Page 86 - DMGT545_INTERNATIONAL_BUSINESS

Unit 5: Political and Economic Environment

a direct link between government and industry but major efforts by government to alter income notes
distribution have considerable influence on the structure of household purchases and therefore
on the pattern of demand for industrial products.
The fourth function is the stabilization of the economy by attempting to reduce fluctuations in
income and employment and to control movements in the general price level. The effects of
this action can be seen in both the volume and the mix of transactions between the government
and the rest of the economy. Policy models of the economy which place particular emphasis
on the control of the money supply and interest rates will pay close attention to the size of the
government budget deficit/surplus. Therefore, no particular transaction with the private sector
is solely identified with this function except perhaps for the interest paid by government to
firms and households as a payment for holding government debt accumulated in the course of
financing past government deficits.

self assessment

Fill in the blanks:
4. .................. country markets are at different stages of development.
5. .................. per capita provides a very useful way of grouping these countries.

6. There are .................. types of economic systems: capitalist, socialist and mixed.
7. The world economy has changed profoundly since .................. .
8. The international marketer is fortunate in having a substantial body of data available that
charts the nature of the environment on a .................. basis.

Task Discuss factors hindering Indian economy and its growth.

5.2.6 Budget

Every year democratic countries present, for the approval of their parliaments, a budget alongside
which there will be published extensive information on the central government’s finances,
including accounts of past years. In this respect governments have to achieve certain standards of
accountability and audit. It is taken for granted here that these standards are being met and this
enables us to concentrate on the method of presentation of accounting data by the government
which gives us the best idea of its structure and size in relation to the rest of the economy. While
accounting and audit standards will require the government to produce full information on the
responsibility of each main administrative unit for its use of authorized funds, what is needed
here is an economic classification which enables us to identify government transactions which
have their counterpart in receipts and payments of other major sectors of the economy presents
such a classification is a typical extract from data supplied by governments when they are putting
forward the annual budget. When considering the government’s place in the economy and its
impact on business, the following check-list of questions should be applied.

lovely Professional university 81