AIOU 0402 Solved Assignment 4 Spring 2025 ~ Education For All

AIOU 0402 Economics Solved Assignment 4 Spring 2025

AIOU 0402 Assignment 4

Q.1 What is protection? Enumerate its evolution. Also, discuss merits and demerits of protection in detail.

Answer:

Protection refers to an economic policy where a country safeguards its domestic industries from foreign competition using tariffs, quotas, subsidies, and other trade barriers.

Evolution of Protection:

Mercantilism (16th-17th centuries): Countries prioritized exports over imports to accumulate wealth.
19th Century: Protectionist policies were widely implemented to promote industrialization.
20th Century: Shift towards free trade with organizations like WTO supporting globalization.

Merits of Protection:

Shields domestic industries from foreign competition.
Creates jobs and strengthens local businesses.
Encourages industrial development and innovation.

Demerits of Protection:

Leads to higher prices for consumers.
Causes inefficiency in protected industries.
Can result in trade wars and international disputes.

Q.2 What are public revenues and their important sources? Also, discuss the canons of taxation in detail.

Answer:

Public revenues are the funds collected by the government to finance expenditures and public services.

Sources of Public Revenue:

Tax Revenue: Income tax, corporate tax, property tax, etc.
Non-Tax Revenue: Fees, fines, grants, interest on loans, etc.
State-Owned Enterprises Profits: Earnings from government-owned businesses.

Canons of Taxation (Adam Smith's Principles):

Canon of Equity: Taxes should be fair and based on one's ability to pay.
Canon of Certainty: Taxpayers should know how much, when, and how taxes are collected.
Canon of Convenience: Taxes should be easy and convenient to pay.
Canon of Economy: Collection of taxes should be cost-effective for the government.

Q.3 (a) Discuss how fiscal policy plays its role in the economic stability of a country.

Answer:

Fiscal policy involves government spending and taxation to regulate the economy and ensure stability. It helps by:

Stimulating Growth: Increasing spending during recessions and reducing taxes.
Controlling Inflation: Reducing spending and increasing taxes when the economy overheats.
Redistributing Wealth: Providing welfare programs to reduce inequality.
Managing Public Debt: Ensuring long-term financial sustainability.

(b) Discuss different sources of income for the provincial government.

Answer:

Provincial Taxes: Sales tax, excise duty, property tax.
Transfers from Federal Government: Grants and shared revenues.
Non-Tax Revenue: Fees, fines, licenses.
State-Owned Enterprises: Earnings from public sector businesses.

Q.4 What is meant by economic development? Also, discuss in detail different economic factors which play an important role in the development of a country.

Answer:

Economic development is the process of improving a country's economic conditions, increasing income levels, and enhancing living standards.

Key Factors Influencing Economic Development:

Human Capital: Education, healthcare, skilled workforce.
Physical Capital: Infrastructure, technology, machinery.
Natural Resources: Availability of minerals, water, oil, etc.
Institutional Framework: Effective governance, legal systems.
Innovation and Entrepreneurship: Encouraging business startups and inventions.
Trade and Investment: Access to international markets and foreign direct investment.

Q.5 Define economic planning? Also, discuss in detail the process of economic planning in a country like Pakistan.

Answer:

Economic planning refers to a systematic approach by the government to allocate resources and set economic objectives for growth.

Economic Planning Process in Pakistan:

Setting Economic Goals: Short-term and long-term objectives are defined.
Conducting Economic Surveys: Assessing the current financial situation.
Formulating Policies: Creating strategies for different sectors.
Budget Allocation: Distributing resources efficiently.
Implementation and Monitoring: Government bodies ensure execution.
Policy Adjustments: Revising plans based on feedback and changing conditions.