What is money as a Medium of exchange?
When money is used as a medium of exchange, it distinguishes from other assets
How does money perform a function of a Measure of value?
When performing afunction ofa measure of valuemoney is used as a common denominator of value for pricing goods and services. The use of money as a measure of value helps make rational market decisions.
What does money mean as a Store of value?
Money as astore of value enables people to use the value of something that they sell today to make a purchase sometime in the future.
What does the purchasing power of money mean?
purchasing powermeans the amount of goods and services people can buy with their money. When prices increase, money cannot buy as much. Its purchasing power declines.
Why and when does the value of money change?An extended period of rising prices is called inflation.Economists distinguish two general types of inflation – demand-pull inflation and cost-push inflation.A period in which prices are falling is called deflation.The value of the monetary unit increases during periods of deflation.
TAXATION
1. What are the main purposes of collecting taxes?
Without taxes to finance its activities, governments could not exist. Governments use tax revenues to pay soldiers and police, to build roads and bridges, to control schools and hospitals, to provide food to the poor and medical care to the elderly..the principal purpose of taxes is to pay for the cost of government.
2. What is a tax?
Tax:money compulsory levied by government on individuals, property, businesses.
3. What types of taxes do governments impose?
Governments impose many types of taxes. In most democracies, individuals pay income taxes when they earn money, consumption taxes such as excise tax, sales taxes,and value-added taxes when they spend it, property taxes when they own a home or land, and some others.
4. What are income and property taxes?
Property tax:a tax based on the value of property owned by the taxpayer.Income tax:a tax on the income earned by individuals and corporations.
5. What are sales and value-added taxes?
Sales tax:a regressive tax added to the price of goods and services at the time they are sold.Value-added taxis a tax levied on the value added to goods at every stage of production.
6. What excites considerable controversy when it comes to taxation?
7. What are the principles of taxation?
8. What does the benefits-received principle state?
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Benefits-received principle of taxation:a form of taxation in which taxpayers pay according to the amount of benefits that they receive from government programs.
9. What does the ability-to-pay principle mean?
Ability-to-pay principle of taxation: a form of taxation in which taxes are levied on the basis of the taxpayer’s ability to pay
10. How can most taxes be classified? Define them.
Most taxes can be classified as proportional, progressive, or regressive.
11. Why do sales taxes and value-added taxes have a regressive effect?
12. A regressive tax takes a lower percentage of income as income rises - poor people pay a larger share of their incomes in taxes than rich people. Although both sales taxes and value-added taxes are not based on income, they have a regressive effect because they take a larger share of earnings from a low-income taxpayer than from a high-income taxpayer.
13. What is an incidence of the tax?
The way a tax affects people is called the tax incidence.
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