Chapter 12: Fiscal Policy
Chapter Learning Objectives
After reading the chapter, you ought to understand and be able to explain:
- Thy government expenditures are needed even in a market economy.
- The main categories of government spending in developing countries.
- Why there often is little scope for augmenting government saving through cuts in recurrent expenditure.
- The main types of taxation used in developing countries.
- The prospects for boosting government saving by increasing tax rates, introducing new types of tax, improving tax administration, and fundamental tax reform.
- How the level and structure of taxation may affect private saving and investment.
- Why governments have little success in redistributing incomes through the tax system.
- How government expenditures can be used to improve equity.
- How various taxes create efficiency losses and why neutrality is a favored principal of taxation in developing countries.
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