4.4.1 Government Revenue

• Taxes are compulsory payments made by individuals and businesses to the government.Compulsory
• What are the main sources of government revenue?

  Taxes, borrowing, other sources
• Other sources contribute a smaller portion of government revenue compared to taxes and borrowing.


  True
• What is government revenue?

  Income received by the government
• Taxes are the primary source of government revenue.


  True
• Borrowing allows the government to fund spending beyond its current tax revenue.Beyond
• Which type of government revenue is considered the primary source?

  Taxes
• What are direct taxes?

  Taxes paid directly to the government
• Which direct tax is paid by businesses on their profits?

  Corporation Tax
• What are indirect taxes?

  Taxes paid through prices
• What is excise duty levied on?

  Specific goods and services
• Taxes are used to fund public spending and achieve fiscal policy objectives as part of macroeconomic management
• Taxes are compulsory payments made by individuals and businesses
• Which type of government revenue is considered the primary source?

  Taxes
• Other sources of revenue include fees, fines, and revenue from state-owned enterprises
• What is income tax levied on?

  Personal income
• What is VAT added to the price of?

  Most goods and services
• Indirect taxes are paid directly to the government by consumers.

  False
• What is generated from the sale of government-owned assets?

  Asset sales revenue
• Direct taxes provide more flexibility for fiscal policy compared to indirect taxes.

  True
• How do lower taxes typically affect economic growth?

  Encourage investment
• Taxes are used to fund public spending and achieve fiscal policy objectives.


  True
• Income Tax is a tax paid on wages, salaries, and investment returns.Personal
• Direct taxes can be adjusted to influence individual and business behavior.


  True
• VAT stands for Value Added Tax, which is a tax added to the price of most goods and services
• Indirect taxes are paid directly by consumers to the government.

  False
• Indirect taxes are more flexible than direct taxes as a fiscal policy tool.

  False
• What is government revenue primarily used for?

  Public spending
• Borrowing allows the government to fund spending beyond current tax revenue.


  True
• Direct taxes are embedded in the prices of goods and services.

  False
• Match the direct tax with its description:

  Income Tax ↔️ Tax on personal income

  Corporation Tax ↔️ Tax on business profits

  Capital Gains Tax ↔️ Tax on profits from asset sales

  Inheritance Tax ↔️ Tax on wealth transfer
• Excise duty is a tax on specific goods like alcohol, tobacco, and fuel
• Order the following non-tax revenue sources from largest to smallest contribution to government revenue:

  1️⃣ Borrowing

  2️⃣ State-Owned Enterprises

  3️⃣ Asset Sales

  4️⃣ Fees and Fines
• Non-tax revenue provides the government with additional flexibility in funding its policy objectives
• Match the tax effect with its economic outcome:

  Lower Taxes ↔️ Increase economic growth

  Higher Taxes ↔️ Reduce aggregate demand

  Progressive Taxes ↔️ Decrease income inequality