Page 75 - BA1 Integrated Workbook STUDENT 2018
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Macroeconomics 1 – The domestic economy
Taxation
8.1 Purposes of taxation
To change markets e.g. tax demerit goods and negative
externalities to try to reduce production of both
To move AD e.g. Higher tax moves AD to the left
To finance production of public e.g. tax spent on roads, hospitals, defence and
and merit goods to allow education to be free
To change the distribution of e.g. Progressive direct taxes most affect upper
wealth groups while indirect taxes and regressive
taxes most affect lower income groups.
Illustrations and further practice
Now try TYUs 12 to 17 from Chapter 4
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