ch 12 macroeconomics

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  1. Goverment Expenditures
    Federal, state and local goverment outlays for goods and services, including transfer payments.
  2. Financing Goverment Budget
    • Income taxes
    • Social insurance taxes
    • Corporate Income Taxes
    • Excise taxes
  3. Benefit-received priciple
    The concept that those whose benefit from goverment expenditures should pay the taxes that finance their benefits.
  4. Ability to pay principle
    The concept that those who have the higher income can afford to pay greater proportion at their income in taxes, regardless of benefits received.
  5. Progressive tax
    A tax that charges a higher % of income as income rises.
  6. Regresive tax
    A tax that charges a lower % of income as income rises.
  7. Proportional tax
    A tax that charges the same % of income regardless of the size of income. Also called the flat-tax rate.
  8. Public choice theory
    The analysis of the goverment's decision making process for allocating resources.
  9. Benefit cost analysis
    The comparasion of the aditioanl reward and cost of an economic alternative.
  10. Special interes group effect
    Occurs when the goverment approves programs that benefits only a small group within society, but society as a whole pays the cost.
  11. Rational Ignorance
    The voter's choice to remain uninformed because the marginal cost of obtaining information is higher than the marginal benefit from knowing it.
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ch 12 macroeconomics
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