Exam 3 Review

Exam 3 Review - Natural Resources Taxed - Government earns...

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Natural Resources Taxed - Government earns income and spending through taxes, from the public consumption, wealth, and employment. With a taxed income a government has more of the incentive to put the money back into public goods (health & education), creates consumer confidence and a healthy economy. (Diversification of income) However there are lots of places where things could go wrong Untaxed - government receives money from natural resources, loans, and foreign aid. This money becomes an excessive amount of disposable income, which is usually spent on either private goods or the military. The public however is usually left out in this kind of economy. The government has no incentive to be accountable, the "pot of money" the government has does not come from the public, much less of an incentive to give back to the public. Depending on where a governments income comes from, the public or from resources and aid, they will have a different opinion on public welfare and public goods spending. 2) Disposable income- Amount of money a government has for spending after income taxes. Military, private goods, public goods. 3) Untaxed Income - Accessibility & Mobility - Unstable Untaxed income economies - creates less consumption, no public goods, weak economies, commodity price shocks, not much diversification, economic fractionalization, no incentive to invest back in the people, dependency on aid, resources, loans, wealth is more immediate, relative deprivation. Stable untaxed income economies – since the people aren’t taxed, they don’t care and they are less susceptible to shocks in the economy * why is some untaxed income more dangerous than others? :
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Mobile Immobile Access (for rebels) Alluvial Diamonds (Sierra Leone) (most dangerous place to be, light weight, high value) No Access (for rebels) Foreign aid (safest from the government perspective) Oil, Offshore Refineries, primary diamonds that you have to dig for, aluminum ore If you’re a rebel, can you count on the good in the future? Yes if its immobile, no if its mobile because, for example, foreign aid can be retracted What kind of conflict should we expect? Widespread? Point (specific location) Diffuse Proximate to state power Coups or state control (small states – Kuwait, Equatorial Guinea) Civil war, rebellion (Ivory Coast) Distant (Frontier) Secession (e.g. Chechnya, South Sudan, Angola) (e.g. oil enclaves in Cabinda) Warlordism (e.g. Colombia-huge fields of coca out in the jungle, Afghanistan) (e.g. Somalia- pirates) 4) Dutch Disease - When a state starts to make large exports of one natural resource abroad, rates go up and foreign states don't invest into state, much less investment and domestic consumption. Exports +, Exchange Rates +, Exports get more expensive, imports are cheaper. Starts to hurt other parts of the economy. Slums, expensive cities, unemployment, mass migration. Oil exports makes other exports
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Exam 3 Review - Natural Resources Taxed - Government earns...

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