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Questions about Budget and Economy

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Furqan
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Post: #1
Questions about Budget and Economy

1-) Exactly how much should Money Supply be more than GDP? The optimum ratio (so I've read elsewhere on the forum) is 1.1 Money Supply:1 GDP. Is that accurate? And what if Money Supply is super high compared to GDP?

2-) I'm not sure if a regular increase in 'Government Purchases' is a good or a bad sign for the economy. Does it mean the amount of money spent to take over private land/businesses etc and to make them public-owned?

3-) Is there a general rule about Exchange Rate? I can easily conclude that an excessively-devaluated (toilet paper notes) currency will only deal a fatal blow to the Economy. But what if it is too valuable?

4-) Saving Ratio.. Who's doing the saving? The government or the citizens/Investors etc? If it's the latter, then the higher the saving rate the lesser the consumption and the investment, right?

5-) Tariff revenue looks like a really negligible figure. (It's not even one percent of the amount I and my PMs steal from the treasury.) Increase it or decrease it?

6-) What is State Income?

7-) In my US template state, i've managed to change new indebtedness to positive, thanks to Pacifism and Privatised Healthcare.
Debt= -5046
New Indebtedness= 807
Is it gradually pay off all my national debt?

8-) I don't understand how Payment of Interest works. Is my positive indebtedness gonna help me with that?

9-) What is PE Payments? Why the hell am i paying whom?

21.09.2012 19:57
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Helsworth
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Leeds
Post: #2
RE: Questions about Budget and Economy

Furqan Wrote:
1-) Exactly how much should Money Supply be more than GDP? The optimum ratio (so I've read elsewhere on the forum) is 1.1 Money Supply:1 GDP. Is that accurate? And what if Money Supply is super high compared to GDP?

If you're playing the USA template state, you can greatly increase the MS without fears of too much inflation. However, you can't do that with other templates. A lower currency does stimulate exports, however there is a bad random event that triggers when your currency is seriously depreciated. Maintaining a lower MS than GDP will inevitably put pressures on your economy to shrink. You have to consider how much growth you'll have in a year and increase the MS appropriately. If you're averaging 1% growth, there's no need to manually increase the MS.

Furqan Wrote:
2-) I'm not sure if a regular increase in 'Government Purchases' is a good or a bad sign for the economy. Does it mean the amount of money spent to take over private land/businesses etc and to make them public-owned?

Government purchases refers to things like PE health, education, others, administration and projects. It's best that you keep gross investment higher than government purchases. If you do want to stimulate your economy by government spending, be assured to have some reserves and a decent budget surplus.

Furqan Wrote:
3-) Is there a general rule about Exchange Rate? I can easily conclude that an excessively-devaluated (toilet paper notes) currency will only deal a fatal blow to the Economy. But what if it is too valuable?

If you have a competitive economy, your exports will not suffer from a hard currency.

Furqan Wrote:
4-) Saving Ratio.. Who's doing the saving? The government or the citizens/Investors etc? If it's the latter, then the higher the saving rate the lesser the consumption and the investment, right?

Saving ratio includes private households and business savings. It can even get a negative figure. The lower it is, it means inflation. Tasks, reforms and budget changes will affect it.

Furqan Wrote:
5-) Tariff revenue looks like a really negligible figure. (It's not even one percent of the amount I and my PMs steal from the treasury.) Increase it or decrease it?

It impacts your imports. Decreasing it without increasing competitiveness isn't wise. You can obtain high revenues off of it, if you implement protectionism and combine it with the right task options. Here's one of my old states (a USA template) Junko

Furqan Wrote:
6-) What is State Income?

It's incomes that cannot be categorized as taxation, like fees, rents etc.

Furqan Wrote:
7-) In my US template state, i've managed to change new indebtedness to positive, thanks to Pacifism and Privatised Healthcare.
Debt= -5046
New Indebtedness= 807
Is it gradually pay off all my national debt?

The surplus you have goes to cover your payment of interest primarily, if there's more left it goes to paying off the accumulated debt. After you've repaid all of your debt you're going to start making reserves and receive interest payments.

Furqan Wrote:
8-) I don't understand how Payment of Interest works. Is my positive indebtedness gonna help me with that?

Payment of interest figure is the sum of interest you have to pay yearly based on your contracted debt.

Furqan Wrote:
9-) What is PE Payments? Why the hell am i paying whom?

PE payments refers to contributions you're making to your alliance, if you have one, when that alliance collects a percentage of each statemembers as a tax. It will appear negative in such cases, and positive, when you're alliance will give you payments.


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This post was last modified: 21.09.2012 20:43 by Helsworth.

21.09.2012 20:38
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Furqan
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Post: #3
RE: Questions about Budget and Economy

You! Big Grin Admins should canonise you.

Last question. When my payment of interest turns positive, isn't it more beneficial to increase nominal interest a bit now that i'm gonna start earning from the interest?

21.09.2012 21:31
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Helsworth
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Leeds
Post: #4
RE: Questions about Budget and Economy

Furqan Wrote:
You! Big Grin Admins should canonise you.

Last question. When my payment of interest turns positive, isn't it more beneficial to increase nominal interest a bit now that i'm gonna start earning from the interest?

Hehe Thanks, I appreciate your proposal, but I'm no saint.
Yes, by all means you can do that. I remember a player who lived off of mostly interest payments, and his nominal rate was somewhere around 30% if I recall correctly. Of course his economy stagnated and had people that were starving to death, but that was because of how he managed his state.


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This post was last modified: 21.09.2012 21:41 by Helsworth.

21.09.2012 21:40
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