The Effects of Government Intervention Essay Example for Free

The Effects of governing body Intervention Es jointWhat is the government? What is the government agency of the government? How does the government twine the economy? What pitifullife we say ab appear the effects of the government yield in Romania? These ar some of the questions that wewill try to answer during our case of study.We are citizens of a gild, and our society is based on proper rules enacted and en pressure by the high powers of our secernates. We need to act responsibly and declare ourselves, as much as we can, regarding this problem. The people from the government, how did they get there? How is the government organized? How are they elect? By which criteria are these people elected? What are their attributes and what are their initiatives? We must know if they learnly influence our lives, our economyTaxes, import and export restrictions, tariffs, unscathedsale interest rates are barely a set off of the governments duties to be established. Is the governments capital, in fact our money? And if they are our money, how do they spend it, on what, and why? These are some things that must concern us.And now, we should focus on our country, Romania, and, of course, on ourselves. Even though Romania is a country of considerable potential in most of the fields, its economy is rattling fragile. Our economy is strong related to the European economy, and some of these connections between our economy and the international economy are made by the government.Most of the people tend to blemish the president, the government, the parliament etc. for the fragility of our economy, and to us it skill seem not to work, but we drop to bear in mind that this is the effect of the whole nations actions and of the worlds as well.In the pages that follow we presented subjectively and objectively our ideas concerning the effects of the governments influence on Romanias economy, starting with explaining that is the government and which is the govern ments eccentric in the economy.The government activity political sympathies refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a adduce at a given time, and to the carcass of government by which they are organized. government is the means bywhich state policy is enforced, as well as the mechanism for determining the policy of the state. A form of government, or form of state governance, refers to the set of political institutions by which a government of a state is organized. Synonyms intromit regime fount and system of government.The word government is derived from the Latin verb gubernare, an infinitive meaning to govern or to manage. The administration is the ordinary authority of executive power that functions on the basis of the vote of confidence granted by Parliament, ensures the achievement of the countrys domestic and foreign policy and that exercises the general leadership of mankind administration. The Gove rnment is appointed by the President of Romania on the basis of the vote of confidence granted to the Government by Parliament.ObjectivesThe Government has the fiber of ensuring balanced functioning and development of national economic and social system, and its connection to the world economic system art object promoting national interests. The Government is organized and operates in accordance with constitutional provisions, on the basis of the Government program approved by Parliament.OrganizationThe Government consists of old Minister and Ministers. Prime Minister leads the Government and coordinates the activities of its members, in compliance with their effectual duties. The working apparatus of the Government is composed of the working apparatus of the Prime Minister, Secretariat General of the Government, departments and other similar organizational structures with specific tasks set by Government Decision.legislative processThe Government adopts decisions and ordinance s.Decisions are issued for law enforcement organization. Ordinances are issued under a special enabling law, indoors the limits and conditions specified by it. The decisions and ordinances adopted by the Government are signed by Prime Minister, countersigned by the Ministers who are duty bound to implement them and are published in the Official Gazette. The non publication entails the absence of a decision or ordinance. Decisions with military character shall be conveyed only to the institutions concerned.Legislative initiativesThe following public authorities start the right to initiate draft public policy documents and draft legislative acts for toleration / approval by the Government, according to their tasks and activity field Ministries and other specialized bodies of central public administration, subordinated to the Government, and autonomous administrative authorities specialized bodies of central public administration subordinated or coordinated by Ministries, by th e Ministries under whose subordination or coordination they are Prefects, county councils, the General Council of Bucharest, according to the law, through the Ministry of Interior and Administrative Reform.Governments government agency in the EconomyWhile consumers and producers make most decisions that mold the economy, government activities exact a mightily effect on the Roumanian economy in at least five areas. Stabilization and Growth. perhaps most all important(p)ly, the federal government guides the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and equipment casualty stability. By adjusting outlay and tax rates (fiscal policy) or man age the money supply and controlling the use of ascribe ( fiscal policy), it can slow d avouch or speed up the economys rate of growth in the process, modify the level of determines and employment. The government could instill the economy in multiple ways, but the most common cha nges that can be made to influence the economy are (1) Taxes (2) Import Restrictions (3) Wholesale Interest Rates and (4) Government Speeding.TAXESTaxation understandably affects the economy by redistributing money from consumers and producers to the government coffers. The higher(prenominal)(prenominal) the tax, the less people have to spend, the less aggregate demand total demand there is in the economy.IMPORT RESTRICTIONSWhen a country uses protectionism to shield domestic producers from their own inefficiency and inability to compete with foreign firms, they may enact quotas or tariffs. A quota is when there is a maximum amount of a good that can be imported into the country, where imports that exceed the limit have either the responsible parties prosecuted for breaking the law or the goods being turned away. Tariffs are when the price of imports is artificially inflated with a tax, in order to make them less attractive to consumers that are price sensitive. The higher the quot as and tariffs, the higher the prices of those penalised goods in the economy, which in turn will negatively affect aggregate demand.WHOLESALE arouse RATESWholesale interest rates are the rates at which the central bank loans out money to retail banks, which in turn loan out their money to consumers and producers at a higher rate (the difference, in a very basic sense, is their profit margin, or revenue minus costs). If the in large quantities interest rates are increased, then retail banks must also increase their rates, otherwise their vocation would become less profitable (or unprofitable). For large purchases, producers (e.g. investments) and consumers (e.g. buying a home) need loans, since they do not have sufficient cash on-hand. Interest rates are effectively the price of borrowing money and because affects the Consumption and Investment components of gross domestic product (Consumption + Investment + Govt. Spending + Net Exports). (A small caveat, however, that central b anks are created by legislation but are not run by government their actions are independent of politicians agendas.) governing body SPENDINGGovernment Speeding (revenues filln from taxes, mentioned above) creates what is known as the Spending Multiplier. When the government consumes, called Government Spending, it is demanding goods and go in the economy. However, that demand in turn generates more demand than a single consume, because of not only the size of the demand (the government has a lot more money than you do) but also the type of demand (e.g. building infrastructure benefits everybody, as opposed to building a closed-door mansion) government spending affects aggregate demand. The spendingmultiplier, or how much additional demand is generated from each dollar of government spending, is mensural as follows Change in Equilibrium divided by Change in Investment.Case get hold of RomaniaRomania is a country of considerable potential rich agricultural lands, diverse power sources (coal, oil, natural flatulence, hydro, and nuclear), a substantial industrial base encompassing almost the full range of manufacturing activities, an educated work force, and opportunities for grow development in tourism on the Black Sea and in the Carpathian Mountains.The Romanian Government borrowed hard from the West in the 1970s to build a substantial state-owned industrial base. Following the 1979 oil price shock and a debt rescheduling in 1981, Ceausescu decreed that Romania would no longer be subject to foreign creditors. By the end of 1989, Romania had paid off a foreign debt of about $10.5 billion through an unprecedented private road that wreaked havoc on the economy and living standards. Vital imports were slashed and food and fuel strictly rationed, while the government exported everything it could to earn hard currency. With investment slashed, Romanias infrastructure fell behind its historically poorer Balkan neighbours.Since the fall of the Ceausescu reg ime in 1989, successive governments sought to build a Western-style market economy. The pace of restructuring was slow, but by 1994 the legal basis for a market economy was largely in place. After the 1996 elections, the coalition government try to eliminate consumer subsidies, float prices, liberalize exchange rates, and put in place a tight monetary policy. The Parliament enacted laws permitting foreign entities incorporated in Romania to purchase land. Foreign capital investment in Romania had been increase rapidly until 2008, although it remained less in per capita terms than in some other countries of East and Central Europe.Romania was the largest U.S. employment partner in Eastern Europe until Ceausescus 1988 renunciation of most favoured nation (MFN, or non-discriminatory) trading attitude resulted in high U.S. tariffs on Romanian products. Congress approved restoration of MFN status effective November 8, 1993, as part of a new bilateral trade understanding. Tariffs on mo st Romanian products dropped to zero in February 1994, with the inclusion of Romania in the Generalized System of Preferences (GSP). Major Romanian exports to the U.S. include shoes, clothing, steel, and chemicals. Romania signed an Association engagement with the European Union (EU) in 1992 and a free trade reason with the European Free work Association (EFTA) in 1993, codifying Romanias access to European markets and creating the basic framework for further economic integration.At its capital of Finland Summit in celestial latitude 1999, the European Union invited Romania to establishedly begin accession negotiations. In December 2004, the European Commission concluded pre-accession negotiations with Romania. In April 2005, the EU signed an accession treaty with Romania and its neighbour, Bulgaria, and in January 2007, they were both(prenominal) welcomed as new EU members.Romania suffered through a deep economic recession root with the 2008 spherical financial crisis, but s hould return to supreme if very modest growth by the end of 2011. due to rapidly deteriorating economic conditions, a ballooning budget deficit, and large external imbalances, the Romanian Government was forced to conclude a 2-year, $27 billion financial care package with the International Monetary stemma (IMF), the European Commission, and the World bank in March 2009. Under the terms agreed with the IMF, the Romanian Government embarked on a difficult austerity program to reduce the budget deficit, cut public empyrean employment, and restructure local and national government agencies. Austerity measures included a 25% cut in public sector wages, a hike in the national value added tax (VAT) rate from 19% to 24%, and thousands of layoffs. GDP declined by 7.1% in 2009 and a further 1.3% in 2010, but the government succeeded in meeting IMF-agreed deficit targets despite strong opposition to the austerity measures from labour unions.In late 2010 and former(a) 2011 the government also pushed several important pieces of reform legislation through Parliament, includingpension reforms, an overhaul of public sector pay systems, and modernization of the labour code. The final IMF review under the 2009 agreement, conducted in February 2011, declared the agreement a success in stabilizing the economy and setting the stage for a return to growth. A new 2-year precautionary agreement between Romania and the IMF, effective March 2011, focuses on deepening structural reforms and restructuring or privatizing unprofitable state-owned enterprises.Privatization of industry was first pursued with the transfer in 1992 of 30% of the shares of some 6,000 state-owned enterprises to five private ownership funds, in which each adult citizen received certificates of ownership. The remaining 70% ownership of the enterprises was transferred to a state ownership fund. With the assistance of the World pious platitude, European Union, and IMF, Romania succeeded in privatizing most ind ustrial state-owned enterprises, including some large state-owned energy companies. Romania completed the privatization of the largest commercial bank (BCR) in 2006. Two state-owned banks remain in Romania, Eximbank and the National Savings Bank (CEC), after an attempt to privatize CEC Bank was indefinitely postponed in 2006. Four of the countrys eight regional electricity distributors have now been privatized.Privatization of natural gas distribution companies also progressed with the sale of Romanias two regional gas distributors, Distrigaz Nord (to E.ON Ruhrgas of Germany) and Distrigaz Sud (to Gaz de France). Further progress in energy sector privatization has been delayed as the government is contemplating the creation of two integrated, state-owned energy producers. However, this bundling scheme has been challenged in court and is also under review by the Romanian Competition Council and by competition authorities at the European Commission. Romania has a nuclear power whole kit and boodle at Cernavoda, with one nuclear reactor in operation since 1996 and a second one fit in the fall of 2007.The return of collectivized farmland to its cultivators, one of the first initiatives of the post-December 1989 revolution government, resulted in a short-term decrease in agricultural production. Some four million small parcels representing 80% of the arable surface were returned to originalowners or their heirs. Many of the recipients were elderly or city dwellers, and the slow progress of granting formal land titles remains an obstacle to leasing or selling land to active farmers.Financial and technical assistance continues to flow from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romanias reintegration into the world economy. The IMF, World Bank, European Bank for Reconstruction and Development (EBRD), and European Investment Bank (EIB) all have programs and resident representatives in Romania. U.S. chest of drawers for International Development (USAID) programs were phased out completely in 2008, except for Small Project Assistance Grants, which are still available through the Peace Corps. According to the National Office of the Trade Register, which measures foreign direct capital registered and disbursed to firms, between 1990 and November 2010 Romania attracted a total of $37.91 billion in foreign direct investment, of which the U.S. represented 2.59%. The demonstrable level of U.S. investment, however, is underreported as much of it flows to Romania through European subsidiaries of U.S. companies.After years of consistently high pompousness in the 1990s, Romanias inflation rate steadily decreased through 2004, only to rise once more on with high GDP growth rates of 4% to 8% through 2008. The deep recession beginning in late 2008 dramatically reduced inflationary pressures, but the VAT tax hike from 19% to 24% imposed in mid-2010 reversed that trend and pushed prices h igher. Stoked also by rising global food and energy prices, inflation hit an annualized rate of 8% at the end of 2010, the highest in the EU.The IMF has been critical of Romanias low rate of tax collection and poor enforcement mechanisms as a medium- to long-term impediment to growth. Tax arrears are slightly decreasing, but Romania still has one of the lowest percentages in the EU of revenues collected, at 33% of GDP in 2010. The current account deficit had been a concern, as it reached 13.6% of GDP in 2007 and 12.4% of GDP in 2008. However, due to the recession, the current account deficit dropped to 4.2% of GDP in 2010. Deteriorating education and health services and aging and inadequate physical infrastructure continue to be seen as threats to future growth.Sometimes a encounter is worth a thousand wordsConclusionAs a conclusion we can say that governments intervention in the economy can have both a positive and a negative influence on the market. Government intervention does n ot always end up the way it was intended or the way in which economists theories say it would. A enthralling part in the study of Economics is that the law of unintended consequences often comes into play events can affect a particular policy, and consumers and businesses rarely behave precisely in the way in which the government might want We will consider this in more detail when we consider government failure. One important thing to remember is that the effects of different forms of government intervention in markets are never unbiased thus financial support given by the government to one set of producers rather than another(prenominal) will always create winners and losers.Taxing one product more than another will alike have different effects on different groups of consumers. A concret example of too much government intervention is the following. Lets assume that in a time of recession, a government makes and agreement with the banks to lower interest rates and people will st art buying houses and other goods on loan.As time goes by, government debt also rises and thus they will be obliged to print out their own money. Printing their own money has a negative impact on the inflation rate and money value will go down. Also, after the recession, the interest rates will go up again and people will end up losing their previously bought goods. Nevertheless in most cases, the governments intervention proved to be efficient and actually helped the market economy. It all depends on the people that take the decisions and they need to take into consideration any factors that can influence the result of their decision.The European Union provides me the shell opportunity to connect with people Europe and to develop my ability of communication. I think is very important to get in touch with different people from different cultures and different countries.