Economics Terms Series Part 4 – Types of Taxes, Types of Rates, Boom, Recession, Recovery, Growth

PERSONAL INCOME TAX 

A direct tax on a person’s earnings or income.

CORPORATE INCOME TAX 

A tax on company profits.

DIRECT TAX 

A tax levied on the incomes or wealth of individuals or firms that must be paid from their own funds and cannot be passed on to others to pay.

INDIRECT TAX 

A tax that is applied to the value of transactions or added to the prices of goods or services. The collection and payment of indirect taxes to government is normally the responsibility of producers who will then pass on as much of each tax as they can to consumers through higher prices.

HYPOTHECATED TAX 

Term used to describe a tax on a specific good or activity used to raise revenue for a specific purpose, such as paying for road or public transport improvements, rather than financing general public spending.

PROPORTIONAL TAX 

A flat tax that takes the same proportion of income in tax from all incomes.

PROGRESSIVE TAX 

A tax designed to take proportionally more in tax from a higher income than a low income.

REGRESSIVE TAX 

A tax designed to take proportionally less in tax from income as it rises. People on low incomes therefore pay proportionally more in tax from their incomes than high-income earners.

VALUE ADDED TAX 

A tax added as a percentage of the value of goods and services at each stage of their production. Because firms can deduct the tax they pay on the purchase of inputs from the tax they collect from the sale of their outputs, the tax only taxes the additional value they add during production.

TAX BASE 

The assessed value of income, wealth or expenditure that is then made subject to taxation.

EXCISE DUTY 

A tax or charge applied to certain goods and services based on their quantity and not their value.

TARIFF 

A tax levied on the price of an imported product to contract domestic demand for it.

TAX BURDEN

This measures total tax revenue as a proportion of the national income of an economy.

AVERAGE TAX RATE 

The total amount of personal or corporate income tax a person or firm pays from their total annual income as a proportion of their total annual income.

MARGINAL TAX RATE 

Economic term to describe a tax rate applied to each additional unit of taxable income above a pre-defined income threshold.

PIECE RATE 

A fixed payment to labour for each unit produced.

INTEREST RATE 

The price of money, i.e. the cost of borrowing money or a reward for saving.

PARTICIPATION RATE 

The percentage of people of working age who choose to be economically active in the labour force.

NATURAL RATE OF POPULATION GROWTH 

Population resulting solely from the difference between the birth and death rate, i.e. excluding net migration.

BIRTH RATE 

A measure of the number of babies born per period per 1,000 people in a population.

DEATH RATE 

A measure of the number of people who die per period per 1,000 people in a population.

ADULT LITERACY RATE 

A measure of the number of people of working age as a proportion of the total population in a country who are able to read and write.

EXCHANGE 

Trade in goods and services between producers and consumers.

EXCHANGE RATE 

The equilibrium market price of one national currency in terms of another currency established through trade in currencies on the foreign exchange market.  

FLOATING EXCHANGE RATE 

The market price of a national currency against another currency that is determined on the foreign exchange market by the supply and demand for that particular currency.

MANAGED FLOATING 

A floating exchange rate system that is partially controlled by government through the sale or purchase of its currency reserves to limit an appreciation or depreciation in the value of its national currency.  

ECONOMIC GROWTH 

A sustained increase in the total output or real GDP of an economy.

ECONOMIC CYCLE 

The recurrent pattern of fairly predictable fluctuations in the growth rate of real GDP over time.

ECONOMIC BOOM 

A period following economic recovery in an economic cycle, characterized by an economy working at full or near-full capacity with a low level of unemployment and aggregate demand, sales and profits at or near their peak, and often accompanied by rising inflation.

ECONOMIC RECESSION 

A general slowdown in the rate of economic growth in an economy following an economic boom. Officially, it is usually associated with prolonged period of negative growth in real GDP.

ECONOMIC RECOVERY 

A period following an economic recession in an economic cycle during which aggregate demand, output, employment and incomes begin to rise.

ECONOMIC SYSTEM 

How an economy allocates resources to competing productive activities and assigns the outputs or products of these activities to different consumers.

MIXED ECONOMIC SYSTEM 

An economic system that combines a market economy with government planning and the public sector ownership of resources and provision of goods and services.

ECONOMICALLY ACTIVE POPULATION 

Those people in a population willing and able to participate in productive activity and are therefore either in paid employment of actively seeking employment.

INTERNAL GROWTH  

An ‘organic’ increase in the scale of production in a firm through the employment of additional factors of production.

EXTERNAL GROWTH 

An increase in the size of a firm through its takeover of, or merger with, another organization.

SUSTAINABLE GROWTH

Growth in real output that is achieved without depleting natural resources or harming the natural environment.