Public Finances Flashcards
What are the two types of tax
Direct - paid directly to the government
Indirect - a tax on goods and services which the producer pays indirectly to the government
What sort of direct tax is payed by businesses
Corporation tax
What two types of direct tax
Income tax
Corporation tax
What are the two types of indirect tax
Specific - a fix amount of tax paid on each unit sold
Ad valorem - charged as a % of the price of the good
Give an example of an ad valorem tax
VAT
What is a budget deficit
When the government is spending more than tasx revenue
Calculate this government’s budget (the numbers are in billions of pounds)
Income tax + Corporation tax + Value added tax = £99 billion
What is a budget surplus
When the government’s tax revenue is more than its spending
What is a balanced budget
When total spending = tax revenue
What is current account deficit
When current account outflows are greater than current account outflows
What do governments do if they need spend more than the tax revenue
They borrow from other countries
What is national debt
The debt accumulated from borrowing over time
What are government bonds
A bond issued by a country’s government
How are government bonds used by a government to raise money
Businesses, investors and random people give money to the government in the form of government bonds
Then the government has to pay them back with interest
What is another word for government bonds
Treasury bills
What happend to Greece in 2016 with regards to its national debt
They had to raise tax revenue and decrease government spending to pay back the debt
This led to the population being very poor
