Explain how each of the following events would affect the national budget deficit, as it is...

Explain how each of the following events would affect the national budget deficit, as it is measured by government. Also make sure that you distinguish between one-time effects and permanent effects if appropriate.

If the government decides to sell the botanical garden to a private investor who will build a major tourist attraction in the area.
| The parliament approves $300 million for the construction of a monorail between the Suva and Nausori corridor. The government expects to save $10 million in maintenance costs per year for the next fifty-year life of the project.
| Government decides to completely privatize the Fiji National Provident Fund and removing all government involvement with payroll taxes.

Solutions

Expert Solution

i. If the government decided to sell the botanical garden to a private investor who build a major tourist attraction in the area, it will have positive effect on national budget deficit. The sale value of the garden has one time positive effect and the tax gained from tourist revenue will have permanent positive effect. So, in both way it will have positive effect on national budget deficit.

ii. The construction of monorail will have one time negative effect on budget but the revenue collected from this service will have permanent positive effect.

iii. Government's decision to privatize Fiji National Provident Fund will have both one time and permanent positive effect. Sale proceed from selling of Provident has one time positive effect. Tax collected on profit of provident fund will have permanent effect. Profit from business will not come to government and it will have negative effect on national budget.

jeff jeffy answered 6 months ago

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