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Economics-Mankiw-P4
Definitions of the newest Mankiw (Special edition with financial crisis)Ch.10-12
Question | Answer |
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Externality | the uncompensated impact of one person's actions on the well-being of a bystander |
Internalizing an externality | altering incentives so that people take account of the external effects of their actions |
Coase theorem | the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own |
Transaction cost | the cost that parties incur in the process of agreeing and following through on a bargain |
Pigovian tax | a tax enacted to correct the effects of a negative externality |
Excludability | the property of a good whereby a person can be prevented from using it |
Rivalry | the property of a good whereby one person's use diminishes other people's use |
Private goods | goods that are both excludable and rival |
Public goods | goods that are neither excludable nor rival |
Common resources | goods that are rival but not excludable |
Natural monopolies | goods that are excludable but not rival |
Free rider | a person who receives the benefit of a good but avoids paying for it |
Cost-benefit analysis | a study that compares the costs and benefits to society of providing a public good |
Tragedy of the Commons | a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole |
Indirect tax | a tax that is levied on goods and services bought |
Direct tax | a tax that is levied directly on a person's income |
Budget deficit | an excess of government spending over government receipts |
Budget surplus | an excess of government receipts over government spending |
Lump-sum tax | a tax that is the same amount for every person |
Average tax rate | total taxes paid divided by total income |
Marginal tax rate | the extra taxes paid on an additional unit of income |
Benefits principle | the idea that people should pay taxes based on the benefits they receive from the government |
Ability-to-pay principle | the idea that taxes should be levied on a person according to how well that person can shoulder the burden |
Vertical equity | the idea that taxpayers with a greater ability to pay taxes should pay larger amounts |
Horizontal equity | the idea that taxpayers with similar abilities to pay taxes should pay the same amount |
Proportionl (or flat) tax | a tax for which high-income and low-income taxpayers pay the same fraction of income |
Regressive tax | a tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers |
Progressive tax | a tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers |