State Budget
What are the main sources of government revenue?
Taxes.
What are direct and indirect taxes?
Direct taxes are levied on income or property, while indirect taxes are imposed on goods and services.
What are the main tools of monetary policy?
Interest rates, open market operations, and reserve requirements.
What are internal and external debts?
Internal debt is borrowed within the country, while external debt is taken from foreign lenders.
What is the role of foreign direct investment (FDI)?
Job creation.
Stages of budget process.
Drowing, review and approval, execution, preparing
What is the difference between progressive and regressive taxation?
Progressive taxation increases with income regressive taxation places a higher burden on low-income earners.
What happens when the central bank lowers interest rates?
Lower interest rates encourage borrowing and investment, boosting economic growth.
Why do governments borrow money?
To fund infrastructure, social programs, or cover budget deficits.
How does the government attract investors?
Tax incentives, stable policies.
What is the role of the Ministry of Finance in budgeting?
Prepares, implements, and monitors.
How do taxes influence economic growth?
High taxes may reduce investment and consumption, while lower taxes can stimulate economic activity.
What is inflation targeting?
The central bank sets a specific inflation rate as its goal.
What is the debt-to-GDP ratio?
Ratio of a country’s debt to its total economic output, indicating debt sustainability.
Why is financial transparency important for investment?
Transparency prevents corruption in public finance.
How can a government reduce a budget deficit?
Increase taxes, cut spending, borrow funds.
What are tax exemptions and why are they used?
Tax exemptions reduce or eliminate taxes for specific groups to encourage investment or social welfare.
How does monetary policy affect exchange rates?
High interest rates attract foreign investment, strengthening the currency, while low rates weaken it.
How can excessive public debt harm an economy?
It can lead to higher taxes, reduced spending on public services, and economic instability.
How does government spending affect private investment?
High government spending = High interest rate
What is the impact of budget deficits on the economy?
Inflation, higher interest rates, and increased national debt.
How can tax evasion affect a country’s economy?
Tax evasion reduces government revenue, limits public services, and can lead to higher tax burdens on honest taxpayers.
Why can excessive money printing lead to hyperinflation?
Money reduces its value, leading to rapidly rising prices and loss of purchasing power.
What happens if a country defaults on its debt?
It loses investor confidence, faces higher borrowing costs, and may experience a financial crisis.
What is the impact of political instability on investment?
Reduces investment cause of uncertainty and high risk.