Taxes can influence the price of goods and services, influencing consumer demand. They add costs, diverting resources away from certain types of economic activity
Direct Taxes
Those that are paid by the individuals or firms on which they are levied - cannot be passed on to someone else
Indirect Taxes
Levied on individuals and firms but can be passed on to someone else. They are attached to a good/service rather than an individual or company
Types of Expenses
Governments intervene in the production process to better allocate resources.
Spending
Government spending can directly reallocate resources to a particular sector of the economy, or influence decisions of consumers and businesses
