Jacaranda Key Concepts in VCE Economics 2 Units 3 & 4

“c04AggregateDemandPoliciesAndDomesticEconomicStability_PrintPDF” — 2022/6/7 — 8:31 — page 293 — #7

4.3 Sources of government revenue (receipts) KEY KNOWLEDGE • sources of government revenue, including direct and indirect taxation; progressive, regressive and proportional taxes; and revenue from government businesses and the sale of government assets.

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Source: VCE Economics Study Design (2023–2027) extracts © VCAA; reproduced by permission

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Budget revenues are the federal government’s incoming receipts of money from various sources. Figure 4.2 part 1 shows the split between direct taxes (levied on incomes received), indirect tax (added onto the price of goods when they are purchased) and non-tax receipts, while part 2 shows the breakdown budget revenues in more detail. As we shall soon see, their level and composition greatly impacts disposable incomes, AD, economic activity, inflation, unemployment, the allocation of resources, external transactions, income distribution and living standards. FIGURE 4.2 Sources of Australian government budget receipts of $532.1 billion for 2021–22

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Part 1-Sources of Australian government budget revenue by type (percentage of total)

G

Non-tax revenue 7.1%

PA

Revenue from indirect taxes levied on goods and services sold 23.7%

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D

Revenue from direct taxes levied on incomes received 69.2%

CO RR EC

Part 2-Estimated value of key Australian government budget receipts (revenue), 2021–22 ($ billions) Fringe beneﬁts tax

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N

Types of budget revenue

Other levies, taxes, and revenues Superannuation taxes

Non-tax revenue

Total excise & customs duties

3.3 7.2 23.2 41.6 42

Goods and services tax (GST)

75.5

Company & resource rent taxes

100.3

Income tax on individuals

239 0

50

100

150

200

250

300

Value of budget revenues ($ billions) Source: Data derived from Australian government, 2021-22 Budget, MYEFO, December 2021, see https://budget.gov.au/2021-22/co ntent/myefo/index.htm#:~:text=The%20Mid%2DYear%20Economic%20and,last%20Budget%2C%20whichever%20is%20later.. For graph part 1 see P72. For graph part 2 see P132,

TOPIC 4 Aggregate demand policies and domestic economic stability

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5.8 Review

5.4 Encouragement of skilled immigration as an aggregate supply policy

5.3 The budget as an aggregate supply policy

5.5 Trade liberalisation as an aggregate supply policy

5.6 A market-based environmental strategy as an aggregate supply policy

5.1 Overview

5.7 Strengths and weaknesses of using aggregate supply policies — review

4.16 Review

4.12 The transmission mechanisms of monetary policy and their influence on the level of aggregate demand

macroeconomic goals and the affect on living standards

4.13 The RBA’s monetary policy stance

domestic macroeconomic goals and living standards

4.11 Conventional monetary policy and how the RBA can affect interest rates

4.10 Definition and aims of monetary policy, and the role of the RBA

achievement of domestic macroeconomic goals and living standards

3.2 The gains from international trade

3.1 Overview

domestic macroeconomic goals and living standards

2.13 Review

impact on the level of government debt

4.5 The budget outcome

4.6 The stance of budgetary policy — is it expansionary or contractionary?

of domestic macroeconomic goals over the past two years

2.11 The goal of full employment

2.5 The five-sector circular flow model to understand the macro influences on domestic economic activity

domestic economic conditions

domestic economic conditions

2.10 The goal of strong and sustainable economic growth

macroeconomic conditions

2.9 The goal of low and stable inflation (price stability

2.4 The business cycle and its cases

2.3 BACKGROUND KNOWLEDGE Nature, effects and measurement of economic activity

2.2 The difference between material and non-material living standards and factors that may affect each

2.1 Overview

1.11 Review

1.9 Types of market failure and government intervention to address market failure in Australia’s economy

1.10 Government intervention in markets that unintentionally leads to decreased efficiency

1.8 The meaning and significance of price elasticity of demand and supply

of resources

1.6 Microeconomics — the market as an important decision maker in Australia’s economy

1.4 Choice, opportunity cost and efficiency in resource allocation

1.2 BACKGROUND KNOWLEDGE What is economics?

1.3 Relative scarcity

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