Question

In 2007, there were many people in Sri Lanka who have an opinion that the government should interfere more in the economy as there were some economic problems. The reason was the Sri Lankan citizens are not happy with the future of some of their private car companies like Maruthi and Daewoo. The Sri Lankan car brands were victims of low domestic demand. Most of the sales of these cars were made inside the country. Some economists wanted the jobs of the people to be saved. Some other people wanted the government to give more freedom to the companies and required no need to enter in the problems faced by the company. They believed that the freedom of the companies will be lost. The Sri Lankan government has seen itself as a referee in market issues and has avoided entry in to market issues in the past. The Sri Lankan government also is the owner of some companies in the country. Some economists were of the opinion that the government interference will regulate anti-competitive behavior. However, in the recession of 2009, when the economy was shrinking, the government was forced to spend more to stimulate demand and had to intervene heavily to save the banking sector from collapse. The government also had to offer financial support to businesses to keep them alive. Based on the above case answer the following questions ( 5 + 10 = 15 marks) Instruction: Please make sure that this question is answered using 150 - 175 words 1. What kind of economic system is followed in Sri Lanka and why? Give two reasons to justify your answer. Instruction: Please make sure that this question is answered using 250 -325 words 2. Imagine that you are the finance minister of Sri Lanka. What would you do in this situation to solve the country’s economic problems?

Answer 1

1, ANSWER

Sri Lanka is a blended economy, wherein both the private area and the state segment take part in the creation procedure of the nation

During the principal period of economic development, the legislature forced numerous limitations on imports and advanced creation locally. this way the administration attempted to empower the creation with in the country.also during this period they additionally upgraded free instruction and wellbeing administrations to the individuals

during the second stage they changed the economy from over the top government controls and given private part their space. they began empowering remote speculations and outside organizations.

despite the fact that they advanced private divisions, later during the 2000s the economic crisis influenced the privates ector.due to the fall in the worldwide economy, the imports and fares were frozen.as an outcome, numerous private area organizations who trading different merchandise were fall into crisis .the administration themselves were in a terrible stage and had to support this segment

2. ANSWER

The primary point of the legislature ought to be to fortify the local market. Expanding total interest is the most ideal approach to assist the businesses with having enough deals for the economy to thrive. This will require a total revamping of the economy. The accompanying advances can be taken by the legislature -

1. The most significant advance is to reinforce the work laws in the economy. This will empower the work class to gain more and consistent salary. This can e done by ensuring the lowest pay permitted by law and furthermore other joblessness advantages and medical coverage. On the off chance that the work class has a sense of safety about their profit, at that point their peripheral inclination to devour will increment and therefore, the aggregae request will increment.

2. Firms and organizations ought to be incentivised to work openly. This should be possible by giving some expense exclusions so the porductive movement in the economy increments. There will be more creation, and that will make greater business and that will thus help increment both the total interest just as the total flexibly.

3. The fiscal arrangement ought to be adequately used to expand interest in the economy. The more organizations are allowed to grow and contribute, the more will the per capita just as the national pay increment in the economy. This will go far in expanding the economic quality of the country.

4. Area specfic projects can be taken up to help those segments that are falling behind like the car part. The administration can give extraordinary awards and endowments as well as duty exceptions to this division and assist it with developing by additionally making a legitimate worldwide market for this area by diminishing its fare limitations.

5. Finallt, the administration needs to painstakingly adjust the fiscal arrangement alongside the money related approach with the goal that the nation is not left onto the way on swelling and cost increment. On the off chance that the financial strategy is expansionary to incite greater venture, the fiscal approach ought to be contractionary by including an assessment system that is reasonable and dynamic, and judicious government spending to enable the legislature to adhere to the income earned.

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