The Overall the study of economic environment is divided into two categories, microeconomics and macroeconomics. The micro-economics deals with individual units while the macro-economic deals national or international economy as a whole. …
Download file to see previous pages...
Adam Smith, the famous father of economics was behind the classification of economics. This term paper seeks to evaluate the effect of taxation on both the Macro & Micro economics. Taxation is a key facet in any economy as suggested by Adam Smith in his work on Canons of Taxation .The paper also suggests the areas of further study, in which researchers and other scholars are invited to work on. The Overall the study of economic environment is divided into two halves, microeconomics and macroeconomics. The "Micro" originated from a Greek word. The word means small. Microeconomics entails the study of individual economic units. It is concern with particular individual elements in the economy. It thus gives a worm’s eye view of the economy."Macro" originated from Greek word whose meaning is large. Macroeconomics entails the study of global perspective of the economy. It combines the national or international economy concepts of economy e.g. Total Output, Income and Expenditure, Unemployment, Inflation Interest Rates and Balance of International Trade, etc and what economic policies a government can pursue to influence the conditions of the national economy. It thus gives a bird's eye-view of the economy (Gupta 409) This term paper will focus on taxation as a factor that affects both micro and macro-economic fields. The overall function of taxation is to provide funds to finance the activities of government and can be discussed in the following terms: First, Tax revenue is required to pay for goods and services which government provides: These could be public such as defence or merit goods such as education and medical services respectively. Second, a major function of taxation is to bring about some redistribution of income of income – progressive tax system. Third, Tax revenue may be used to pay interest on national debt. Fourth, Taxation may be used as a fiscal policy instrument to influence full employment levels. Fifth, Social welfare function: is the use of tax to discourage the production of harmful commodities. Sixth,-Protection policy Function. The Seventh function is the economic stability goal by discouraging unnecessary expenditure (Marshall 87). Adam Smith was the first economist to study the principles of taxation and how they affect the economic environment. Adam Smith came up with principles of taxation; these are equity, certainty, economy and convenience. He came to believe that when a tax is imposed certain conditions must be fulfilled. These conditions are what he called canons of taxation (Marshall 324).These are: The Canon of Equity: This refers to the fairness of a tax system. It’s borne out of the feeling that “the states’ subjects should support the government in a proportionate way in regard to the revenue they derive’’ (Marshall 324). This means that every person should pay the tax based on the ability; they don t pay the amount. There are three approaches of achieving equity, namely: The Benefit Principle; under this approach, benefits derived from the consumption of goods and services are used as the basis for taxation. Thus people should be taxed according to the benefits they derive from the consumption of public goods. The disadvantage here is to determine the benefits and expenditure of each tax payer. First, The ability to pay: Here the argument is that citizens of a given country are differently endowed in wealth and earnings. Besides the government cannot raise enough funds to finance public expenditure if each and everyone was asked to pay the same amount of tax. So ability to pay should be the basis for taxation because the tax burden is distributed equitably. However, ability to pay is very difficult to effect because of
...Download file to see next pagesRead More
Cite this document
(“Effects of Taxation on Macro & Micro economics Term Paper”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1478053-adam-smith-father-of-economics
(Effects of Taxation on Macro & Micro Economics Term Paper)
“Effects of Taxation on Macro & Micro Economics Term Paper”, n.d. https://studentshare.org/macro-microeconomics/1478053-adam-smith-father-of-economics.
Keynesian general theory of macroeconomics states that in the short run, economic output is strongly influenced by aggregate demand. Keynes also said that the total economy expenditure is not a reflection of its productivity. Keynes states that in order for aggregate supply to meet aggregate demand, the goods supplied should be those that are in demand.
Macroeconomics has critical elements, which include price stability, equilibrium in balance of payment, economic growth, and employment. It is the central role of any government to ensure that the economy of the country is which it is run has favorable economic policies by use of various fiscal or monetary policies.
Bonds are long-term debt instruments that pay the investor periodic dividends and return of principal at the end of the maturity period. Investing and financing in varying proportions of stocks and bonds is the way by which
most of the revenue generated from taxes goes in public order, social engineering, the enforcement of law, defense of property, defense expenditure, public services, economic infrastructure (roads, parks etc) .
Total can claim a deduction of $36900.
Section 28-13 ITAA97 refers to the car expense, which is a loss or outgoing related with the operating and depreciation of a car used to derive assessable income, and the percentage of costs related to the
There are several profit maximization theories that are applicable to firms. In understanding profit maximization, the theory of the firm comes to play.
Firms must act to maximize their profits, and this is the basic tenet of the theory. Profit is defined as the
It can also be considered as the lowest wage at which a worker may sell his or her labor. Minimum wage differs from one country to another and from one state to another in the United States. The US federal government has specified a statutory minimum wage that each employer
s’ participation and inclination determine how any product or service can become useful for sale or purchase so to satisfy the needs of consumer and generate profit for entrepreneurs. However, competition in business market impacts directly on the decision of producers to
4 Pages(1000 words)Term Paper
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Term Paper on topic Effects of Taxation on Macro & Micro economics for FREE!