指导essay范文：政府支出增加的后果

指导essay范文：政府支出增加的后果

Consequences Of Increase In Government Spending 

 

需求拉动的通货膨胀是指总需求的增加价格从一国输出时所产生的消费，增加投资，政府支出和净出口的上升，没有相应的增加的水平。如果政府增加公共开支，增加基础设施的发展，社会部门的支出将增加总需求。这将导致更高的通货膨胀却会降低失业率（从而从滞胀阶段）这个通货膨胀引起的需求拉动的通货膨胀。这将导致基本商品短缺。

收入的增加（由于政府支出的增加）也将导致更高的储蓄（即使是高风险的储蓄），这将使股市增长。由于散户投资者将开始投资他们的盈余资金在股票市场或共同基金。如果股票市场现在开始给予积极的回报。储蓄倾向上升将导致在股票市场的更高的投资。

 

1Demand-pull inflation is defined as an increase in prices arising from the increased overall demand for a nation's output when consumption, investment, government spending or net exports rise without a corresponding increase in the level of AS. If the government increases public spending by spending more on infrastructure development, social sector spending it will increase the aggregate demand. AD shifts to the right. This will lead to more inflation but it will lower unemployment (thereby removing India from the current phase of stagflation) This inflation which is caused is demand-pull inflation. It will lead to a shortage of basic commodities.

 

A rise in incomes (due to higher government spending) would also lead to higher savings (even high risk savings), which would make the equity markets grow. Since retail investors would start investing their surplus funds in the equity markets or in mutual funds. Propensity to saving will rise leading to higher investments in the equity markets. If the equity markets now start giving positive returns.

 

Beyond a certain point, every rise in income will also lead to a rise in savings Propensity to consume falls with a rise in incomes and the propensity to save rises.

 

Interest rates are high and the option of reducing inflation by increasing interest rates is not applicable in this scenario. Level of risk taking in the economic sector has gone down drastically. People have become risk averse and highly defensive of their original capital.

 

Consequences of Increase in Government Spending.

 

1) Assuming that the government spending is done by deficit financing, it will lead to higher borrowing on the part of the government which will affect future tax rates and future disposable incomes thus, this is merely a short term solution.

 

2) Increase in public spending would lead to demand-pull inflation since the AD would increase but the AS would remain constant.

 

3) If the government spends on infrastructure development or in building human capital (health care, education, sanitation, etc.) the opportunity cost would be that there would be lesser spending on other areas like defense but this would lead to greater economic development as this will improve the long-term productive efficiencies and increase GDP in the long term. However, if the government would spend this money in sectors like defense, it will increase the AD but will not lead to an economic development.

 

Due to the current account deficits being high, the government really cannot do further deficit financing and so as a solution this option is only viable in the short run. For a long run solution to this problem, the government can encourage foreign direct investment (FDI) in India, especially in high priority and high growth sectors such as retail, infrastructure, insurance, etc. This would lead to the sectors becoming more efficient and higher employment rates since the sectors mentioned above employ large number of people. The FDI would also act like an injection into the economy thereby, increasing AD and getting the same results that are suggested in the article.

 

What mechanism coordinates individual decision, so that saving always equals investments?

 

To answer these question, we need to develop a model of what happens in the market for loanable funds, that is the market in which individual savers supply funds and individual borrowers demand funds.

 

SUPPLY AND DEMAND FOR LOANABLE FUNDS

 

Like any other market, an analysis of the market for loanable funds revolves around supply and demand. The supply of loanable funds comes from individuals who have saved and want to lend the funds out, either directly in the stock and bond markets or indirectly through a bank or mutual funds. When the interest rate rises, saving becomes more attractive, so the supply of loanable funds goes up, so the supply curve for loanable funds slope up.

 

With the loanable funds framework in hand , we can consider the impact of various government policies on saving and investment such as:

 

Policy 1. Saving Incentives

Policy 2. Investment Incentives

Policy 3. Government Budget Deficits and Surpluses

Policy 4 : Expansionary monetary

Policy 5 :Contractionar monetary policy

 

Saving Incentives

 

What happens if the government increases the amount of income that individuals can allocate to individual Retirement Accounts and other tax advantaged accounts?

 

This Policy would increase the after-tax interest return that individual would receive on their saving.

 

Investment Incentives

 

Suppose that the Government institutes an investment tax credit, giving a tax advantage to any firm that builds a new factory or purchase new capital equipment.

 

Government Budget Deficits and Surpluses

 

A budget deficit results when government spending exceeds tax revenue. The Government borrows by issuing bonds. The entire amount of government bonds outstanding, representing the accumulation of past government deficits, is the government debt. A budget surplus can be used to retire(repay) existing government debt. If the government spending exactly equals tax revenue, then the government has a balanced budget.

 

Contractionary monetary policy

 

This policy may be used to reduce price inflation by increasing the interest rate.

 

Because banks have to pay more to borrow from the central bank they will increase the interest rates they charge their own customers for loans to recover the increased cost. Banks will also raise interest rates to encourage people to save more in bank deposit accounts so they can reduce their own borrowing from the central bank.

 

As interest rates rise, consumers may save more and borrow less to spend on goods and services. Firms may also reduce the amount of money they borrow to invest in new equipment. A reduction in capital investment by firms will reduce their ability to increase output in the future. Higher interest rates may therefore reduce economic growth and increase unemployment.

 

Expansionary monetary policy

 

This may be used during an economic recession to boost demand and employment by cutting interest rates. However, increasing demand can push up prices and may increase consumer spending on imported goods and services.

 

The Government Mission should be to provide a tax regime which provides the required revenue for financing governments programmes and commitments encouraging saving and investment and promoting social justice. This is achieved by tax measures, which broaden the tax base by creating a system that facilitates voluntary compliance by being efficient simple and fair.