(a) Identify two responsibilities of government to an economy.
(b) Show how the government of your country carries out these two responsibilities.
(a) Protection and general welfare of citizens, and protecting the environment.
(b) The government of my country protects vulnerable citizens through welfare programms. These include food stamps and cash grants.
The government of my country protects the environment by legislation to prevent degradation of wetlands and the extinction of certain species.
Give two reasons why government should be the chief guardians of the environment.
For the well-being of citizens; health issues can be a consequence of pollution. This is very costly for the economy.
Eco-tourism is a market niche that can earn foreign exchange for an economy.
Discuss two consequences of unregulated business activity in an economy.
If businesses are not regulated by government agencies then consumers may receive poor quality goods and services. Acceptable standards are outlined by government agencies which business must abide by.
Businesses may also overcharge for goods such as basic food items. If basic food items are unaffordable to the very poor and vulnerable, the consequence might be malnutrition.
List two consumer protection laws.
The Standards Act and The weights and measures Act.
Identify two purposes of taxation and discuss the importance of each.
Taxation may be used to discourage behaviour. Taxing firms that pollute the atmosphere, rivers and seas will reduce pollution. Also taxing the consumption of harmful goods such as cigarettes will reduce its consumption.
Taxation can also redistribute income by providing welfare programs and cash grants to the very poor and vulnerable in the society.
Differentiate between direct and indirect taxes and give two examples of each.
Direct taxes are paid by individuals directly from income earned or on the value of assets owned to the income tax department. Examples of direct taxes are: income tax, corporate tax and capital gains tax. Indirect taxes differ from direct taxes as they are paid to the income tax department through the suppliers of goods and services. These taxes are levied on consumption and therefore are paid by individuals when purchasing commodities. Examples of indirect taxes include: value added tax, purchase tax and excise and custom duties tax.
Distinguish between progressive and regressive taxation.
A progressive tax system levies a higher percentage of tax on high income earners compared to lower income earners. This ensures that higher income earners pay a larger proportion of their income in taxes than lower income earners. However, a regressive tax system allows higher income earners to pay a smaller proportion of their income compared to low income earners who pay a higher proportion of their income in taxes.
The regressive tax system is unfair and places a greater burden on the lower income earners. Discuss.
An examples of a regressive tax is a value added tax where each persons pays a fixed percentage on the cost of a good or service. Therefore, if $10 is the tax amount to be paid for a particular item charged, a high income earner who receives $1000 will pay 1% of his income in taxes while another income earner who receives $100 will pay 10% of his income in taxes. The regressive tax system is unfair as low income earners will pay a higher proportion of their income in taxes than a high income earner.
Outline two ways in which governments provide assistance for businesses.
Governments assist small businesses with soft loans. They provide loans at low interest rates through financial institutions and government agencies.
Governments also provide information, training and advice through various agencies for small business.
Discuss the importance of the provision of one social service by a government.
Education is a very important social service. High levels of literacy, numeracy, and skills will increase productivity. A highly skilled workforce is also attractive to international investors who seek new locations to expand their businesses.