THE JAMAICA ACTION PARTY
J A P
The Nation's Economy
The economy of a nation is similar in many ways to that of a household. As such, there are certain basic rules that
must be followed if they are to operate properly. The most basic of these is that you cannot spend more than is
earned. If this is done you are said to be ‘living above your means’and over any extended period of time there are
certain problems that are bound to arise. To fund the excess expenditure one must resort to begging, selling assets
that have been accumulated in the past, taking money from your saving, borrowing, and in some extreme case
stealing and other dishonest means.
The fourth means, that of borrowing is by far the most common. Unlike the other means, however, this funding will
have to pay back over an agreed period of time and usually with interest. This is where a lot of people find themselves
in trouble as they are not able to repay the fund that was borrowed. In this case, if the means previously discuss have
been exhausted the person can seek to renegotiate the terms of the loan, default (not pay up ) or seek to borrow from
another source to pay the debt (borrow from Peter to pay Paul ). The process of ‘borrowing from Peter to pay Paul’
can be repeated a number of times and usually the terms of such loans become increasingly difficult. If a part of these
loans are used to fund income generating ventures, then this income can be used to repay the loan and help meet
expenditure shortfall. On the other hand if this money is used only for house keeping purposes such as paying bills,
example phone and light, and buying food, the economic state of the household will worsen leading to the point where
there is just no one left to borrow from. At such time we can say that the the person is now bankrupt as he is no longer
able to service his debt. The best thing to do is to cut back on the expenditure to bring it in line with the income of the
household. This will result in a fall in the standard of living as some things will have to be given up such as the motor
car, the cable television service or other amenities.
The economic management of a country, in a general way, operates along the same principle as that of the
household. This will help us to clearly understand the economic state which the country is in, how we got where we are
and how we can get out. The first thing to do is to work out a budget. The household income is derived from the wages
and other sources of income such as the interest paid on savings of the household members. With its income, the
household must meet all of its bills and pay for all the goods and services that it requires. These bills will include
utilities, credit cards and payment on any loan obtained. Services such as gardening and legal service will have to be
paid for if required. Also goods such as food, clothing and other supplies will have to be purchased. Any excess
income can be put aside as saving. At times it is necessary to revise the budget as an expenditure planned for may no
longer be necessary or one not planned for could arise. In this case it might be necessary to put off some expenditure
or resort to borrowing if additional funds are needed and it cannot be found from within the household from savings
etc.
Similarly the income of the country is derived from the taxes it collects and well as service charges such as stamp duty.
The country must meet all its obligations from the money it collects in taxes and service charges. There are many
obligations of the government such as the provision of health, education and security, the repair and building of
roads, schools and other infrastructure plus the payment of salaries to government employees. To do this the
government goes through what is called the budget exercise in which the programmes to be undertaken for the
budgeted year is decided and funding for them are identified. During this exercise the cabinet members meet and
identified all the things that need to be done and the amount of money that is available from taxes, service charges
and loans. When this is done the budget is then presented to the country by the finance minister after which the
cabinet members will announce how the money allotted to their ministry will be spent. It is under the various ministries
that the programmes agreed to by the cabinet will be carried out. If the total expenditure is equal to the revenue
expected to be collected, the budget is said to be balanced. If the revenue expected to be collected is less than the
amount to be spent there is said to be a budget deficit while if it is more, there is said to have a budget surplus.
During the financial year the budget may be modified due to a short fall in the revenue collected or the need to
undertake other programmes that were not planned or budgeted for. In this case the budget will be modified and a
modification to the budget called the supplementary estimate will be presented to the country. This can be done any
number of times and is referred to as the first, second or third supplementary estimate depending on which revision it
is. If addition revenue is needed this is usually found by cutting some of the programmes and redirecting the funds
allotted, introducing new taxes or resort to borrowing funds. In some case the government resorts to literally printing
the additional money that is needed to balance the budget.This always cause inflation as there is now more money
chasing the same amount of goods and services.
To fully understand what is happening in our country, there are three terms that must be clearly understood. These
are the Gross Domestic Product ( GDP ), Gross National Product ( GNP ) and Net International Reserve ( NIR ). The
GDP is the total valve of all goods and services produced in the country throughout that year. GNP is similar to GDP
but it also includes goods and services produced by the country’s nationals overseas. Most countries use GDP as a
measure of the economic activities of the country. The growth of the country is determined by comparing the GDP in
one year to that of the previous year. If it is greater, there is said to be positive growth and is usually given as a
percentage while if it is negative there is said to be negative growth and this too is usually given as a percentage. The
NIR is the foreign exchange that the country has as savings for use in any budgetary shortfall, emergency situation or
to support the local currency against devaluation.
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The economy of a nation is similar in many ways to that of a household. As such, there are certain basic rules that
must be followed if they are to operate properly. The most basic of these is that you cannot spend more than is
earned. If this is done you are said to be ‘living above your means’and over any extended period of time there are
certain problems that are bound to arise. To fund the excess expenditure one must resort to begging, selling assets
that have been accumulated in the past, taking money from your saving, borrowing, and in some extreme case
stealing and other dishonest means.
The fourth means, that of borrowing is by far the most common. Unlike the other means, however, this funding will
have to pay back over an agreed period of time and usually with interest. This is where a lot of people find themselves
in trouble as they are not able to repay the fund that was borrowed. In this case, if the means previously discuss have
been exhausted the person can seek to renegotiate the terms of the loan, default (not pay up ) or seek to borrow from
another source to pay the debt (borrow from Peter to pay Paul ). The process of ‘borrowing from Peter to pay Paul’
can be repeated a number of times and usually the terms of such loans become increasingly difficult. If a part of these
loans are used to fund income generating ventures, then this income can be used to repay the loan and help meet
expenditure shortfall. On the other hand if this money is used only for house keeping purposes such as paying bills,
example phone and light, and buying food, the economic state of the household will worsen leading to the point where
there is just no one left to borrow from. At such time we can say that the the person is now bankrupt as he is no longer
able to service his debt. The best thing to do is to cut back on the expenditure to bring it in line with the income of the
household. This will result in a fall in the standard of living as some things will have to be given up such as the motor
car, the cable television service or other amenities.
The economic management of a country, in a general way, operates along the same principle as that of the
household. This will help us to clearly understand the economic state which the country is in, how we got where we are
and how we can get out. The first thing to do is to work out a budget. The household income is derived from the wages
and other sources of income such as the interest paid on savings of the household members. With its income, the
household must meet all of its bills and pay for all the goods and services that it requires. These bills will include
utilities, credit cards and payment on any loan obtained. Services such as gardening and legal service will have to be
paid for if required. Also goods such as food, clothing and other supplies will have to be purchased. Any excess
income can be put aside as saving. At times it is necessary to revise the budget as an expenditure planned for may no
longer be necessary or one not planned for could arise. In this case it might be necessary to put off some expenditure
or resort to borrowing if additional funds are needed and it cannot be found from within the household from savings
etc.
Similarly the income of the country is derived from the taxes it collects and well as service charges such as stamp duty.
The country must meet all its obligations from the money it collects in taxes and service charges. There are many
obligations of the government such as the provision of health, education and security, the repair and building of
roads, schools and other infrastructure plus the payment of salaries to government employees. To do this the
government goes through what is called the budget exercise in which the programmes to be undertaken for the
budgeted year is decided and funding for them are identified. During this exercise the cabinet members meet and
identified all the things that need to be done and the amount of money that is available from taxes, service charges
and loans. When this is done the budget is then presented to the country by the finance minister after which the
cabinet members will announce how the money allotted to their ministry will be spent. It is under the various ministries
that the programmes agreed to by the cabinet will be carried out. If the total expenditure is equal to the revenue
expected to be collected, the budget is said to be balanced. If the revenue expected to be collected is less than the
amount to be spent there is said to be a budget deficit while if it is more, there is said to have a budget surplus.
During the financial year the budget may be modified due to a short fall in the revenue collected or the need to
undertake other programmes that were not planned or budgeted for. In this case the budget will be modified and a
modification to the budget called the supplementary estimate will be presented to the country. This can be done any
number of times and is referred to as the first, second or third supplementary estimate depending on which revision it
is. If addition revenue is needed this is usually found by cutting some of the programmes and redirecting the funds
allotted, introducing new taxes or resort to borrowing funds. In some case the government resorts to literally printing
the additional money that is needed to balance the budget.This always cause inflation as there is now more money
chasing the same amount of goods and services.
To fully understand what is happening in our country, there are three terms that must be clearly understood. These
are the Gross Domestic Product ( GDP ), Gross National Product ( GNP ) and Net International Reserve ( NIR ). The
GDP is the total valve of all goods and services produced in the country throughout that year. GNP is similar to GDP
but it also includes goods and services produced by the country’s nationals overseas. Most countries use GDP as a
measure of the economic activities of the country. The growth of the country is determined by comparing the GDP in
one year to that of the previous year. If it is greater, there is said to be positive growth and is usually given as a
percentage while if it is negative there is said to be negative growth and this too is usually given as a percentage. The
NIR is the foreign exchange that the country has as savings for use in any budgetary shortfall, emergency situation or
to support the local currency against devaluation.
Page 1 2 3
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