Theme 4:4.5.2:Taxation

Question 1

3 roles of tax

Answer 1

redistribute income
correct market failure(microeconomics)
pay for g/s provided by the government

Question 2

progressive tax

Answer 2

higher income pay more proportion of income on tax e.g.income tax

Question 3

regressive tax

Answer 3

the rate if tax paid falls as incomes rise e.g. VAT

Question 4

proportional tax

Answer 4

the marginal rate of tax is constant leading to a constant rate of tax e.g.national insurance

Question 5

impact of tax changes

Answer 5

incentives to work
tax revenue-laffer curve
income distribution
real output and employment
price level
trade balance
FDI flows

Question 6

incentives to work

Answer 6

high taxes disencourages individuals from working
high taxes on high income earners can encourage them to move abroad and taxes on poor can lead to poverty trap