What are the factors underlying government taxation and spending decisions?
What will be an ideal response?
There are four main factors underlying government taxation and spending decisions:
i. The government imposes taxes and provides subsidies to correct externalities.
ii. Most taxes are imposed to raise revenues to provide public goods like national defense, police protection, and infrastructure projects.
iii. Governments use transfer payments and the tax system to limit the extent of inequality and economic hardships that poorer households in society suffer.
iv. The government also collects taxes in order to pay for their own operations, including the salaries of presidents, congressmen and other politicians, and for the bureaucracy in charge of the day-to-day running of government operations and services.
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The size of the multiplier depends in part on the
A) level of autonomous expenditures. B) change in autonomous consumption. C) level of consumption. D) marginal propensity to consume.
The situation in which a person places greater value on a good as more and more people possess it is called
A) Bandwagon Effect. B) Greater Value Effect. C) Snob Effect. D) Behavioral Effect.
Which is NOT an example of signaling high quality in a social setting
a. wearing a business suit on a job interview b. leaving a big tip for the waiter after a dinner date c. offering a cheap engagement ring to your bride d. Visiting the beauty salon before a big date
An example of a stock variable in economic theory will be: a. the amount of money saved by an individual each week
b. the amount of money spent on buying gasoline each month. c. the weekly grocery bill of an average household. d. the total value of the government bond held by an individual. e. the total fiscal spending during a particular quarter.