Economics Chapter 15 Vocab.

BA-110 w/ Perez

public finance

The study of government expenditure and tax policy and of their impact on the economy.

government expenditures

All spending by government agencies.

government revenue

All funds received by government agencies.

government purchases

Goods or services purchased by a government agency.

transfer payments

Payments made by government agencies to individuals in the form of grants rather than in return for labor or other services.

balanced budget

Situation that occurs when a government’s revenues equal its expenditures for a particular period.

budget surplus

Situation that occurs when a government’s revenues exceed its expenditures.

budget deficit

Situation that occurs when government expenditures exceed revenues.

merit good

Goods whose consumption the public sector promotes, based on a presumption that many individuals do not adequately weigh the benefits of the good.

demerit good

Goods whose consumption the public sector discourages, based on a presumption that individuals do not adequately weigh all the costs of these goods.

progressive tax

A tax that takes a higher percentage of income as income rises.

proportional tax

Tax that takes a fixed percentage of income, no matter what the level of income.

income taxes

Taxes imposed on the income earned by a person or firm.

property taxes

Taxes imposed on assets.

sales tax

Taxes imposed on the value of goods sold.

taxable income

The amount of income that is actually subject to any tax.

public interest theory

Theory that assumes that the goal of government is to seek an efficient allocation of resources.

public choice theory

Body of economic thought based on the assumption that individuals involved in public sector choices make those choices to maximize their own utility.

cost benefit analysis

. A type of economic analysis that seeks to quantify the costs and benefits of an activity.