3.10 Public Economics

• Direct taxes are applied to goods and services, while indirect taxes are based on income or profits.

  False
• VAT is a tax on goods and services
• Current spending includes investments in infrastructure and assets.

  False
• What are the two main types of government revenue sources?

  Direct and indirect taxes
• Match the tax type with its base:

  Income Tax ↔️ Income

  Corporation Tax ↔️ Profits

  VAT ↔️ Goods and Services

  Excise Duties ↔️ Specific Goods
• What are the three main types of tax systems?

  Progressive, regressive, proportional
• What type of tax system maintains the current income distribution?

  Proportional
• Direct taxes are levied directly on individuals or corporations
• Corporation tax is a tax on corporate profits
• Match the government expenditure type with its description:

  Current Spending ↔️ Day-to-day operational expenses

  Capital Spending ↔️ Investments in long-term infrastructure

  Transfer Payments ↔️ Redistributes income
• Transfer payments are used to provide goods or services in exchange.

  False
• VAT is an example of a direct tax.

  False
• What is an example of a regressive tax?

  VAT
• High public debt can crowd out private investment
• What is one cause of public sector failure?

  Bureaucratic inefficiencies
• Public economics analyzes how public policies can improve efficiency, equity, and stability
• What is the tax base for corporation tax?

  Profits
• Categories of government expenditure

  1️⃣ Current Spending

  2️⃣ Capital Spending

  3️⃣ Transfer Payments
• Match the expenditure type with its description:

  Current Spending ↔️ Day-to-day operational expenses

  Capital Spending ↔️ Investments in infrastructure

  Transfer Payments ↔️ Redistribution of income
• Indirect taxes are ultimately paid by consumers but collected by businesses.

  True
• VAT is an example of a direct tax.

  False
• Regressive taxes increase income inequality.


  True
• What are the key government revenue sources?

  Direct, indirect taxes, fees
• Indirect taxes are paid directly by consumers to the government.

  False
• Excise duties are taxes on specific goods.


  True
• Capital spending is funded by taxes and borrowing
• Indirect taxes are collected by businesses and remitted to the government
• In a progressive tax system, higher income earners pay a larger percentage of their income
• What are the main causes of public debt accumulation?

  Deficit spending, economic downturns
• Passing on high public debt to future generations raises concerns about fairness.


  True
• What is the primary focus of public economics?

  Government's role in the economy
• What is taxed under income tax?

  Individual earnings
• What type of tax is VAT considered?

  Indirect tax
• What is the purpose of transfer payments?

  Redistribute income
• Direct taxes are levied directly on income or profits
• What is the key difference between direct and indirect taxes?

  How they are levied
• In a progressive tax system, higher income earners pay a larger percentage of their income
• Match the tax system with its impact on income distribution:

  Progressive ↔️ Reduces income inequality

  Regressive ↔️ Increases income inequality

  Proportional ↔️ Maintains current income distribution
• What is income tax based on?

  Individual earnings
• What is VAT levied on?

  Goods and services