Government intervention

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What is a direct tax?
A tax taken at a source and goes directly to the government
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What is a hypothecated tax?
A tax that is levied with a specific purpose in mind eg sugar tax and then 'ring fencing ' that revenue to be spent on the NHS.
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What is an indirect tax?
Added on to retail prices and is paid to the government by sellers
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Give and example of a direct tax?
Income tax, National Insurance
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Give and example of an indirect tax?
VAT, excise duty
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What is a progressive tax?
A tax that takes a greater percentage from richer than poorer
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What is a regressive tax?
A tax that takes a greater precentage from the poorer than ther the rich.
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Give an example of a progressive tax?
Income tax
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Give an example of a regressive tax?
VAT
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Do progressive taxes reduce or increase inequality?
Reduce
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Do regressive taxes reduce or increase inequality?
Increase
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Why can't income tax account of more than 40% of national income?
Changes the spending power of different income groups and alters the pattern of demand.
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How do progressive taxes affect businesses?
Reduce demand for high end luxury goods and boosts demand for products brought by low income sectors.
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How might high corporation tax affect the economy?
Drive businesses away to relocate elsewhere with negative impacts on jobs and output.
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What would supporters of the free market say about taxs?
Redistribution reduces efficiency, Prices are distorted and interfere with the price mechanism thus preventing allocative efficiency.
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What impact does tax redistribution have on economic welfare?
Poverty trap reduce effectiveness of redistribution because of the disincentive to work, trade off between low taxes and poverty reduction, governments are afraid of heavly taxing successful people because it discourages hard work and success.
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What are the positive impacts of government intervention for businesses?
Correction of market failure will provide oppertunities for businesses to exist and grow, MErit goods like education and healthcare require businesses to build who pay suppliers and schools need equipment which funds more businesses.
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What are the negative impact of government intervention for businesses?
Legislation increases costs, indirect taxes increase costs so businesses may absorb the cost or pass it on to consumers, specific taxes may penalise successfull firms, regulation reduces competitivness.
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Card 2

Front

What is a hypothecated tax?

Back

A tax that is levied with a specific purpose in mind eg sugar tax and then 'ring fencing ' that revenue to be spent on the NHS.

Card 3

Front

What is an indirect tax?

Back

Preview of the front of card 3

Card 4

Front

Give and example of a direct tax?

Back

Preview of the front of card 4

Card 5

Front

Give and example of an indirect tax?

Back

Preview of the front of card 5
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