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Economic and management sciences

Grade 9

The economic cycle

Module 7

The national budget

Assessment standard 1.5:

The national budget

  • The national budget is a document that is drawn up annually by the Minister of Finance, and in which a forecast is made of the government’s expected income and expenditure for the coming year. The national budget is regarded as the planned framework within which the state must operate, and therefore it has the following two main objectives:
  • the announcement of expected government expenditure and tax income; and
  • an indication of government strategy to keep the economy on a specific course.

In planning the national budget the first important step is that the different state departments must compile their own budgets in which an indication is given of their needs / expenditure. When all the departments have submitted their budgets, these are processed in order to obtain a complete view of all state expenditure.

  • GOVERNMENT EXPENDITURE can be distinguished in the following four groups of functions that are fulfilled by the state and for which funds are needed (also called the FUNCTIONAL CLASSIFICATION):
  • GENERAL OR COLLECTIVE SERVICES are services such as defence, maintenance of law and order and general state administration.
  • COMMUNITY SERVICES are services that are provided where a great number of people live together (for example services such as road construction, sanitation and refuse removal).
  • SOCIAL SERVICES such as health care, education and housing that are covered mainly by taxes.
  • ECONOMIC SERVICES such as expenditure on direct production and research.

Hereafter planning is done to find the necessary funds to cover the expenses. These funds are mainly generated by levying TAXES such as DIRECT TAXES (for instance personal income tax that is levied on an individual’s income) and INDIRECT TAXES (for instance customs and excise tax, and value added tax or VAT).

  • A brief summary of the annual budget for the fiscal year 1999-2000 is given below:
ANNUAL BUDGET (1999 – 2000) ALLOCATED AMOUNT PERCENTAGE OF TOTAL EXPENDITURE(%)
Total income: 190,3
Total expenditure:
Transport and communication 8,2 3,7
Interest (on loans) 48,5 22,1
Salaries (government service staff) 86,5 51,0
Education 48,5 22,1
Health 24,0 10,9
Community security and welfare services 19,8 9,0
Housing and community development 9,6 4,5
Police 15,3 7,0
Defence 35,5 5,5
Prison services (Correctional services) 5,4 2,7
Justice (administration of justice) 2,8 1,3
Agriculture, Forestry and Fisheries 3,6 1,6
Deficit 25,1

Activity 1: national budget

Refer to the table above and answer the following questions:

  1. Which expenditure is expected to be the greatest?
  2. Which expected expenditure is the greatest: on Defence or on Education?

Activity 2: national budget

The last column indicates the percentage of the total expenditure for each department.

Use the information to draw a bar graph in order to indicate how much is spent on each category. Insert the graph on a separate sheet.

Activity 3: ranking order of expenditure

Refer to the graph and indicate in order from the highest to the lowest expenditure how the expenses (in order of importance) are prioritised.

Activity 4: assessment of ranking

Do the group members agree with the priority list as presented in the table above?

Decide how your group will spend the available funds according to your own priority list and then redesign the column graph according to your division.

Assessment

Learning Outcomes (LUs)

LO 1

the economic cycle

The learner will be able to demonstrate knowledge and understanding of the economic cycle within the context of “the economic problem.”

Assessment Standards(ASs)

We know this when the learner:

1.5 explains the different flows of money, factors of production, goods and services in the economic cycle within the South African economy;

1.6 discusses the role of the foreign sector in the economic cycle;

1.7 illustrates by means of a graph and discusses how demand and supply influence prices;

1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and during the apartheid era on:

  • the South African economy;
  • political, economic and social transformation;
  • labour issues;

1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education, social welfare, health and security.)

Memorandum

ACTIVITY1: National budget

SELF:

Answers related to the table:

Salaries of civil service employees.

Education 22,15% compared to the 5,5% of Defence.

ACTIVITY 2: Graphic representation of budget figures

Draw a column graph to show the percentage of the contribution to the budget with regard to each kind of expenditure.

ACTIVITY 3: Ranking of expenditure

SELF:

Evaluate the learners’ priorities.

ACTIVITY 4: Evaluation of ranking

GROUP:

Evaluate the group’s classification and their priorities

Questions & Answers

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Source:  OpenStax, Economic and management sciences grade 9. OpenStax CNX. Sep 15, 2009 Download for free at http://cnx.org/content/col11074/1.1
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