Question

Canadian Government short answer questions. Please answer all as they are really related:

a) How are governments different from firms?

b) How big is the government sector now globally compared to 100 years ago? Why did the government grow so much since 1960?

c) What are "government transfers"?

d)Suppose the government stops taxing gasoline. What would this do the market for gasoline? Would there be any other effects?

Answer 1

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Question:

a). Answer:

How are governments different from firms?

A firm may be private or public or both (PPP) but government is totally different from it. The government is the group of people with the authority to govern a country or state; a particular ministry in office. The objective of the firms is maximizing profit but the main objective of the government is maximizing social welfare. The firm do its own business and concentrate on its own business world and utilize its inputs and resources to get economies of scale to maximize its own profit. But the area of work of the government is very wide like, political, social, economical etc. Businesses seek maximum efficiency and the governments seek sufficient efficiency. The firms generate revenue though sales their product but the government generates its revenue through taxation. The firm has own money but the governments have no money.  The government  have only what they take from their citizens, either in taxes or by inflation. The government support and help to the non-productive members or weaker section of the society but the firms fire unproductive member (employees).

b). Answer:

How big is the government sector now globally compared to 100 years ago? Why did the government grow so much since 1960?

The roles and responsibilities of the government have changed with time. Now most of the countries are following democratic capitalism. In the capitalism system the interference of the government is comparatively lower but still the size of role and responsibilities of the government increased. Democratic government is based on equality, liberty and brotherhood and work for maximizing social welfare. The major social and economic and national securities area is covered and handled by the government. The government play an important role in public health, education, national security or defense and other social development activities. In come countries the government play an important role in financial system like, banking, insurance etc. After the 1960 the the roles and responsibilities of the Canadian government has increased such as- respect of such as education, health care, some natural resources, and road regulations etc. The British control ended in 1982, when the British Parliament passed the Canada Act, which formally made Canada responsible for all changes to its own constitution that increase the roles and responsibilities of the government in Canada.

c). Answer:

What are "government transfers"?

Government transfer transfers refer to payments (direct cash transfers) made to individuals by the federal government through various social programs such as- social insurance programs, welfare, and business subsidies, unemployment benefits etc. According to a data - Under Harper's TTP plan, from 2010 through 2013 received a combined total of over $2.2-billion through the TTP program. In 2017–2018, the total amount of the Equalization program was roughly 18.3 billion CAD. According to the Parliamentary Budget Officer September 3, 2020 report, in 2018-2019 total federal transfers—which included $38.6 billion through the Canada Health Transfer, $14.2 billion through the Canada Social Transfer, and $19.0 billion through the Equalization transfer had increased over the ten-year period from $47.1 billion in 2008–2009 to $71.7 billion, which represents an average annual increase of 4.3 per cent with an inflation adjustment of 2.7 per cent a year.

d). Answer:

Suppose the government stops taxing gasoline. What would this do the market for gasoline? Would there be any other effects?

Stop taxing gasoline will decrease the cost of gasoline that will be beneficial for the transportation sectors that will affect the cost of other sectors also and help in decreasing cost. But other side it will reduce the government revenue. Taxes are the main source of government revenue. Stops taxing will increased demand in gasoline market and people consume more. It will help in managing cost in the other sectors that is directly or indirectly affected by the transportation cost. But it will not beneficial for the government. It is also possible that increasing demand increase gasoline price in medium or long run.

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