How the economy works

Question 1

direct tax

Answer 1

a tax on what you earn

Question 2

indirect tax

Answer 2

tax on what you buy

Question 3

corporate tax

Answer 3

tax companies pay on their profits. if it’s low, it incentivises businesses to start up and international groups to register here

Question 4

deficit

Answer 4

spending more than we have in tax

Question 5

surplus

Answer 5

have more tax than we spend

Question 6

progressive tax

Answer 6

proportion of tax paid increases as income rises ~ more you earn, more you pay

Question 7

regressive tax

Answer 7

proportion of tax paid decreases as their income rises ~ poor pay proportionally more

Question 8

economic objectives of the Gov

Answer 8

• rising levels of EG and activity
• stable prices
• low & falling unemployment
• balance of payments
• sustainability
• stable Gov finances

Question 9

how to achieve the economic objectives of the Gov

Answer 9

• fiscal policy ~ gov taxation and expenditure

- monetary policy ~ interest rates and control of the money supply

Question 10

GDP ( gross domestic product )

Answer 10

total value of all g/s produced in the economy in a given period of time

Question 11

GDP per capita

Answer 11

calculates income per person ~ total GDP / population

• takes into account wealth per head and what that wealth buys you

Question 12

Economic Growth

Answer 12

the change in the value of GDP from before to after ~ %

recession = 2+ consecutive quarters of negative growth
depression = even longer than that
economic boom = long periods of high & sustained growth