Possible question about horizonal and vertical imbalances Both verti.pdf
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The document addresses horizontal and vertical fiscal imbalances in decentralized fiscal operations, explaining their causes and potential economic consequences. It also suggests ways to address these imbalances, weighing the pros and cons of each solution. Fiscal imbalance arises when government revenue does not align with debt obligations, leading to a disparity between income and expenditure.
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Possible question about horizonal and vertical imbalances Both verti.pdf
- 1. Possible question about horizonal and vertical imbalances: Both vertical and horizontal imbalances can occur in countries with decentralized fiscal operations. 1. For each of the two imbalances, explain why they occur and why they pose (potential issues) for fiscal and economic performance. 2. Also discuss ways in which these issues can be addressed making sure to mention both pros and cons. Solution Fiscal imbalance in simple words means that the sources of revenues of the government of a country are not in line with the debt obligations. That is the debt obligations outgrow income figures. Fiscal imbalance is of two types: PART 2