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Fiscal Policy
The use of government purchases, transfer payments, taxes, and borrowing to influence economy-wide variables such as inflation, employment, and economic growth.
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Monetary Policy
Regulation of the money supply to influence economy-wide variables such as inflation, employment, and economic growth.
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Ability-to-pay tax principle
Those with a greater ability to pay, such as those earning higher incomes or those owning more property, should pay more taxes.
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Benefits-received tax principle
Those who get more benefits from the government program should pay more taxes.
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Tax incidence
Indicates who actually bears the burden of the tax
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Proportional Taxation
The tax as a percentage of income remains constant as income increases; also called a flat tax
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