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A* summary on taxation and public finance

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EXAM IS COMING!!!!! This is everything you need for this topic! I got A* studying this, soooooo it will probably reduce your time and effort to find a tutor and it will be more beneficial than your class notes!!! Check out for other summaries in my uploads.

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  • January 20, 2023
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4.5.2 Taxation
a) Distinction between progressive, proportional and regressive taxes
Progressive: When income rises, average rate of tax increases
Proportional: When income rises, average rate of tax is constant
Regressive: When income rises, average rate of tax falls


b) The economic effects of changes in direct and indirect tax rates on other
variables:
 Incentives to work
 Tax revenues: the Laffer curve




 Income redistribution (e.g. inheritance tax, change in >150,000 income tax rate
from 50% to 45%)


 Real output and employment (on AD shift)
(Expansionary fiscal policy = increase spending fall tax…….deflationary fiscal
policy…..)


 Price level
(Indirect tax = cost push inflation  increase cost for suppliers)


 Trade balance
Tax on import = tariff…..


 FDI flows

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