CANONS OF TAXATION

CANONS OF TAXATION                    To begin with, we shall elaborate on Adam smith’s canons which are still used as the foundation of discussion on the principles of taxation. His canons are four altogether and the remaining five have been developed with the passage of time. 1.      CANON OF EQUALITY:  The word equality here does not mean that everyone should pay the equal amount of tax. That would be unjust generally...

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ITEMS OF GOVERNMENT EXPENITURE

ITEMS OF GOVERNMENT EXPENITURE        We shall now briefly elaborate on the items of expenditure which the government initiates after accumulating the necessary revenue. These expenditures may be in the form of development expenditure or even non-development expenditure. 1.                            DEFENCE AND INTERNAL SECURITY:  Expenditure on defence for a country...

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USE OF FINANCIAL RESOURCES

USE OF FINANCIAL RESOURCES               Generally the government utilizes its resources for social benefits. However, individuals generally allocate their resources under the law of equi-marginal utility. SOURCES OF GOVERNMENT REVENUE:        Government revenue is obtained by such as (i) Tax revenue (ii) Non tax revenue. Tax revenue is obtained from the taxes itself i.e. direct and indirect taxes. Non-tax revenues are those sources of revenue such...

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PUBLIC FINANCE

PUBLIC FINANCE           Public finance can be classified into three categories i.e. Government Expenditure, Government Revenue and Government Debt and its management.           Government expenditures are the expenditure, incurred by the government for development of the country and also on non-development objectives in view. Government revenue comes from taxation i.e. direct taxation and indirect taxation. Government debt is obtained from internal...

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CRITICISM ON THE CLASSICAL THEORY OF FULL EMPLOYMENT

CRITICISM ON THE CLASSICAL THEORY OF FULL EMPLOYMENT 1.                 According to the classical economists the method of overcoming the problem of unemployment is the cutting down of competitive wage rate as explained in the Marginal Productivity theory. However, such a solution is not applicable in practice particularly in the third world countries where the supply of labour exceeds the demand for it but labourers are already living at low subsistence...

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Classical Theory of Income and Employment

Classical Theory of Income and Employment                    Most of classical theories were involved during the 18th and 19th centuries. Their main emphasis was on the laissez faire economy (free enterprise). However, by the year1936 a British economist, Mr. Keynes, wrote a book titled, “General Theory of Employment, Interest and Money”. in which he challenged the theories of the classical economists. Keynes justified the government intervention into...

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ROLE OF SAVING INVESTMENT AND RATE OF INTEREST IN THE CLASSICAL THEORY OF FULL EMPLOYMENT

ROLE OF SAVING  INVESTMENT AND RATE OF INTEREST IN THE CLASSICAL THEORY OF FULL EMPLOYMENT         As the saving goes money Burns holes in people pockets, money is spent on consumer goods and the rest of it saved and invested. Whichever way it goes it is expenditure. Saving is converted into investment in three ways: (i)  By purchasing capital goods. (ii) By buying bonds. (iii) By money in...

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BALANCE OF TRADE and BALANCE OF PAYMENT

BALANCE OF TRADE and BALANCE OF PAYMENT                  Here, we would like to make a sharp distinction between balance of international trade and balance of international payments as they are often confused by the readers. By balance of international trade we mean, statement that takes into account the total value of exports and imports of visible commodities of a country during a year. By visible commodities is meant the commodities which when exported or imported...

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MULTIPLIER AND ACCELERATOR

MULTIPLIER AND ACCELERATOR CONCEPT OF MULTIPLIER                  We have studied the determination of income and employment in a country. There we saw that the volume of employment depends on aggregate demand. The aggregate demand is composed of (a) Consumption demand (b) Investment demand. Consumption demands on the consumer’s income and his propensity to consume and investment demand on (a) The marginal efficiency of capital (b) The rate of interest            ...

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BARTER ECONOMY

BARTER ECONOMY                   Every producer produces goods and services more than this own personal requirements with the intention that the excess amount of goods and services would be brought into the markets for change with the goods and services produced by the other producers excess of their needs. This method of production and the system of exchange is carried out in the economy throughout the year and hence aggregate supply become equal to the...

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