the Features of business cycle

A business cycle is a swing in total national output, income, and employment, usually lasting for a period of 20 to 10 years, marked by widespread expansion or contraction in most sectors of the economy.

Typically economists divide business cycle into two main phases, recession and expansion. Peaks and troughs mark the turning points of the cycles. The downturn of a business cycle is called a recession, which is often defined as a period of in which real gross domestic product declines for at least two consecutive quarters. The recession begins at a peak and ends at a trough. According to the organization, which dates the beginning and end of business cycles, the National Bureau of Economic Research, the last U.S recession began after the economy peaked in the summer of 1990. This was followed by a brief recession, which ended in March 1991, after which United States enjoyed one of the longest expansions in its history.

Note that the pattern of cycles is irregular. No two business cycles are quite the same. No exact formula, such as might apply to the revolutions of the planets or of a pendulum, can be used to predict the duration and timing of business cycles.

causes of Poverty

10 main causes of Poverty in India

Rapidly Rising Population:

The population during the last 45 years has increased at the rate of 2.2% per annum. On average 17 million people are added every year to its population which raises the demand for consumption goods considerably.

2. Low Productivity in Agriculture:

The level of productivity in agriculture is low due to subdivided and fragmented holdings, lack of capital, use of traditional methods of cultivation, illiteracy etc. This is the main cause of poverty in the country.

3. Under Utilized Resources:

The existence of under employment and disguised unemployment of human resources and under utilization of resources has resulted in low production in agricultural sector. This brought a down fall in their standard of living.

4. Low Rate of Economic Development:

The rate of economic development in India has been below the required level. Therefore, there persists a gap between level of availability and requirements of goods and services. The net result is poverty.

6. Price Rise:

The continuous and steep price rise has added to the miseries of poor. It has benefited a few people in the society and the persons in lower income group find it difficult to get their minimum needs.

7. Unemployment:

The continuously expanding army of unemployed is another cause of poverty. The job seeker is increasing in number at a higher rate than the expansion in employment opportunities.

8. Shortage of Capital and Able Entrepreneurship:

Capital and able entrepreneurship have important role in accelerating the growth. But these are in short supply making it difficult to increase production significantly.

9. Social Factors:

The social set up is still backward and is not conducive to faster development. Laws of inheritance, caste system, traditions and customs are putting hindrances in the way of faster development and have aggravate" the problem of poverty.

10. Political Factors:

The Britishers started lopsided development in India and reduced Indian economy to a colonial state. They exploited the natural resources to suit their interests and weaken the industrial base of Indian economy.

In independent India, the development plans have been guided by political interests. Hence, the planning a failure to tackle the problems of poverty and unemployment.

concept of poverty

Poverty

Poverty is the state of one who lacks a certain amount of material possessions or money. Absolute poverty or destitution refers to the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education. Relative poverty is defined contextually as economic inequality in the location or society in which people live.

For much of history, poverty was considered largely unavoidable as traditional modes of production were insufficient to give an entire population a comfortable standard of living. After the industrial revolution, mass production in factories made wealth increasingly more inexpensive and accessible. Of more importance is the modernization of agriculture, such as fertilizers, to provide enough yield to feed the population. The supply of basic needs can be restricted by constraints on government services such as corruption, tax avoidance, debt and loan conditionalities and by the brain drain of health care and educational professionals. Strategies of increasing income to make basic needs more affordable typically include welfare, economic freedoms, and providing financial services.

Although poverty is one of the most familiar and enduring conditions known to humanity, it is an extremely complicated concept to understand. Some researchers view it as a reaction to the stress of being poor, whereas others perceive it as a process of adapting to the condition of poverty. Historical definitions are numerous, but can be classified as relating to either lack of financial income or lower social status. Numerous factors contribute to the concept of poverty, including political, economic, social, and cultural forces. The one that has consistently had the greatest effect on the evolving concept is the passage of time, which encompasses all these forces in a very intricate manner. This author explored the evolution of the concept of poverty to identify relevant themes for consideration in the public health nursing domain.

Central Budget

Definition of 'Budget'
An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money. A budget is a micro economic concept that shows the trade off made when one good is exchanged for another.

The Central Budget of India, referred to as the Annual Financial Statement in Article 112 of the Constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget, which is presented by means of the Financial Bill and the Appropriation bill has to be passed by the House before it can come into effect on April 1, the start of India's financial year.

                                                                                        

Fiscal Policy : Concept, Objectives, Instruments

Fiscal policy is how the government manages its budget. It collects revenue via taxation that it then spends on various programs. Elected officials guide fiscal policy, redirecting funds from one sector of the population to another. The purpose of fiscal policy is to create healthy economic growth and increase the public good for the long-term benefit of all. As you can imagine, legislators and their constituents have different ideas of the best way to do that. As a result, fiscal policy is usually hotly debated, whether at the federal, state, county or municipal level.

Objectives of Fiscal Policy –

1. To achieve desirable price level:
The stability of general prices is necessary for economic stability. The maintenance of a desirable price level has good effects on production, employment and national income. Fiscal policy should be used to remove; fluctuations in price level so that ideal level is maintained.


2. To Achieve desirable consumption level:
A desirable consumption level is important for political, social and economic consideration. Consumption can be affected by expenditure and tax policies of the government. Fiscal policy should be used to increase welfare of the economy through consumption level.


3. To Achieve desirable employment level:
The efficient employment level is most important in determining the living standard of the people. It is necessary for political stability and for maximization of production. Fiscal policy should achieve this level.


4. To achieve desirable income distribution:
The distribution of income determines the type of economic activities the amount of savings. In this way, it is related to prices, consumption and employment. Income distribution should be equal to the most possible degree. Fiscal policy can achieve equality in distribution of income.


5. Increase in capital formation:
In under-developed countries deficiency of capital is the main reason for under-development. Large amounts are required for industry and economic development. Fiscal policy can divert resources and increase capital.


6. Degree of inflation:

In under-developed countries, a degree of inflation is required for economic development. After a limit, inflationary be used to get rid of this situation.


Instruments of Fiscal Policy

The first tool is taxation, whether of income, capital gains from investments, property, sales or just about anything else. Taxes provide the major revenue source that funds government. The downside of taxes is that whatever or whoever is taxed has less income to spend themselves. That makes taxes very unpopular. Find out exactly how the U.S. Federal budget is funded in Federal Income and Taxes.


The second tool is spending. The government provides subsidies, transfer payments, contracts to perform all kinds of public works, and of course salaries to government employees -- to name just a few. The reason government spending is a tool is that whatever or whoever receives the funds has more money to spend, thus driving demand and economic growth.

Public Finance and Private Finance

Public Finance and Private Finance

Meanings:

public finance is a branch of economics that deals with the expenses and revenues from government to government in the economy.

The long-term financing is revenue and expenditure. If you have a link to the private sector, private financing is needed. On the other hand, if it related to the public sector, ie, the public finances.

Private Finance:
Deal to income and expenditure by the private sector.

Public Finance:
This revenue and expenditure of the Government Sector (public sector)

Public finance Vs Private finance
1. Time period: The public finances in a period of several years together, while private financing to do with the financial daily, weekly, monthly, etc.


2. Assets Vs expenditure: In public finance, income from fees as follows. In addition, the cost of private financing in line with sales.


3. Arrears financing: Budget deficit, government. can create new tickets issued. In addition, the private sector has no authority to issue new tickets.


4. Nature of budget: In the public sector's budget deficit is important. In the private sector, the budget surplus is large.


5. Compulsory loans: The government can borrow to bind to other financial institutions to their cost, while the private sector can not be met.


6. Secrecy: State budget is not a secret, but Govt. published their budgets for television, radio, etc. On the other hand, the household, to keep the secret.


7. Nature of projects: In public finance, the government must complete the long-term projects. In addition, the private sector has a short project is completed.


8. Nature of changes: Public Finance shows significant changes, while the private sector has to do with minor modifications.


9. Accounting document: The state budget is a written document that the budget sector is a written document.


10. Analysis system: Govt. Revenue and expenditure is regularly monitored by an audit system. On the other hand, there is no system of private financing.


11. Adopted assistance: In the public finances, the Government may rely on foreign aid, but private financing, there is no way of outside help.


12. Absolute or aberrant antecedent of income: Public Finance, source of income is indirect, while the tax is a source of private funding, that address income.


13. Above-mentioned sanction: Public Finance, Government. have the prior approval of his cabinet, etc. National Assembly, Senate, while in private funding, without prior permission is required from any authority.


14. Future planning: In public finance, there are no long-term planning, while private funding is nothing planned.


15. Use of banking resources: In public finance, the main goal for the welfare of the population, used as in private funding, the resources for maximum personal satisfaction.


16. Almanac of finance: The private sector may or may not keep records of your finances, the govt. maintains a permanent record of your finances.

Conclusion:
We conclude that the financing of public and private sector for revenue and expenditure. In any case, we distinguish between public and private financing on the basis of certain criteria.

tax

Tax

A tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.

According to Black's Law Dictionary, a tax is a "pecuniary burden laid upon individuals or property owners to support the government [...] a payment exacted by legislative authority." It "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government [...] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."

Characteristic :

• Taxes are imposed by the government only.
• A tax is compulsory contribution of the tax payer.
• Payment of a tax is the personal obligation of the tax payer.
• The aim of taxation is the welfare of the community as a whole.
• A tax is a legal collection.
• An element of force is there.

Classification

Direct and Indirect Taxes

Taxes have been broadly categorised into direct taxes and indirect taxes. Dalton made a distinction between direct and indirect taxes as "that a Direct Tax is really paid by a person on whom it is legally imposed while an indirect tax is imposed on one person, but paid partly or wholly by another owing to a consequential charges in the terms of some contract or bargaining between them".

A direct taxes involve a direct money burden and in the case of indirect taxes, the man who pays the tax to the government is different from the person who bears it ultimately.

Merits of Direct Tax:

1. Economy
2. Certainty
3. Equity
4. Reduction in inequalities
5. elasticity
6. Civil consciousness

Demerits of Direct Tax:

1. Unpopular
2. Inconvenience
3. Possibility of injustice
4. Possibility of evasion
5. Exemption of low income group

Merits of Indirect Tax:

1. Convenient
2. Difficult to evade
3. Elastic
4. Equitable
5. Can be progressive
6. Productive
7. Wild Coverage
8. Social Welfare

Demerits of Indirect Tax:

1. Regressive
2. Administrative cost
3. Reduction in savings
4. Uncertainty
5. No civil consciousness

Generally speaking, the burden of indirect taxes tends to fall more heavily on the poorer sections of the community and that of the direct taxes mainly on the richer sections of the community. They both are not competitive but are complementary. That is why Gladstone, the great Victorian statesman, remarked that the direct and indirect taxes should be viewed  as equally attractive sisters, neither of whom should be pursued too ardently.

Proportional and Progressive Taxation

Taxes may be divided into proportional and progressive basing on the burden of taxation.

1. Proportional Taxation:
   P.E. Taylor says, "A schedule of proportional tax rates is one in which the rates of taxation remains constant as the tax base changes". The amount of tax payable is calculated by multiplying the tax base with the fixed rate. Thus, in proportional tax system the multiplier, i.e., the rate remains constant with the change in multiplicant (Income).
   
   Case for/Merits:
   1) Proportional  tax does not affect the relative position of the tax payer.
   2) Proportional tax is simple to estimate and calculate and the imposition is uniform.
   3) The willingness to work more and save more of the tax payer is not adversely affected by the proportional taxation.
   4) The principle of equality of justice is being followed in proportional taxation.
   5) 'Equality of sacrifice' as between the rich and the poor can be achieved by it.
   
   Mc Culloch, a well known supporter of proportional taxes says, "When you abandon the plain principle (of proportion) you are at sea without rudder and compass and there is no amount of injustice you may not commit."
   
   Case against/Demerits:
   1) A system of proportional taxation would not lead to equitable and just distribution of the burden of taxation as it falls more heavily on the small incomes than on the high incomes because the marginal utility of money diminishes more rapidly as the income increases.
   2) A system of proportional taxation means the tax rates for the rich and the poor are the same. Hence, the State cannot obtain from the richer sections of the community as much as they can give.
   3) The proportional tax system, however, cannot be elastic as the financial needs of a government may change from time to time and it is often required to have more funds.
   
2. Progressive Taxation:
   P.E.Taylor says,"A schedule of progressive tax rate is one in which the rate of taxation increase as the tax base increases". In the case of progressive tax, the multiplier (i.e., the rate) increases as the multiplicant (income) increases.
   
   Case for/Merits:
   1)  Proper distribution of money: Since progressive taxation allows income-based taxes, a person with low income will pay much less than a person with a high income. This is an effective way for proper distribution of wealth.
   2) Protects the lower income group: Progressive taxation system allows the lower income group to pay less in taxes. Since most of the working population falls in this category, progressive taxation is favored by most.
   3) Protection during recession times: Progressive taxation system also protects people during recession times because if their income drops, they fall into lower income bracket.
   4) Stable income stream: Progressive taxation also allows the government to have a stable income stream even in times of depression.
   
   Case against/Demerits:1) Opposes equality: Many believe that progressive taxation opposes the Constitution which promotes equal rights for citizens. By taxing the higher income group at a higher rate, progressive taxation defies the Constitution.
   2) Prevents taking high paying jobs: Progressive taxation system may also prevent individuals from taking a high paying job because most of their income would be taken away as taxes. It also discourages individuals to work harder to gain higher incomes.
   3) Encourages emigration: High progressive taxation system can encourage high earning workers to move overseas to escape the tax system.
   4) Encourages hiding of assets: High progressive taxation system can also encourage high income earners to opt for off-shore banking by which they can hide their assets and save taxes.