A transfer payment requires
no good or service in return
during that time period.
The budget surplus (deficit) is
the excess (shortfall) of its
spending over its revenue.
The marginal tax rate is the
fraction of each extra pound of
income paid in tax.
Direct taxes are taxes on
income and wealth. Indirect
taxes are taxes on spending
and output.
A private good, if consumed
by one person, cannot be
consumed by others. A public
good, if consumed by one
person, must be consumed by
others in exactly the same
quantity.
Merit (demerit) goods are
goods that society thinks
everyone should have (not
have) regardless of whether an
individual wants them.
Progressive taxes reflect the
principle of ability to pay.
The benefits principle is that
people getting most benefit
from public spending should
pay most tax for it.
Tax incidence is the final tax
burden once we allow for all
induced effects of a tax.
The tax wedge is the gap
between the price paid by the
buyer and the price received by
the seller.
Supply-side economics
analyses how taxes and other
incentives affect national output
when the economy is at full
capacity.
The Laffer curve shows how
much tax revenue is raised at
each possible tax rate.
Economic sovereignty is the
power of national governments
to make decisions
independently of those made
by other governments.
Political economy is the study
of how governments make
decisions.
The median voter on an issue
is the person whose
preferences are such that half
the population’s preferences on
the issue lie on one side and
half the population’s
preferences on the other side.
Logrolling is a vote for another
person’s preferred outcome on
one issue in order to exchange
for their vote for your preferred
outcome on another issue.
A credible promise about
future action is one that is
optimal to carry out when the
future arrives. A commitment is
a current device to restrict
future room for manoeuvre to
make promises more credible
today.
Policy co-ordination is the
decision to set policies jointly
when two interdependent areas
have big cross-border
spillovers.
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