ECS1601 ASSIGNMENT 2: 2021
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2.1 An appropriate government intervention in the economy …
[1] is to encourage a monopolistic market that satisfies the aggregate
demand for goods and services by the public.
[2] is to get involved in the economic sectors where the private sector is
producing goods and services more efficiently.
[3] involves measures to correct market failure and provision of public
goods and services.
[4] has to do with taking income from those with low incomes and
providing income to those with higher incomes.
Cognisance should be taken of the fact that markets do not always produce
efficient outcomes. Markets fail and when they do, a case for government
intervention arises. In other words, government intervention may be
required in an attempt to correct market failure.
2.2 Which of the following statements is/are correct?
a) The failure of markets to produce efficient outcomes, is called
government failure.
b) Government may fail to have efficient outcomes due to corruption.
c) Government failure arises because bureaucrats put the interest of
society first.
[1] b and c
[2] a and b
[3] a and c
[4] b
Corruption is one of the main variables affecting the efficiency of
government, it reduces resources that could be used to enhance efficiency.
2.3 Which one of the following statements on nationalisation and privatisation is
correct?
[1] Nationalisation is the transfer of ownership from the public sector to
the private sector.
[2] Privatisation is the transfer of ownership from private enterprise to
government.
[3] One of the arguments in favour of privatisation is that the privatised
firm may attract foreign direct investment.
[4] Privately owned enterprises are often a burden on the taxpayer.
, Because of the potential efficiency and profitability, privatised firms are
likely going to attract FDI (See Philip mohr on arguments for privitasition).
2.4 Fiscal policy …
[1] involves spending and/or changing of taxes by government.
[2] is said to be expansionary if the government increases taxes.
[3] does not influence the economy.
[4] can be used to attain price stability in the economy.
The two instruments of fiscal policy include government expenditure and
taxes which are used to to inflate or deflate the economy.
2.5 Which of the following statements regarding fiscal policy and the budget
is/are correct?
a) A country’s budget is the main instrument of fiscal policy
b) Budget outlines government spending plans and tax rates to be levied
on taxpayers.
c) Political decisions about government spending plans are reflected in
the budget.
[1] a
[2] b
[3] a and b
[4] a, b and c
All these are correct for reference purposes and further understanding see
Philip mohr Pg 289.
2.6 Expansionary fiscal policy refers to , while contractionary fiscal policy
refers to .
[1] an increase in government borrowing; decrease in government
spending.
[2] decrease in taxes; increase in government spending.
[3] an increase in government spending; an increase in taxes.
[4] demand management policy; monetary policy.
An increase in government spending increases aggregate demand hence it
is an expansionary fiscal policy whilst an increase in taxes reduces the
disposable income and hence reduces aggregate demand.
WITH WORKINGS AND EXPLAINATION; 100% guaranteed
Call 0618441387 for further assistance
2.1 An appropriate government intervention in the economy …
[1] is to encourage a monopolistic market that satisfies the aggregate
demand for goods and services by the public.
[2] is to get involved in the economic sectors where the private sector is
producing goods and services more efficiently.
[3] involves measures to correct market failure and provision of public
goods and services.
[4] has to do with taking income from those with low incomes and
providing income to those with higher incomes.
Cognisance should be taken of the fact that markets do not always produce
efficient outcomes. Markets fail and when they do, a case for government
intervention arises. In other words, government intervention may be
required in an attempt to correct market failure.
2.2 Which of the following statements is/are correct?
a) The failure of markets to produce efficient outcomes, is called
government failure.
b) Government may fail to have efficient outcomes due to corruption.
c) Government failure arises because bureaucrats put the interest of
society first.
[1] b and c
[2] a and b
[3] a and c
[4] b
Corruption is one of the main variables affecting the efficiency of
government, it reduces resources that could be used to enhance efficiency.
2.3 Which one of the following statements on nationalisation and privatisation is
correct?
[1] Nationalisation is the transfer of ownership from the public sector to
the private sector.
[2] Privatisation is the transfer of ownership from private enterprise to
government.
[3] One of the arguments in favour of privatisation is that the privatised
firm may attract foreign direct investment.
[4] Privately owned enterprises are often a burden on the taxpayer.
, Because of the potential efficiency and profitability, privatised firms are
likely going to attract FDI (See Philip mohr on arguments for privitasition).
2.4 Fiscal policy …
[1] involves spending and/or changing of taxes by government.
[2] is said to be expansionary if the government increases taxes.
[3] does not influence the economy.
[4] can be used to attain price stability in the economy.
The two instruments of fiscal policy include government expenditure and
taxes which are used to to inflate or deflate the economy.
2.5 Which of the following statements regarding fiscal policy and the budget
is/are correct?
a) A country’s budget is the main instrument of fiscal policy
b) Budget outlines government spending plans and tax rates to be levied
on taxpayers.
c) Political decisions about government spending plans are reflected in
the budget.
[1] a
[2] b
[3] a and b
[4] a, b and c
All these are correct for reference purposes and further understanding see
Philip mohr Pg 289.
2.6 Expansionary fiscal policy refers to , while contractionary fiscal policy
refers to .
[1] an increase in government borrowing; decrease in government
spending.
[2] decrease in taxes; increase in government spending.
[3] an increase in government spending; an increase in taxes.
[4] demand management policy; monetary policy.
An increase in government spending increases aggregate demand hence it
is an expansionary fiscal policy whilst an increase in taxes reduces the
disposable income and hence reduces aggregate demand.
