2.3 Macroeconomic Objectives -- Equity
Equity
refers to fairness in economics, while equality means minimising the disparities in income and wealth among a nation's household. Ultimately promotes greater equality in income distribution.
Regressive Tax
Percentage decreases as the taxpayer's income rises
Transfer payment
a payment from the government to an individual for which no good or service is exchanged. Income is redistributed from one group to another.
Absolute poverty
condition experienced by individuals who cannot afford to acquire the basic necessities for a healthy and safe existence
Relative poverty
condition experienced by people in a country whose incomes are considerably lower than the higher income groups in the same country.
Gini Index
economic indicator of the level of income distribution in a nation. It is expressed as a number between 0 to 100. The closer the index to 100, the greater the disparity between the richest and poorest households in a nation.
Laffer Curve
shows the hypothetical relationsip between the tax rate in a country and the amount of tax revenue generated
Equality
smaller disparities among a nation's households in their maintainable living standards and in the distribution of income and wealth
Average Rate of Taxation (ART)
tax/individual's gross income
Marginal Rate of Taxation (MRT)
change in tax/change in gross income
Direct Taxes
taxes paid directly to the government by those on whom they are imposed
Proportional Tax
A tax for which the percentage remains constant as income increases
Efficiency
getting the most out of a given input
Lorenz Curve
graphical representation of a country's income distribution.
Indirect taxes
paid by households through an intermediary such as a retail store. The intermediary then pays the government
Gini Coefficient
used to quantify the degree of inequality in a nation (higher the ratio, the greater the inequality in a country)
Progressive Tax
A tax for which the percentage paid in tax increases as income increases