A report on Tax and Macroeconomics

Total revenue from direct and indirect taxes given as share of GDP in 2017
Circulation in macroeconomics.
Pieter Brueghel the Younger, The tax collector's office, 1640
A traditional AS–AD diagram showing a shift in AD and the AS curve becoming inelastic beyond potential output.
Substitution effect and income effect with a taxation on y good.
In this example of an IS/LM chart, the IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).
Budget's constraint shift after an introduction of a lump sum tax or a general tax on consumption or a proportional income tax.
Natural resources flow through the economy and end up as waste and pollution
The Laffer curve. In this case, the critical point is at a tax rate of 70%. Revenue increases until this peak, then it starts decreasing.
A chart using US data showing the relationship between economic growth and unemployment expressed by Okun's law. The relationship demonstrates cyclical unemployment. Economic growth leads to a lower unemployment rate.
General government revenue, in % of GDP, from social contributions. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 20% by social contributions revenue.
Changes in the ten-year moving averages of price level and growth in money supply (using the measure of M2, the supply of hard currency and money held in most types of bank accounts) in the US from 1880 to 2016. Over the long run, the two series show a close relationship.
Egyptian peasants seized for non-payment of taxes. (Pyramid Age)
An example of intervention strategy under different conditions
Public finance revenue from taxes in % of GDP. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 32% by tax revenue.
Diagram illustrating deadweight costs of taxes

In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic performance of the economy (a government's strategy for doing this is called its fiscal policy; see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of the transaction more or less attractive.

- Tax

Examples of such tools are expenditure, taxes, debt.

- Macroeconomics
Total revenue from direct and indirect taxes given as share of GDP in 2017

2 related topics with Alpha

Overall

Microeconomics analyzes the market mechanisms that enable buyers and sellers to establish relative prices among goods and services. Shown is a marketplace in Delhi.

Microeconomics

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Branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Microeconomics analyzes the market mechanisms that enable buyers and sellers to establish relative prices among goods and services. Shown is a marketplace in Delhi.
The supply and demand model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase (that is, right-shift) in demand from D1 to D2 along with the consequent increase in price and quantity required to reach a new equilibrium point on the supply curve (S).
United States Capitol Building: meeting place of the United States Congress, where many tax laws are passed, which directly impact economic welfare. This is studied in the subject of public economics.

Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics.

Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on microeconomic behavior and thus on the aforementioned aspects of the economy.

The Market for Capital (the Loanable Funds Market) and the Crowding Out Effect. An increase in government deficit spending "crowds out" private investment by increasing interest rates and lowering the quantity of capital available to the private sector.

Government spending

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Government spending or expenditure includes all government consumption, investment, and transfer payments.

Government spending or expenditure includes all government consumption, investment, and transfer payments.

The Market for Capital (the Loanable Funds Market) and the Crowding Out Effect. An increase in government deficit spending "crowds out" private investment by increasing interest rates and lowering the quantity of capital available to the private sector.
Tax Burden as a Percentage of GDP (2014 Index of Economic Freedom).
Government spending as percentage of GDP in different countries, 1890 to 2011
Government Expenditure as a Percentage of GDP (2014 Index of Economic Freedom).

Government spending can be financed by government borrowing, taxes, custom duties, the sale or lease of natural resources, and various fees like national park entry fees or licensing fees.

In economic theory or in macroeconomics, investment is the amount purchased of goods which are not consumed but are to be used for future production (i.e. capital).