ability-to-pay tax principle
Those with a greater ability to pay, such as those earning higher incomes or those owning more property, should pay more taxes
balance of payments
A record of all economic transactions during a given period between residents of one country and residents of the rest of the world
benefits-received tax principle
Those who get more benefits from the government program should pay more taxes
cooperative
An organization consisting of people who pool their resources to buy and sell more efficiently than they could individually
corporation
A legal entity owned by stockholders whose liability is limited to the value of their stock ownership
externality
A cost or a benefit that affects neither the buyer nor seller, but instead affects people not involved in the market transaction
firms
Economic units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale
fiscal policy
The use of government purchases, transfer payments, taxes, and borrowing to influence economy-wide variables such as inflation, employment, and economic growth
foreign exchange
Foreign money needed to carry out international transactions
Industrial Revolution
Development of large-scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia
Information Revolution
Technological change spawned by the microchip and the Internet that enhanced the acquisition, analysis, and transmission of information
marginal tax rate
The percentage of each additional dollar of income that goes to the tax
market failure
A condition that arises when the unregulated operation of markets yields socially undesirable results
merchandise trade balance
The value during a given period of a country's exported goods minus the value of its imported goods
monetary policy
Regulation of the money supply to influence economy-wide variables such as inflation, employment, and economic growth
monopoly
A sole supplier of a product with no close substitutes
natural monopoly
One firm that can supply the entire market at a lower per-unit cost than could two or more firms
not-for-profit organizations
Groups that do not pursue profit as a goal; they engage in charitable, educational, humanitarian, cultural, professional, or other activities, often with a social purpose
partnership
A firm with multiple owners who share the profits and bear unlimited liability for the firm's losses and debts
private good
A good, such as pizza, that is both rival in consumption and exclusive
progressive taxation
The tax as a percentage of income increases as income increases
proportional taxation
The tax as a percentage of income remains constant as income increases; also called a flat tax
public good
A good that, once produced, is available for all to consume, regardless of who pays and who doesn't; such a good is nonrival and nonexclusive, such as a safer community
quota
A legal limit on the quantity of a particular product that can be imported or exported
regressive taxation
The tax as a percentage of income decreases as income increases
sole proprietorship
A firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm's losses and debts
tariff
A tax on imports
tax incidence
The distribution of tax burden among taxpayers; who ultimately pays the tax
transfer payments
Cash or in-kind benefits given to individuals as outright grants from the government
utility
The satisfaction received from consumption; sense of well-being