Economics 30: The Role of the Government

Vocabulary flashcards covering the role of government, taxation systems, fiscal policy, market interventions, and governmental jurisdictional responsibilities.

Privatization

The process of transferring the control and ownership of a business or public service from the government to private hands.

Excise Tax

An indirect tax levied by the government on the sale of specific goods and services, such as a sin tax.

Federalist System

A political structure in which different levels of government share power and administrative responsibilities.

Wagner's Law of Increasing State Activity

An economic principle stating that government spending increases as national income rises and the economy develops.

Deadweight Loss

The total loss of economic welfare that occurs when a market fails to operate at its competitive equilibrium.

Direct Tax

A tax paid directly to the government by the taxpayer, assessed on financial ability and income, such as personal income tax or property tax.

Indirect Tax

A tax levied on goods and services rather than income, collected through higher consumer retail prices based on spending, such as the GST or PST.

Benefits-Received Approach

The taxation principle holding that individuals should pay taxes in proportion to the specific benefits and public services they receive from the government.

Ability-to-Pay Approach

The taxation principle holding that the amount of tax a person pays should depend on their income and overall capacity to contribute financially.

Progressive Tax

A tax structure in which the tax rate increases as taxable income rises, assessing lower rates on lower incomes and higher rates on higher incomes.

Regressive Tax

A tax structure where the tax charge remains a fixed dollar amount for everyone regardless of income, placing a higher relative burden on low-income earners.

Proportional Tax

A tax system in which all individuals are charged the exact same percentage of their income, regardless of total earnings.

Marginal Tax Rate

The percentage of tax applied to the next single dollar of earned income.

Equalization Payments

Federal cash transfer payments made to provincial governments to offset economic disparities and redistribute wealth among provinces.

Stabilization Payments

Targeted government revenue payments distributed to help provinces manage and absorb sudden downturns in revenue.

Invisible Hand Theory

The economic concept that individuals acting in their own self-interest can unintentionally produce positive social and economic benefits for society.

Natural Monopoly

An industry where a single firm can supply a good or service at a lower cost than multiple competitors, avoiding wasteful duplication of expensive infrastructure.

Price Floor

A legally mandated minimum price that producers can charge for a product or service, designed to stabilize producer revenue and prevent prices from falling too low.

Price Ceiling

A legally established maximum price that can be charged for a good or service, set to prevent market prices from rising to unaffordable levels.

Federal Government Responsibilities

National-level areas of jurisdiction, which include allocating spending toward the military, immigration, and international trade.

Provincial Government Responsibilities

Regional areas of jurisdiction, which include spending on healthcare, primary and secondary education, highways, and social services.

Federal-Provincial Jurisdictional Overlap

Shared governmental responsibilities between federal and provincial jurisdictions, including collecting taxes, supporting the economy, and protecting citizens.

Population Growth (Wagner's Law Factor)

A primary driver of Wagner's Law where population expansion forces the government to allocate more funds to public infrastructure, schools, and hospitals.

Services and Urbanization (Wagner's Law Factor)

A driver of Wagner's Law where the growth of cities necessitates increased government funding for transportation networks and municipal infrastructure.

Fiscal Policy

The strategic use of government taxation and public expenditure adjustments to stabilize and guide national economic activity.

Fiscal Response to Recession

A macroeconomic policy response to declining economic activity characterized by lowering tax rates and increasing government spending.

Fiscal Response to Inflation

A macroeconomic policy response to general increases in goods and services prices characterized by reducing government expenditure and raising taxes.