Macroeconomics Ch 5-7
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Created by:
Davethekidney on September 23, 2011
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Econ 201
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26 terms
Terms | Definitions |
|---|---|
 Market Failure | A situation in which the market economy leads to too few or too many resources going to a specific economic activity. |
| Externality | A consequence of an economic activity that spills over to affect third parties. (e.g. Pollution) |
| Third Parties | Parties who are not directly involved in a given activity or transaction. |
| Property Rights | The rights of an owner to use and exchange property. |
| Principal of Rival Consumption | The recognition that individuals are rivals in consuming private goods because one persons consumption reduces the amount for others to consume. |
| Public Goods | Goods for which the principal of rival consumption does not apply. Can be consumed by many individuals simultaneously. |
| Free-rider Problem | A problem that arises when individuals presume that others will pay for public goods so that, individually, they can escape paying for their portion without causing a reduction in production. |
| Transfer Payments | Money payments made by governments to individuals for which no goods or services are rendered in return. (e.g. Social Security) |
| Transfers in Kind | Payments that are in the form of actual goods and services. (e.g. Food Stamps, Housing.) |
| Tax Base | The value of goods, services, wealth, or incomes subject to taxation. |
| Tax Rate | The proportion of a tax base that must be paid to a government as taxes. |
| Marginal Tax Rate | The change in the tax payment divided by the change in income, or the percentage of additional dollars that must be paid in taxes. Applied to the highest tax bracket of taxable income reached. |
| Tax Bracket | A specified interval of income to which a specific and unique marginal tax rate is applied. |
| Average Tax Rate | The total tax payment divided by total income. It is the proportion of total income paid in taxes |
| Proportional Taxation | The tax as a percentage of income remains constant as income increases; also called a flat tax |
| Progressive Taxation | the tax as a percentage of income increases as income increases |
| Regressive Taxation | A system of taxation in which tax is levied at a decreasing average rate as income rises. This form of taxation takes a greater proportion of tax from the low-income taxpayer than from the high-income taxpayer. |
| Capital Gain | the amount by which the selling price of an asset exceeds the purchase price |
| Retained Earnings | profits that businesses save and invest in their operations |
| Tax Incidence | The distribution of tax burdens among various groups in society |
| Ad Valorem Taxation | the tax is applied "to the value" of the good |
| Excise Tax | A tax levied on purchases of a particular good or service. |
| Frictional Unemployment | unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills |
| Cyclical Unemployment | unemployment caused by a business cycle recession |
| Natural Rate of Unemployment | the normal rate of unemployment around which the unemployment rate fluctuates |
| Misery Index | the sum of unemployment and inflation every month |
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