TOPICS
Economic Functions of
Government in an Market Economy
Government Finance:
- Expenditures and
Revenues
- Average and Marginal Tax Rates
- Progressive, Proportional, and Regressive
taxes
OUTCOMES
Functions of
Government
Understand the five
functions of government in a market
economy
stabilization policies: what
should the government do if unemployment is high? if
inflation is high?
Negative
Externality:
- too much produced
without government, why?
- government micht tax or regulate to reduce
consumption
Positve
Externality:
- too little
produced without government, why?
- government might subsidize or produce the product
itself to increase production
Public good
- nonexcludable and
nonrival
- NONE produced without government
- government must produce
- why are public schools, public parks, and public
libraries NOT "public goods"?
Government Finance
What are the major
revenue sources and major expenditures for the
federal, state, and local governments?
Define and give examples of
progressive, proportional, and regressive
taxes.
Be able to calculate average
tax rates, marginal tax rates, and taxes
paid
Calculate average tax rates and
marginal tax rates.
What are the PROS
and CONS of using a lottery to finance
government?
Discuss the
progressivity or regressivity of the following
taxes:
-
federal income tax
- sales tax
- payroll tax (Social Security Tax)
- property tax
exhaustive and non exhaustive
government purchases
or government purchases vs. government
spending,
benefits
received principle, vs. ability-to-pay principle
(sometimes called the equal sacrifice principle) and
the law of diminishing marginal utility
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