Government Investment And Financing Problems

Government investing and financing appeared at the end of I 940s, on the basis of equality and efficiency. It mainly invests in industries that are associated with the development of national economy such as basic industry, new-technology industry and so on, whereas business capital enters those industries with difficulty and unwillingness. So, government investing and financing has not only general functions of investmental and financial activities but also obvious policy sense. It becomes important means to allocate resources, enhancing the economic development and growth around the world. Market failure due to non-rival consumption and non-excludability and their combined causes. The government must take actions to make-up under investment in industries with positive externality. To stabilize and develop economy, the government uses such means as investing and financing to get rid of efficiency loss during business cycle as follows: when macro economy appears too hot, the government may control investment inflation by accumulating private capital to cut down general investment. While in economic depression, the government may increase investmental and financial capital, thus stimulating effective demand and improving economic growth. It is meaningful for China to study issues about government investing and financing not only in theory but also in reality. The full text consists of eight chapters. Chapter one: mainly introduce the definition, characteristics and functions of government investing and financing. Chapter two: analyze the theoretical basis of government investing and financing. The government which stands for the public universally plays an important role in economic circle. Its functions will decide the generation and development of government investing and financing .The government has to intervene in 揗arket Failure?because of the existence of public goods and externality. Public goods Abstract refers to those that can be shared together in the sense that each individual抯 consumption of such a good leads to no subtraction from that of any other individual抯. It has two characteristics: non-rivalness in consumption and non- excludability. When public goods are provided through the market, idle public goods and efficiency loss in allocating resources will emerge. So it is important for the government to provide public goods and services, its economic functions decide the means and the ranges of government investing and financing. Chapter three: macroeconomic effects of government investing and financing. The reason why all governments pay regards to government investing and financing is that it has functions on economic development and growth. For one nation, especially for developing countries, financing is the precondition for economic development. National resources, labor force and capital are the three main factors for economic development and growth. Among them, capital has been regarded as a main factor by many economists such as Adam Smith, Roste, etc. Government investing and financing is an important factor in generating capital, realizing economic growth and impulsing economic taking-off in developing countnes. Government investing and financing play an important role in promoting technological advance, which is the origin of economic growth. Privat...