Government budget deficit reasons and ways of its solving

Government budget is centralized fund of money resources.A budget deficit increases likewise on account of the natural cycle of business. The business cycle comes full circle from the stages of "trough", to "expansion", to "peak" and to its "downturn" before it rotates again on the same wheel. Trough is the bottompoint before the start of the economic upturn, expansion is the continued rise in economic activities that culminates at the peak before economic events slackens into the period of downturn.

Perfect competition and its features.

Competitiveness pertains to the ability and performance of a firm, sub-sector or country to sell and supply goods and services in a given market, in relation to the ability and performance of other firms, sub-sectors or countries in the same market.In recent years, the concept of competitiveness has emerged as a new paradigm in economic development. Competitiveness captures the awareness of both the limitations and challenges posed by global competition, at a time when effective government action is constrained by budgetary constraints and the private sector faces significant barriers to competing in domestic and international markets.“Competitiveness is defined as the ability to produce goods and services which meet the test of international markets, while at the same time maintaining high and sustainable levels of income or, more generally, the ability of (regions) to generate, while being exposed to external competition, relatively high income and employment levels’.”

Imperfect competition and its features

1. Existence of large number of firms:
The first important feature of monopolistic competition is that there are a large number of firms satisfying the market demand for the product. As there are a large number of firms under monopolistic competition, there exists stiff competition between them.
(2) Product differentiations:
· The various firms under monopolistic competition bring out differentiated products which are relatively close substitutes for each other. So their prices cannot be very much different from each other. Various firms under monopolistic competitors compete with each other as the products are similar and close substitutes of each other

(3) Some influence over the price:
· As the products are close substitutes of others any reduction of price of a commodity by a seller will attract some customers of other products. Thus with a fall in price quantity demanded increases. It therefore, implies that the demand curve of a firm under monopolistic competition slopes downward and marginal revenue curve lies below it.
(4) Absence of firm's interdependence:
· Under oligopoly, the firms are dependent upon each other and can't fix up price independently. But under monopolistic competition the case is not so. Under monopolistic competition each firm acts more or less independently. Each firm formulates its own price-output policy upon its own demand cost.
(5) Non-price competition:
· Firms under monopolistic competition incur a considerable expenditure on advertisement and selling costs so as to win over customers. In order to promote sale firms follow definite -methods of competing rivals other than price. Advertisement is a prominent example of non-price competition.
(6) Freedom of entry and exit:
· In a monopolistic competition it is easy for new firms to enter into an existing firm or to leave the industry. Lured by the profit of the existing firms new firms enter the industry which leads to the expansion of output. But there exists a difference.

Government regulation of the economy: aims and instruments

Government regulation of the economy — a purposeful and active impact of the state and supranational authorities on the functioning and development of integral economic system (and thus on its expanded reproduction) by the use of economic laws and the resolution of economic contradictions using certain combination of forms and methods.The essence of state regulation of the economy comprehensively reveal its basic functions, which are, on the one hand, a logical extension of state functions, their specificity, and on the other due to the inability of the market mechanism of self-regulation and monopoly regularity to ensure the stable development of the economic system.

main government instruments in this case are the financial and monetary policies and a variety of government programs with which the state is able to smooth out economic fluctuations and to create a more modern, competitive operating environment.This is most clearly the action of indirect methods is shown during a recession or overheating of the economy, when stabilize the situation can only state holding a certain fiscal and monetary policy.