TÜRK EKONOMİSİ - Deneme Sınavı - 3

A pure public good is nonrival in consumption. This means that once the good is provided, the additional resource cost of another person consuming the good is zero. A pure public good is also nonexcludable as it is either very expensive or impossible to prevent anyone from consuming the good who is not willing to pay for it.

Keynesian fiscal policy had a significant impact on the increase in the share of public expenditures in GDP. After the Great Depression of 1929, Keynesian economics took over in almost all countries’ economic policies. The idea that the state should take an active role in the economy was adopted, and thus public expenditures were used as a fiscal policy tool.

In the old classification of budget expenditures implemented in Turkey until 2003, budget expenditures consisted of current expenditures, capital expenditures, and transfer expenditures.

It is not social spendings. however it is social security.

Informal economy in Turkey is estimated to be around 30% of the economy. Source: Medina, L. and Schneider, F., 2018. Shadow economies around the world: what did we learn over the last 20 years?

Public Net Debt Stock in Turkey as a share of GDP is shown for the period of 2001-2018. There are 4 main factors determining public net debt stock:

I. Total Public Gross Debt Stock

II. Central Bank Net Assets

III. Public Sector Assets

IV. Unemployment Insurance Fund Net Assets.

Privatization gained speed post-2003, and in 2013, approximately 12.5 billion dollars of revenue was obtained from privatization.

Fiscal policy can also contribute to pushing aggregate demand beyond potential GDP in a way that leads to inflation. This is sometimes known as an “overheating economy” where demand is so high that there is upward pressure on wages and prices, causing inflation. In this situation, a contractionary fiscal policy involving government spending cuts or tax increases can help to reduce the upward pressure on the price level. Where expansion typically leads to deficits, contractionary fiscal policy is usually characterized by budget surpluses. Mainly, when inflation is a problem, the policies which could curb the inflation expectation in the future should be implemented by policymakers.

To illustrate how the government can use fiscal policy to affect the economy, let’s consider an economy that is experiencing a recession. The government might lower tax rates to increase aggregate demand and stimulate economic growth. This is known as expansionary fiscal policy. The logic behind this approach is that when people pay lower taxes, they have more money to spend or invest, which fuels higher demand.

Fiscal policy has important effects on the economy in the short run. Expansionary fiscal policy, either a cut in taxes or an increase in government spending, leads to an increase in aggregate demand, thus causing both aggregate output and inflation to rise in the short run.

According to economic classification, the evaluation of budget expenditures allows us to evaluate the results of the applied economic and social policies. With this type of classification, we can see which kind of payments are allocated, and the measures, if necessary, can be taken accordingly.

In the old classification of budget expenditures implemented in Turkey until 2003, budget expenditures consisted of current expenditures, capital expenditures, and transfer expenditures. Since 2004, budget expenditures have been grouped under two groups as non-interest expenditures and interest expenses in the analytical budget classification

The years 1945-1950 were the transition period from the one-party system to the multi-party system. The Democrat Party, which came to power after 1950, adopted the development policies under the leadership of the private sector and reduced the share of the public sector in the economy

Taxes are levied on income, expenditure, and wealth. Income Tax and Corporate Tax for income taxes; Value Added Tax (VAT) and Special Consumption Tax (SCT), Tax on Banking andn Insurance Transactions for expenditure taxes; Motor Vehicle Tax (MVT), Inheritance and Transfer Tax and real estate tax for wealth taxes can be given as examples.

One purpose of the tax system is to provide adequate financing for public services, while the other is to make the income distribution fairer. The tax system should also not have a deterrent effect on the economic activities of entrepreneurs and employees.

Taxes on international trade and transactions, which ranges from 15% to 18%, also play an essential role in budget revenues.

The ratio of the total tax revenues collected from the economy to the GDP to finance public expenditures is called tax burden. It includes direct taxes, in terms of the top marginal tax rates on individual and corporate incomes, and overall taxes, including all forms of direct and indirect taxation at all levels of government, as a percentage of GDP

The public sector is obliged to borrow if it cannot cover public expenses with public revenues. The public sector borrows from two sources as internal and external.

Debt management is crucial in achieving financial stability in an economy. Whether an economy is healthy cannot be understood only by looking at the debt stock, which can lead to misjudgments.

There are 4 main factors determining public net debt stock:
I. Total Public Gross Debt Stock
II. Central Bank Net Assets
III. Public Sector Assets
IV. Unemployment Insurance Fund Net Assets.