B.ed math lesson plan

Lesson no-3 

ਕੋਣ ਅਤੇ ਕੋਣ ਦੀਆਂ ਕਿਸਮਾਂ

Pdf link:-  ਕੋਣ ਅਤੇ ਕੋਣ ਦੀਆਂ ਕਿਸਮਾਂ

Math lesson plan for b.ed,punjabi punjabi language

Class no-2- ਮਿਸ਼ਰਿਤ ਵਿਆਜ

Pdf link:- 

https://drive.google.com/file/d/183wyGqdZGPirplOK48nQ_EyNVGZpYOFp/view?usp=drivesdk

YouTube link 

Class no-2 :- https://youtu.be/xCZTkH6l_0g

Class no-1:- https://youtu.be/onX-zmDzAqY

TYPES OF GOODS

Congestible Public Goods: These are partially rivalrous (i.e., by imposing a fee, the users may become excludable). 

Social Goods or Public Goods: Which are produced or provided by the government. 

Pure Public Goods: Which are produced by the government but are totally non-rivalrous and non-excludable. 

Private Wants: Which can be satisfied by the market. 

Social Wants: Which are satisfied by the government. 

Merit Wants: Which can be satisfied by the market but because of non availability of resources in the hands of a certain sections of the society, government must satisfy these wants. 

Functional Finance: Use of the government finances i.e., tax and expenditure policies, for achieving the goal of economic stability, i.e., to avoid both depression and inflation.

 Capital Levy 

This is a direct tax upon the capital rather than income of the tax payers.The government may retire its public debt by levying a heavy additional tax only once, or at the most twice. This special heavy tax to repay public debt is generally called a capital levy as it is assessed on the value of capital held by the rich people. Sometimes, when the heavy tax is levied on an index of ability other than capital, it is also known as special levy. It is also a capital levy over the sinking fund method it is that in the case of the latter method the government has to impose the burden of taxation to repay public debt over a period of years, whereas in the former case the burden of taxation is imposed once for all and, therefore gives some psychological relief to people that there will be no more taxation for the purpose of repaying debt. In times of war or emergencies, the money necessary for the redemption of the public debt is raised by imposing a special tax on capital. During and after the First World War, capital levies were frequently proposed and sometimes enacted either as a means of securing additional tax revenues or as a method of repaying government debts. 

Dalton recommended this method very strongly. It was advocated as a method of liquidating the unproductive war debts. Debt redemption by imposing a very high taxation on property has been advocated. They are usually advocated as a means of disposing of onerous debts. 

In the recent capital levies, certain property was often exempted, especially the property of less wealthy. The rates of the taxes were commonly progressive. It has sometimes been proposed that the capital levy should be laid only on wealth arising for war enterprise, but it would probably be impracticable to separate such wealth from all other property for taxation.

If such a capital levy were practicable, it might be utilised to provide enough funds to finance a war or some other emergency expenditure. But European experience with the capital levy shows that it could probably be employed only as a minor source of revenue, as suggested by Prof. A Comstyck.One of the best known capital levies was imposed by Germany in 1916 in the form of an emergency tax at rates that progressed from 10 to 65 percent on taxable capital. This had provided about 18 per cent of the total tax receipts in 1921, and then declined its importance. If a highly productive capital levy were used at the beginning of a war, it would lessen the need for borrowing and would tend to discourage the continuance of war, because the owners of the taxed property at least would immediately feel the effects of the war expenditures. In fact, it might have a demoralizing effect upon middle and upper income classes, as Keynes intimated.

The idea behind this is that increased levels of public debt are accompanied by mounting private wealth,which is increasingly concentrated on the wealthy elite. There is no burden on future generations because only existing wealth is subject to the capital levy.

Advantages of Capital Levy :

A capital levy, according to its advocates, would have several advantages.It would raise a large sum by a special property tax that might be assessed only once, although the tax might be paid in convenient instalments. A capital levy would fall heavily on the wealthy classes who generally have most of the resources to pay taxes. These classes usually buy large amount of government loans and a tax on their capital would compel them to bear the burden of the levy. A capital levy imposed in lieu of borrowing would tend to reduce debt and keep the budget in better balance. This tax should also, if collected at steeply progressive rates from property owners, tend to reduce inequalities in the distribution of wealth.

A capital levy could be employed to equalise the distribution of wealth on ethical grounds as weapon of economic warfare to combat over-saving and under-consumption, thus striking at what are popularly regarded as causes of economic instability. The proposal raises the issues of the capital levy primarily as a regulatory measure and of the validity of theory of business cycles that would call for its application.

As a result of the imposition of a capital levy, as R. N. Bhargava observes,it may be possible to reduce the level of taxation and this may give relief to earned income and may thus encourage work and enterprise. A very large national debt may also weaken the financial position of the government and may at some times make it difficult for the government to raise loans in an emergency situation when its financial needs may be very great. When a nation is engaged in a war, soldiers take lives for the sake of the nation and it may, therefore be necessary for political reasons to resort to a capital levy so that the sacrifice of soldiers and others during the war may be matched by the sacrifice of the capitalists who are asked to part with some of their capital to pay the public debt. It may, however, be noted that the payment of interest on internal debt is not a loss to the community. It is largely a problem of distribution. The government taxes one group of people in order to pay interest to another group, some of whom may belong to the former group itself. Since taxation is imposed in accordance with the principles of taxation and public expenditure is incurred in accordance with the principles of expenditure there is no inequity involved from the distributional view point in the payment of interest and the imposition of taxes to pay it. Further the advantage of reduction in public expenditure that used to be incurred in paying interest on the debt, would to a great extent, be balanced by a reduction in the future yield of taxes on income and wealth.

Disadvantages of Capital Levy :

However, as H.M. Groves mentioned, like the excess profit and the income tax the capital levy is weaker on its administrative side. Although the tax might be equitable, it is very difficult to apply. Probably, the most difficult part of a tax on capital is that of finding a fair value of property involved.

There are certain disadvantages of a capital levy or special levy which may produce extremely adverse effects on the economy. They force a relatively small section of the population to meet an expenditure that is theoretically undertaken for the general welfare. A general capital levy might also be so heavy as to exert a deadening effect upon initiative and enterprise and seriously penalize saving.

Another important disadvantage of capital levy is that it produces a concentrated burden on the community whereas in the sinking fund method the burden is spread over number of years. Thus, the capital levy is discriminatory because it imposes burden on those who own capital on that particular date and relieves those who are likely to acquire or build up capital in the future.

Besides as R.N. Bhargava observes, the capital levy may also hit industries by reducing the amount of capital that may be available for their use. So far as joint stock companies are concerned they will have to be exempted fromthe capital levy otherwise great inequity will result. If, however, the capital levy is imposed on joint stock companies it would adversely affect the operations of many of them as they would not be able to liquidate capital assets to pay the levy. This, in turn will produce adverse effect on national output and income. In the case of private business, the extent of hardship will depend upon whether the owners have any liquidating assets to meet the liability of their capital levy. Otherwise they will be forced to sell their businesses to people who are relatively less competent to manage them. It is sure that capital equipment will remain intact even after the imposition of a capital levy,but the existing owners may find it difficult to borrow in a dislocated money market and may be forced to sell their business at distress price to those who possess liquid cash but not business brains as the two do not always go together. The imposition of a capital levy may also dislocate the securities market as many owners of capital may be forced to sell their securities hurriedly to meet the tax liability. However, this difficulty could be overcome to a considerable extent if the government agreed to realize the capital levy in the form of securities or other assets. These could be passed on to a special institution to be created to hold such assets on behalf of the government and to liquidate them gradually so as to prevent the dislocation of the securities market.

Fiscal Policy and Redistribution of Income and Wealth :

In developed countries inequalities of income and wealth, while still substantial have narrowed down. This has been possible by a combination of increases in productivity and redistributive government.

The case do developing countries is quite different. There is worsening poverty with increasing GNP. Traditionally, fiscal policy has been considered to take care of income redistribution. For this purpose it is considered as "the most effective and least disruptive instrument of the state for bringing about distribution." The fiscal redistribution is brought about in two ways. The first instrument is progressive income taxes which take relatively larger shares from the rich than from the poor.The other is the expenditure programmes which transfer income to the poor through various measures.

Now, increasing doubt is expressed about the efficacy of the fiscal system as a weapon of social justice. It is now being realized that fiscal systems of developing countries have failed to redistribute income in favour of the poor. On the contrary, it has accentuated the inequality and the short term effect of economic growth on income distribution may cause greater inequality.

 Anti-Inflationary Fiscal Policy

Inflationary phase of trade cycle is the reverse order of unemployment and deflationary situation. Under inflationary situation, private expenditure go on increasing even after full employment is reached. Since there do not remain unutilised capacity and idle resources or manpower, the increase in aggregate expenditure cannot add to production but only raises the price level. However, due to increased incomes in society, government revenues would rise and would lead to budget surplus. But this surplus is often not sufficient to counter the inflationary pressure of over-investment. The normal budget surplus that could be created due to automatic rise in revenues and fall in deflation - oriented public expenditure is no

likely to be anywhere near the excessive rise in private expenditure. Therefore a deliberate budget policy and fiscal action must be evolved to meet the situation. The alternative fiscal remedies are :

(i) reduce effective demand to a level where aggregate expenditures become equal to the value of output at stable prices.

(ii) reduce private consumption by imposing new taxes or raising rates of taxes.

(iii) curtail all non-development expenditure of government.

(iv) combine tax-expenditure measures. If economy suffers from acute inflation, decrease in government expenditure should be combined with increase in tax rates and imposition of new taxes. Thus Budget surplus is the main instrument to check inflation. But the creation of budget surplus is not always feasible, when inflation arises due to war expenditures or compulsions of public expenditure for economic development in under-developed countries. Hence in such cases the revenue side has to provide the main fiscal measures. Taxation as an anti-inflationary fiscal device has also serious limitations.The fiscal policies must be supplemented by monetary and debt policy.

 Fiscal Policy Vs Monetary Policy

The divergent views on the relationship of money supply and level of economic activity resulted in the formulations of different sets of policies for the control of economic oscillations. The doubts have been frequently raised about the monetary policy from the angles of its effectiveness, the desirability of the ways in which the policy works and the value of the actual compatibility of its aims. 

A very significant factor which affects the effectiveness of monetary policy is the duration of the lags of monetary policy. In addition, there are certain institutional difficulties in the effective operation of the monetary policy. The effectiveness of the monetary policy is also limited by the decisions of the individuals and business units about the income, spending and assets. Still another factor to account for the limited efficacy of the monetary policy is inflation and particularly the cost push inflation. 

The fiscal policy too has its weaknesses. It is often considered to be quite rigid, insensitive and cumbersome.Anderson and Jordan laid down, tests to know the relative effectiveness of monetary policy and fiscal policy. On the basis of strength, predictability and promptness they found that monetary policy has a relatively greater effectiveness than the fiscal policy. 

Now the attitudes of the two divergent groups of economists have been considerably softened. An appropriate monetary - fiscal policy must be evolved for the achievement of different macroeconomic goals. 

During the period of boom or inflation, the fiscal restraints are likely to generate greater unemployment.

Therefore, the monetary action is likely to tackle the situation much more effectively. The expansion of income and output and the maintenance of price stability can be ensured through a proper mix of monetary and fiscal action. When the economy is in a state of recession or depression, the easy money supply should be supplemented by a policy of tax reduction and expansion in government expenditure. When the system is close to a boom, the greater reliance upon monetary rather than fiscal action can yield desired results. For achieving other goals fiscal policy is more powerful than monetary policy.

 INTRODUCTION

It is now widely recognized that the state has a sine qua non in the regulation of economic activity along the desired lines. Fiscal policy is traditionally concerned with the determination of state income and expenditure policy. However, in recent times, public borrowing and deficit budgeting have also become a part of fiscal policy.Thus all the budgetary instruments like taxes, public spending, borrowing and debt management constitute the fiscal policy. Fiscal policy tries to achieve its objectives by regulating the working of the market mechanism while retaining the mechanism itself.

Meaning and objectives of Fiscal Policy

In simple words, fiscal policy refers to the instruments by which a government tries to regulate or modify the economic affairs of the economy keeping in view certain objectives.The concept of fiscal policy has been defined by different economists as follows:

Harvey and Johnson define fiscal policy as "changes in government expenditure and taxation designed to influence the pattern and level of activity."

According to G.K. Shaw, "We define fiscal policy to include any design to change the price level, composition or timing of government expenditure or to vary the burden, structure or frequency of the tax payment."

Must see- Fiscal-policy-and-crowding-out-effect

Objectives of  Fiscal Policy

Fiscal policy in under-developed countries has a different objective to that in advanced countries.The objective of fiscal policy in developed economies is to maintain the condition of full employment, economic stability and stabilise the rate of growth.For an under-developed economy, the main purpose of fiscal policy is to accelerate the rate of capital formation and investment.

To achieve economic stability in developed countries, functional finance by regulating the volume of public expenditure go a long way but this device is not relevant to solve the problem of under-developed countries at length because lack of resource mobilisation is the major hindrance in such economies. Thus the technique of "Activating Finance" i.e. mobilisation of resources through taxation, borrowing and deficit financing is advocated to achieve the economic growth and stability.

Following are the main objectives of a fiscal policy in a developing economy :

1. Full employment.

2. Price stability

3. Accelerating the rate of economic development

4. Optimum allocation of resources

5. Equitable distribution of income and wealth.

6. Economic stability

7. Capital formation and growth

8. Encouraging investment.

The nature of economic fluctuations in under-developed countries is different from those in the developed economies.

It follows that in under-developed countries stability cannot be separated from economic growth. Growth and stability present more challenging problem than a merely compensatory fiscal policy. Thus, Government has to follow a policy of 'Activating Finance' and try to increase resources for economic development. The objectives of fiscal policy in under-developed countries are :

(i) To maximise the rate of capital formation and to lead the economy on the path of rapid economic progress.

(ii) To make available the maximum flow of human and material resources consistent with current consumption requirements.

(iii) To guide the allocation of existing resources into socially necessary lines of development.

(iv) To reduce the extreme inequalities in wealth, income and consumption standards which undermine productive efficiency, offend justice and endanger political stability.

(v) To mop up the excess purchasing power so as to mobilise savings for investment.

(vi) To eliminate as far as possible sectorial imbalances in the economy.

Instruments of Fiscal Policy

Contra-cyclical fiscal policy occupies the centre place for maintaining full employment without inflationary and deflationary forces. Thus, the various instruments or measures which influence the economic stability of an economy are :

(i) Budget :- The budget of a nation is a useful instrument to assess the fluctuations in an economy. Different budgetary principles like annual budget,cyclical budget and fully managed compensatory budget have been formulated by the economists.

(ii) Taxation :- Taxation is a powerful instrument of fiscal policy in the hands of public authorities which greatly affect the changes in disposable income,consumption and investment.

(iii) Public Expenditure :- The active participation of the government in economic activity has brought public spending to the front line among the fiscal tools. The appropriate variation in public expenditure as compared to taxes have more direct effect upon the level of economic activity. The increased public spending will have a multiple effect upon income, output and employment exactly in the same way as of increased investment has its effect on them. Similarly, a reduction in public spending, can reduce the level of economic activity through the reverse operation of the government expenditure multiplier.

(iv) Public Works :- Keynes has highlighted public works programme as the most significant anti-depression device because:

(i) they absorb hitherto to unemployed workers.

(ii) they help to create economically and socially useful capital assets as roads, canals, power.

(iii) they increase the purchasing power of the community and thereby stimulate the demand for consumption goods.

(v) Public Debt :- Public debt is a sound weapon to fight against inflation and deflation. It brings about economic stability and full employment in an economy. The government borrowing may assume any of the following forms:

(a) Borrowing from Non-Bank Public

(b) Borrowing from banking system

(c) Drawing from treasury

(d) Printing of currency notes (i.e. Deficit Financing).

Fiscal Policy and Full Employment

When the economy suffers from involuntary unemployment, i.e.unemployment of idle resources and manpower, three alternative fiscal policies measures may be used to attain full employment which are -

(i) Deficit Spending i.e. increased government expenditure without increase in taxation.

(ii) Deficit without spending i.e. decreased taxation without increase in government expenditure and

(iii) Balanced Budget Multiplier i.e. spending without deficit.

Deficit Spending :

When the sum of private consumption, private investment, government consumption and government investment is less than full employment income and as such there is a deflationary gap in the economy causing unemployment, the government may increase its expenditure either on consumption or on investment without an increase in taxation and thereby incur a deficit in the budget, the deficit being covered either by the creation of new money or by government borrowing. For example, marginal propensity to spend is 3/4 in the society and, hence, multiplier is 4, a deficit government expenditure of Rs. 1000 which is invested and spent in total will generate a national income of Rs. 4000 i.e., by multiplier times the initial injection of money into economy. This point has been shown with the help of diagram 1.

Deficit without Spending :

The second device by which the government can remedy the problem of unemployment is by the reduction of taxation without any increase in government expenditure and thereby creating a budget deficit. When taxation is decreased, the

disposable income of the people is increased. This will result in an ultimate increase in national income through successive doses of private expenditure. This is shown in Diagram 2, where a tax reduction of amount AB raises the consumption - investment function, and income, as a result, rises by BC which will generate additional employment.

Balanced Budget Multiplier

The third alternative expansionary fiscal policy measures is the balanced budget multiplier. Here an increase in government expenditure is matched by an equal increase in taxes but still there is net increase in the national income, if we assume that the marginal propensity to spend is same for both the tax payers and the people who receive the money spent by government. An increase in government expenditure financed by an equal increase in taxes leads to a net increase in the national income and hence in employment and output.

Fiscal Policy and Economic Development

Economic growth implies a long-period expansion of the gross national product in real terms. Economic growth does not end with achievement of full employment.Level of full employment varies in different countries. Production capacity can be increased in many ways and, thus, every economy aims at higher rates of growth.Thus deficit financing becomes an essential fiscal instrument in raising the level of full-capacity output as a long-run policy. Long-run growth depends on many factors like volume of employment, technical skill, physical capacity etc., all these will be fully exploited. The physical capacity is higher in developed countries than in under-developed ones. In the former, labour is generally fully utilised with production capacity left unutilised while in the under-developed countries, labour can not be fully employed because of shortage of capital formation. Thus fiscal policy in developed countries is more concerned with increase of labour employment, but in backward economies, it is basically devoted to development of infrastructure which helps to generate capital formation.

Fiscal Policy and Inflation

To meet the chronical situation of inflation and deflation, compensatory fiscal policy is adopted. Compensatory fiscal policy refers to those fiscal actions that are directed to compensate for this undesireable development in the private economy so that a high level of employment can be maintained without inflation or deflation.When there are inflationary tendencies, the government should take steps to reduce its expenditure by having a surplus budget and raising taxes in order to stabilise the economy. In deflationary situation the government should adopt methods to raise expenditure through reducing taxes, public borrowings and deficit budgets.Since the stabilisation function of government budget is to maintain full employment with price level stability, compensatory fiscal policy becomes the main instrument of achieving this objective.

Musgrave describes the basic logic of compensatory fiscal policy in three rules, 

(a) If involuntary unemployment prevails, increase the level of demand so as to adjust aggregate expenditures upward to the value of output produced at full employment.

(b) If inflation prevails, reduce the level of demand so as to adjust aggregate expenditures upward to the value of output measured in current, rather than rising prices. 

(c) If full employment and price-level stability prevail, maintain the aggregate level of money expenditures to prevent unemployment and inflation.The effect of compensatory fiscal policy in relation to inflation and deflation on the economy is created by three principal means, viz., (i) changes in the amount of government expenditure, (ii) changes in the amounts of taxes and transfer payments and (iii) changes in the amount of budget deficit and budget surplus. To cure the economy of inflation and deflation, a combination of these fiscal instruments is generally used.

Anti-Inflationary Fiscal Policy

Inflationary phase of trade cycle is the reverse order of unemployment and deflationary situation. Under inflationary situation, private expenditure go on increasing even after full employment is reached. Since there do not remain unutilised capacity and idle resources or manpower, the increase in aggregate expenditure cannot add to production but only raises the price level. However, due to increased incomes in society, government revenues would rise and would lead to budget surplus. But this surplus is often not sufficient to counter the inflationary pressure of over-investment. The normal budget surplus that could be created due to automatic rise in revenues and fall in deflation - oriented public expenditure is no likely to be anywhere near the excessive rise in private expenditure. Therefore a deliberate budget policy and fiscal action must be evolved to meet the situation. The alternative fiscal remedies are :

(i) reduce effective demand to a level where aggregate expenditures become equal to the value of output at stable prices.

(ii) reduce private consumption by imposing new taxes or raising rates of taxes.

(iii) curtail all non-development expenditure of government.

(iv) combine tax-expenditure measures. If economy suffers from acute inflation, decrease in government expenditure should be combined with increase in tax rates and imposition of new taxes.Thus Budget surplus is the main instrument to check inflation. But the creation of budget surplus is not always feasible, when inflation arises due to war expenditures or compulsions of public expenditure for economic development in under-developed countries. Hence in such cases the revenue side has to provide the main fiscal measures. Taxation as an anti-inflationary fiscal device has also serious limitations.The fiscal policies must be supplemented by monetary and debt policy.

 Introduction

Most of the economists believe that debt redemption that is the repaymentof pubic debt is desirable for the government.The need to repay public debt exercises a sort of check on the recklessnessof the government. A weak government may borrow large amounts to finance its expenditure because public debt does not impose a burden on the subscriber to increase his income. However, the government will have to tax the people to pay interest on the debt even if it postpones repayment of the principal. A government that continuously borrows to finance its expenditure will be faced with a rising interest bill, it will not be able to postpone imposing the burden of taxation indefinitely. The need for debt redemption exercises beneficiary effect on the fiscal policy of the government, as it is then forced to increasea taxation to finance its regular current expenditure. 

Meaning and Need for Debt Redemption

Debt redemption implies repayment of public debt which the government borrows to finance its expenditure. Debt redemption is advantageous because it cancels outstanding claims against the government and places it in a stronger position to secure new loans at moderate rates of interest. The repayment of debt reduces the tax burden by eliminating debt charges and keeps the treasury in a strong position, provided that the redemption of debt is conducted in a manner that will not excessively burden the economy. If the governments knowin advance they must redeem their debts according to the terms of their loan contracts, imprudent spending is less likely to occur and public financing can be kept under more rational control.

Debt redemption enhances the credit worthiness of the government. When the government borrows, it promises to repay the loan at a stated time in the future. It has to redeem the debt to honour its pledged word. Debt redemption also produces a salutary effect on the people who think that, if the government is borrowing, it is simultaneously making efforts to repay the loans.

An advantage of debt repayment is that the problem of debt management becomes less difficult to handle as the amount of debt decreases. Government may also have more freedom of choice as to interest rates and can give more weight to consideration of monetary policy. As the banks find it less necessary to furnish credit to governments, they should be able to give more thought to the credit needs of private borrowers and to serve them more effectively.

Debt redemption saves the cost of debt administration and cost of collecting taxes to service the debt. This is desirable when there is full employment in the economy and the resources needed in debt administration and tax collection can be diverted to produce useful commodities and services that will increase the welfare of the people.

Must see public-debt-its-classifications-and-classical views

Methods of Redemption of Public Debt

The government can adopt several methods to redeem its debt.

1. Conversion or Refunding/Fresh Borrowing : 

The government may redeem its public debt by converting it into a new debt or it may issue conversion loan to the holders of existing debt. Alternatively, it may borrow in the open market and use the funds to repay the old debt. Generally, the government adopts this method when at the retirement of the debt the government has not the capacity to repay or when the current interest rate is lower than the rate which the government is paying for the existing debt and in this way government may reduce its interest expenditure. Strictly speaking, this is actually no retirement because the government incurs fresh obligations to repay old ones and there is thus no decrease in the total amount of public debt. Sometimes a distinction is made between refunding and conversion of debt, though some times both of them are used to mean the same thing. 

In the strict sense, refunding refers to the repayment of debt through fresh loans i.e., the method of paying off an old loan carrying a higher interest rate through a new loan carrying a lower interest rate whereas conversion involves a change in the rate of interest or other details of the lenders the government may pass an ordinance to reduce the rate of interest payable on its debt.

2) Additional Taxation : 

The government imposes new taxes to get revenue to repay the principal and interest of the loan. This is the simplest method of debt redemption.

3. Sinking Fund Method : 

The most commonly used device for the actual retirement of a debt is that of the sinking fund. The government sets aside a small amount every year from the revenue budget and this accumulates at compound interest so that it may equal the amount of the public debt by the time of its maturity. Thus, the burden of taxing the people to repay the debt is spread out evenly over the period of the accumulation of the fund. The government has, therefore, not to impose a concentrated burden, if it were to repay the debt by raising funds through taxation in one year only.

4)Inflation or Currency Expansion : 

This method amounts to confiscation. It implies a fall in the value of the monetary standard due to currency expansion or inflation in the economy. Therefore, the real value of public debt depreciates. If there is hyper-inflation in the economy then the value of the country's currency and also its public debt will become almost negligible. Under this method the debt holders are taxed in proportion to the debt held by them in order to repay the debt. This is very tax for the tax- payers but is related to the extent of their debt holding. Those who supported the government in the past by lending their savings are penalised, whereas those who chose other forms of investment escape the burden of taxationnecessary to redeem public debt. Accordingly, this method is exceedingly inequitable and for that reason, undesirable from the fiscal view point. When the government resorts to this method of liquidating its public debt, it loses confidence of the public and it may be difficult for the government to borrow funds again.

5. Repudiation : 

The most extreme solution to the problem of government debt is repudiation. In this case the government refuses to repay the public debt and in this way liability for public debt is extinguished. In the federal system the states being sovereign so far as debt is concerned, can repudiate their debts if they wish. The bond holders will be having no redress. This is actually no retirement but confiscation of the bond holders to the extent of their holding. A particular group of wealth owner is penalised. Other groups even benefit through reduction in taxation, as thereafter the government will not have to pay interest on the public debt. This procedure is exceedingly inequitable as those who supported the government by investing their savings in public debt suffer irrespective of their ability as compared with the owners of other forms of wealth. When the government repudiates its public debt, it loses the confidence of the public and it will find it extremely difficult to raise further loans in future. 

6. Serial Bonds :

The serial bonds are financial bonds that mature in installments over a period of times. It provides for establishing a scheme for annually retiring a state amount of the issues. The annual payments are usually uniform as they facilitate budgetary provision. The serial bond has become a popular method of retiring local government debt. Many states actually require its use by their local sub divisions.The disadvantage with the method is that it does not permit government to cease retirement of debt during periods of depression. The payments need not be made when the national income falls below a given level.

7.Capital Levy : 

This is a direct tax upon the capital rather than income of the tax payers.The government may retire its public debt by levying a heavy additional tax only once, or at the most twice. This special heavy tax to repay public debt is generally called a capital levy as it is assessed on the value of capital held by the rich people. Sometimes, when the heavy tax is levied on an index of ability other than capital, it is also known as special levy. It is also a capital levy over the sinking fund method it is that in the case of the latter method the government has to impose the burden of taxation to repay public debt over a period of years, whereas in the former case the burden of taxation is imposed once for all and, therefore gives some psychological relief to people that there will be no more taxation for the purpose of repaying debt. In times of war or emergencies, the money necessary for the redemption of the public debt is raised by imposing a special tax on capital.

A Disadvantages of Capital Levy :

A capital levy, according to its advocates, would have several advantages.It would raise a large sum by a special property tax that might be assessed only once, although the tax might be paid in convenient instalments. A capital levy would fall heavily on the wealthy classes who generally have most of the resources to pay taxes. These classes usually buy large amount of government loans and a tax on their capital would compel them to bear the burden of the levy. A capital levy imposed in lieu of borrowing would tend to reduce debt and keep the budget in better balance. This tax should also, if collected at steeply progressive rates from property owners, tend to reduce inequalities in the distribution of wealth.

A capital levy could be employed to equalise the distribution of wealth on ethical grounds as weapon of economic warfare to combat over-saving and under-consumption, thus striking at what are popularly regarded as causes of economic instability. The proposal raises the issues of the capital levy primarily as a regulatory measure and of the validity of theory of business cycles that would call for its application.

Disadvantages of Capital Levy :

However, as H.M. Groves mentioned, like the excess profit and the income tax the capital levy is weaker on its administrative side. Although the tax might be equitable, it is very difficult to apply. Probably, the most difficult part of a tax on capital is that of finding a fair value of property involved.There are certain disadvantages of a capital levy or special levy which may produce extremely adverse effects on the economy. They force a relatively small section of the population to meet an expenditure that is theoretically undertaken for the general welfare. A general capital levy might also be so heavy as to exert a deadening effect upon initiative and enterprise and seriously penalize saving.

Another important disadvantage of capital levy is that it produces a concentrated burden on the community whereas in the sinking fund method the burden is spread over number of years. Thus, the capital levy is discriminatory because it imposes burden on those who own capital on that particular date and relieves those who are likely to acquire or build up capital in the future.