Assumed to be autonomous of income because even in real life G decides on how much or not to spend. As te income of a country goes up, the government spending goes from deficit to surplus. determinants of G; Fiscal policy ( fight inflation/stimulate economy) and debt (battling debt)
Tax Revenue is dependent on National Income Sources of tax Revenue
High Way Tolls
User Fees
Property Taxes
Income Taxes
Sales Taxes
Corporate Taxes
In the equation for aggregate demand, government spending is G
Stephanie Powers "Aggregate Demand"
Tax revenue is dependent on national income but governments do not spend exactly what they make in tax revenue. Government spending > Tax revenue-=deficit Government spending<Tax revenue=Surplus Net taxes Total taxes = autonomous taxex + induced taxes slope of taxes = change in net taxes /change in income = MTR( marginal Tax Rate) Tax function = e.g 60+0.2Y
Marginal Tax rate- is the slope of the Tax function. if T=60+.2Y then the MTR is .2. it tells us that for every additional dollar we make we pay .2 in taxes
Dr. Stephanie Powers, "Aggregate Demand", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)
Assumed to be autonomous of income because even in real life G decides on how much or not to spend. As te income of a country goes up, the government spending goes from deficit to surplus. determinants of G; Fiscal policy ( fight inflation/stimulate economy) and debt (battling debt)
Tax Revenue is dependent on National Income
Sources of tax Revenue
In the equation for aggregate demand, government spending is G
Stephanie Powers "Aggregate Demand"
Tax revenue is dependent on national income but governments do not spend exactly what they make in tax revenue.
Government spending > Tax revenue-=deficit
Government spending<Tax revenue=Surplus
Net taxes
Total taxes = autonomous taxex + induced taxes
slope of taxes = change in net taxes /change in income = MTR( marginal Tax Rate)
Tax function = e.g 60+0.2Y
Marginal Tax rate- is the slope of the Tax function. if T=60+.2Y then the MTR is .2. it tells us that for every additional dollar we make we pay .2 in taxes
Dr. Stephanie Powers, "Aggregate Demand", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)