Crowding Out Effect (Macroeconomics)

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Course: Macroeconomics

Sec: 04

Instructor: Biplob Kumar Nandi

Lecturer

Department of Economics

Assignment Submission

Group Name: “Motivators”

Group Members:

|Name: |ID No: | |Himel Roy |2010-3-10-121 | |Md. Imrul Hasan |2010-3-10-270 | |Md. Kamruzzaman |2010-2-10-326 | |Syed Nagib Mahfuj |2010-3-10-172 | |Md. Zubair Hossain |2010-3-10-109 |

Assignment Topic:

“Key issues in Budget 2012”

• Is crowding out key challenge for investment in Bangladesh?

Crowding-Out: Govt. often borrows money to fund additional spending. Increased Govt. borrowing tends to increase market interest rates. The problem is that the Govt. can always pay the market interest rate but there comes a point when corporations and individuals can no longer afford to borrow. That problem is called crowding out. Because of this crowding out effect private investment started to fall.

Bangladesh National Budget: 2011-12

The total Budget expenditure of (2011-12) is tk. 1,635.89 Billion. Here we have shown that the budget resources are coming from which sectors. Most of the portion (56.2%) will come from Tax Revenue (NBR).

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Non-Development & Development Budget: 2011-12

(Taka 1,635.89 Billion)

➢ Govt. will collect tk. 1,18,385 crore from revenue in FY2011-12. Through this amount govt. won’t be able to cover the whole budget. So this budget has deficit and govt. will cover it from the domestic and foreign financing. Which included bank borrowing, non bank borrowing from own country and grants, loan from foreign assistance. We have shown Govt. Revenue receipts, Domestic receipts & foreign receipts of FY2011-12.

REVENUE RECEIPTS: (Taka in crore)

|Description |Budget 2011-12 |Revised 2010-11 | |TAX REVENUE | | | |NBR Portion: |91,870 |75,600 | |Non-NBR Portion: |3,915 |3,452 | |Total Tax Revenue: | | | | |95,785 |79,052 | |NON-TAX REVENUE: |22,600 |16,135 | |Total Revenue Receipts: |1,18,385 |95,187 |

DOMESTIC RECEIPTS: (Taka in crore)

|Description |Budget 2011-12 |Revised 2010-11 | |BORROWING FROM BANKING SYSTEM(NET) |...
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