Problems Facing by Government during and after Budget.

1.     What does Budget Deficit mean? And why are GCC facing this problem?

Deficit is called that amount which resource, especially money, is less than it needs. Hardships happen when utilizations outperform pay, imports outperform conveys, or liabilities outperform assets. Deficiency earns back the original investment with insufficiency or powerlessness, and negative routine versa. With an insufficiency, the whole number of negative numbers is more unmistakable than that of positive numbers. As such, they got is more conspicuous than the brought. Disasters can happen when the public authority, organization or individual spends the best entirety in a given year. GCC countries highly depend on oil and oil revenue contributor are the major source of country’s economic growth. But due to biggest suckled downdraft in oil prices take GCC’s to economic downfall. 

2.      Mention 2 ways by which the GCC governments can finance their deficits? Explain the pros and cons of each one.  Use models when necessary.  Illustrate impact using graphs.

The very first and renowned ways is to lower the government expenditures and higher the taxes.    

           

It will have better effects on coping with deficit as government’s expenditure would be helping to sustain the country’s economy.         

Industrial Growth:                

Country should invest in industry and introduce new ways and strong employment to the country for its better fiscal position.           

           

This strategy is most beneficial to stable the country economical condition. By taking less debt and investing it in country’s economy and growing the products will be a beneficial strategy to sustain the country’s fiscal condition.     

3.  “The fund said this year’s growth rate, forecast at 2.1 per cent, would fall well below 2015’s 3.6 per cent, but no oil exporters are expected to fall into recession.”

a.      What does the above growth rate refer to?

b.     What is recession?

c.      Explain the impacts of a recession on investments (I) , Unemployment rates  (U) , Consumption (C ).          

a)  In comparison, the economies of the Gulf Cooperation Council countries will grow by 1.7% in 2016

3.4% in 2015, before declining from modestly to 2.3% in 2017 Stability measures, the projected fiscal deficit is large, short, and medium The current account deficit is expected to reach 3.7%. GDP in 2016.

b) GDP is down for two or three consecutive months, or the economy is down. However, the National Bureau of Economic Research, which decides the official timing of the expansion and recession, called the recession "a period of six months to a year in general production, income, employment, and trade." As a result of large-scale contraction in many sectors of the economy. "Thus, along with the length of the fall, its breadth and depth are also considered in determining the official recession.       
c) recession has bad effects on investment especially on the portfolio of companies, their profit and the investments by outsiders. Inventors shortens their hand in investing in companies due to the fear of loss. It also leads biggest crisis of unemployment. When there would be no investment, employment ratio would automatically comes to the downstairs. This can be since people are logically saving usage, which aggravates the subsidence by diminishing use. They really do the appropriate thing, yet the more people they extra, the less clients spend and the less monetary downturn.



4. What are the tools of fiscal policy? What constitute a “tighter fiscal policy”?      

There are three major fiscal policies, government spending, taxes, and transfer payment. Tighter fiscal policy includes raising tax rates or cutting the government spending. It is also known as deflationary monetary policy and aims to improve public finance. 


5. “One of the challenges of governments borrowing to finance public projects is crowding out”  Explain.      

This refers to the policy “Crowding out” for getting stable and better economy. A situation in which higher interest rates reduce the cost of private investment, which in turn reduces the initial increase in total investment costs growth.  Sometimes, the government expands its fiscal expansion policy and increases its spending to boost economic activity. This raises interest rates. High interest rates affect private investment decisions. The effects of overcrowding can also lead to lower incomes in the economy.  



6. What kind of policy should the central bank adopt in these circumstances?         

Maintaining low interest rates is another way for governments to mobilize the economy, generate tax revenues, and ultimately reduce the national debt. Low interest rates make it easier for individuals and companies to borrow. In return, he spends Borrowers money on goods and services, which generate employment and tax revenue.       

7. If  UAE introduces the VAT tax next January, explain the effect of this tax on the economy.          

It has been confirmed that VAT will be implemented in the UAE and other GCC countries after an agreement between countries and incentive after the managing director of the fund International Monetary Fund, which collected GCC tariffs. Convinced of the need and importance of collecting taxes as one of the opportunities to do so. The regime will have positive and negative effects on the population of the UAE, the economy and the country as a whole. Among the positive effects, the VAT system will enhance tax compliance. It will play a key role in promoting savings and investment, because revenue collection will depend on consumption rather than income, leading to economic efficiency and justice.          

8. News since the beginning of the year are about strengthening of the dollar,  how does this impact the economy of the UAE ? Use an AD/AS model to explain the impact of a stronger dollar on the economy of the UAE. Show both short run and long run effects.        

The case of US-based companies is a bit different in that regard. When a currency is said to have appreciated or depreciated, that is always expressed against another currency. So when the dollar appreciates, it appreciates against the euro, for instance.

The immediate result would be that US-based companies living off exports would find turbulence in their maneuvers to keep selling their products abroad where currencies have lost value against the dollar. In other words, it would be difficult to sell to citizens of countries who have lost part of their purchasing power.

Article Research work prepared by:

Huda batool

Mphil English literature and language

PGD Criminology

Content writer

Strategic management expert

shuda87@yahoo.com