.But Prof. Keynes is not agree with them. He says that "When there is large scale of unemployment and the resources of the country are not being fully utilized deficit financing policy is very helpful in improving the economic condition without inflation."Today this policy is commonly used in the all countries. The poor countries are using this policy to utilize their unemployed resources. These countries are using the deficit financing for the construction of roads, railways, canals and factories.There is a time gap between the pumping of money into the hands of the people and the establishment of scheme of development.If the extra demand is increased due to the created money, is matched by the extra supply of goods then prices will not rise. If the time period between input and output is long the prices will rise for the particular time period and economy will face the inflationary pressure. On the other hand if the time is shorter between the consumption and completion of development schemes, then inflationary pressure will be slow.One thing should be noted that the relation between prices and created money may be different. A 100% rise in the money supply may create only 10% rise in the price of the commodity.The rising of prices due to the deficit financing depends upon various factors such as time period, consumption, savings and habits of the people.For example if people hold or save all the created money then there will be no inflationary pressure.HOW TO REDUCE THE INFLATIONARY PRESSURE OF DEFICIT FINANCING :-Deficit financing is very useful weapon for ensuring the high level of employment in the advanced countries. They increase the effective demand and adopt various measures to reduce the inflationary pressure. Following are the important measures which can be adopted to control inflation :1. Formulation of Import and Export Policy :-A country should frame its import and export policy in such a manner that the supply of an essential goods may not fall.2. Proper Allocation Of Resources :-The rise in price due to deficit financing can be controlled by proper allocation of resources. Developing countries should prepare effective plans and resources of the country may not be wasted in unproductive projects.3. Fiscal Policy :-The inflationary pressure can be controlled, if a government increases the rate of taxes on luxuries and introduces the compulsory saving schemes.4. Monetary Policy :-An effective monitory policy can be adopted to reduce the inflationary pressure. Most of developing countries are also using these weapons against the inflationary pressure to reduce the inflation.5. Supply of Commodities :-Inflationary pressure can be controlled by providing the basic goods to the consumer at fixed rates through the utility stores.
What is the correct verb in The spirit of campaign financing laws seem stretched beyond the point of recognition?
The correct verb is 'seems' which refers to the subject 'spirit': spirit seems.
What 2 ways to name an angle?
degrees or radians. beyond that I will not help. look them up and you will almost certainly learn something.
Definition of self confidence?
Con-fi-dent,adjective:Assurred beyond doubt, certain.
What are the green flags in financing a business loan?
We are often asked why it is important to build a strong business image and credit. There are two answers to that question. The first and the most obvious answer is that it is important to build strong business credit in order to Secure Business Financing. However, not all businesses require external financing; often entrepreneurs will refer to family and friends for startup capital. This is where the second reason, Emergency Financing takes precedence. If your business is experiencing strong growth such as a need to expand warehouse space, inventory, or work force, and the financing of such operation is beyond that which is available from friends and family, a strong business image and a strong business credit profile can aide in securing financing with lower rates and quicker approval times.
Is it against rules if motorists make horn beyond certain limit?
I'm sure it isn't
