Government Economic Policies and Financial Instruments

Government Economic Policies

1) Economic growth: the government will always want the economy to grow. They can encourage growth through helping private business to grow, through low business taxes or through government involvement in growth sectors such as new high tech industries.

2) Prices: the government will want to make sure that the general level of prices in the economy is effectively managed. Prices need to rise in a relatively slow and predictable way so that future contracts can be made where both sides know the value of what they pay or receive. Government policies to control inflation might include reducing spending or raising taxes when prices start to rise.

3) Income distribution: all economies are characterized by inequalities in income. The government seeks to redistribute incomes through taxation and other policies. There are different views as to what constitutes a fair distribution of income.

4) Balance of payment: the balance of payments compares values of exports with values of imports. Exports need to be competitive and imports need to be at levels the country can afford. Government policies to tackle balance of payments issues might involve encouraging exporters and discouraging imports.

5) Employment: employment needs to rise in line with the increase of population. Unemployment needs to be minimized so that those seeking work can gain suitable employment. Policies to increase employment might be the government increasing the number of workers directly giving public employs, or reducing business taxes to promote hiring.

KEY TAKEAWAYS:

• Credit cards give you access to a line of debt issued by a bank while debit cards deduct money directly from your bank account.
• Credit cards charge interest on the client account when using the credit possibilities (deferred payment).
• Credit cards usually have more charges and fees. Nevertheless newer credit cards no longer charge annual fees.
• Credit card are more widely accepted, especially in foreign countries, to make payments and withdrawals of money in cash machines.
• Credit card users can reap cash, discounts, travel points, and many other perks that the bank would offer to their clients.

Functions of money:

• Way of payment in exchange of goods and services
• Deposit of value: we accumulate money for security as a way to reduce uncertainty and the possible risks of the future.
• Unit of account: we can value things using money as a reference.

Funds:

a) Monetary funds: the money is mainly invested in different currencies and shifted between it in order to get benefits. The risk is high and the possible benefits are also high and fast.

b) Stock funds (fixed rent): the money is invested mainly in public debt titles of different countries and other fixed rent titles (private companies bonds). The risk is low and the profitability is also low.

c) Stock funds (variable rent): the money is mainly invested in private business stocks and options (swifts, futures, etc.)

Public debt titles: are a kind of small loans that investors make to a country. When the government of a country spends more money that the government have to give back money.