ECON Flashcards
is a purchase that is completed with money that has the potential to produce income or a profit.
investment
is a person or entity who outlays capital in order to produce an income or to make profits.
investor
is the act of putting forth capital with the expectation of income or profit.
Investing
are investments that provide fixed periodic sources of income over a certain period of time.
Fixed Income Investments
These are forms of investment that are suitable for risk tolerant individuals.
Variable Income Investments
play a key role in increasing capital stock, which in turn affects investments.
Interest rates
Roles of Interest in Investment
- It can be the price of the credit
- It can also be the return that the capital earns as an input in the production process.
represents the cost of using or borrowing money.
Interest rate
refer to the amount of money lent out by a lender to a borrower who will pay an interest rate to the lender for the use of that fund.
Loanable funds
Determinants of Investments
Future Expectations
Level of Economic Activity
Technological Change
Public Policy
reflect plans to change production capacity.
Future Expectations
When GDP is high, the level of production increases.
Level of Economic Activity
With changes in technology, demand for capital will have to increase in order to keep up with these important developments.
Technological Change
in the form of granting incentives to firms can significantly affect the demand for capital, thereby increasing investments.
Public Policy
It is typically referring to the use of property for a certain amount.
Rent
It is the price paid for the use of land and other natural resource factors of production that is in fixed supply.
Rent
It is a payment in excess of opportunity costs.
Economic Rent
How is Demand for Land determined?
a. Products grown on the land
b. Prices of other resources which are combined with the land
c. Location attributes
d. Land Quality
A fixed regular payment, typically paid on a daily or weekly basis, is made by an employer to an employee, especially to a manual or unskilled worker.
Wage
have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.
Minimum Wages
Determinants of Market Wage Rates
Labor Demand
Labor Supply
Determinants ofMarket Wages Interest
Labor Demand
Labor Supply
It is the lifeblood of the government
Tax
It is the act of levying a tax so that the sovereign, through its lawmaking body, can raise income to defray the necessary expenses of the government.
Taxation
Types of Taxes
Direct taxes
Indirect taxes
Progressive taxes
Proportional taxes
Regressive taxes
are taxes levied by the government on the income and wealth received by households and businesses to raise government revenue and to act as an instrument of fiscal policy.
Direct taxes
Types of Direct Taxes
Individual income taxes
Corporate income taxes
are taxes that are levied on households. These are taxes on particular persons.
Individual income taxes
taxes on businesses.
Corporate income taxes
These are taxes levied by the government on goods and services to raise revenue and to act as an instrument of fiscal policy. Observe that these are not taxes on people but on goods and services that people purchase and consume.
Indirect taxes
Types of Indirect Taxes
Value-added tax (VAT)
Excise taxes
are taxes included on goods and services
Value-added tax (VAT)
are taxes included on certain products
Excise taxes
These are taxes that place a greater burden on those best able to pay and put little to no burden on the poor.
Progressive taxes
These are taxes that place an equal burden on the rich, the middle class, and the poor. In other words, taxes are levied at a constant rate as income rises.
Proportional taxes
These are taxes that fall more heavily on the poor than on the rich. Under this taxation structure, taxes are levied at a decreasing rate as income rises.
Regressive taxes
Basic Principles of Taxation
- Adequacy.
- Broad basing.
- Compatibility.
- Convenience.
- Earmarking.
- Efficiency.
- Equity.
- Neutrality.
- Predictability.
- Restricted exemptions.
- Simplicity.
Taxes should be just enough to generate the revenue required for the provision of essential public services like health, education, and national defense and police protection.
Adequacy.
Taxes should be spread over as wide as possible to all sectors of the population or economy to minimize individual tax burdens.
Broad basing
Taxes should be coordinated to ensure tax neutrality and meet the overall objectives of good governance.
Compatibility
Taxes should be enforced in a manner that facilitates voluntary compliance to the maximum extent possible.
Convenience
Tax revenue from a specific source should be dedicated to a specific purpose only when there is a direct cost-and benefit link between the tax source and the expenditure, such as the allocation of motor users’ tax for road maintenance.
Earmarking
Taxes should equally burden all individuals and entities in similar economic circumstances.
Equity
Tax collection efforts of the government should not cost an inordinately high percentage of tax revenues.
Efficiency
Taxes should not favor any one group or sector over another and should not be designed to interfere with or influence individual decision-making.
Neutrality
The collection of taxes should reinforce their inevitability and regularity.
Predictability
Tax exemptions must only be done for specific purposes and within a limited period.
Restricted exemptions
Tax assessment and determination should be easily understood by an average taxpayer.
Simplicity
