Catalog / Economics & Taxation Cheatsheet
Economics & Taxation Cheatsheet
A concise reference for key concepts in economics and taxation, useful for students, professionals, and anyone interested in understanding the principles that govern markets and fiscal policy.
Core Economic Principles
Basic Economic Concepts
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Scarcity |
Limited resources relative to unlimited wants, fundamental economic problem. |
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Opportunity Cost |
The value of the next best alternative forgone when making a decision. |
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Supply and Demand |
Model determining price and quantity in a market. Equilibrium is where supply equals demand. |
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Elasticity |
Responsiveness of quantity demanded or supplied to a change in price or other factors. |
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Market Equilibrium |
The point where the quantity demanded by consumers equals the quantity supplied by producers. This determines the market clearing price and quantity. |
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Gross Domestic Product (GDP) |
The total value of goods and services produced within a country’s borders in a specific time period. |
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Inflation |
A general increase in prices and fall in the purchasing value of money. |
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Unemployment |
The state of being without a job but actively seeking employment. |
Market Structures
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Perfect Competition |
Many firms, identical products, free entry/exit, price takers. |
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Monopolistic Competition |
Many firms, differentiated products, relatively easy entry/exit. |
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Oligopoly |
Few firms, interdependent decisions, potential barriers to entry. |
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Monopoly |
Single firm, unique product, significant barriers to entry, price maker. |
Macroeconomic Goals
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Economic Growth |
Increase in the production of goods and services over time (GDP growth). |
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Price Stability |
Maintaining a low and stable rate of inflation. |
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Full Employment |
Minimizing unemployment while avoiding inflationary pressures. |
Taxation Principles
Types of Taxes
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Income Tax |
Tax levied on individual or corporate income. |
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Sales Tax |
Tax on the sale of goods and services. |
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Property Tax |
Tax on the value of real estate and other property. |
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Excise Tax |
Tax on specific goods, like alcohol, tobacco, or fuel. |
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Payroll Tax |
Tax on wages and salaries to fund social security and Medicare. |
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Value Added Tax (VAT) |
Tax on the value added at each stage of production. |
Tax Systems
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Progressive Tax |
Higher-income earners pay a larger percentage of their income in taxes. |
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Regressive Tax |
Lower-income earners pay a larger percentage of their income in taxes. |
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Proportional Tax (Flat Tax) |
All income earners pay the same percentage of their income in taxes. |
Tax Efficiency and Equity
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Tax Efficiency: A tax system is efficient if it minimizes distortions in economic behavior and administrative costs. |
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Tax Equity:
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Fiscal Policy
Fiscal Policy Tools
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Government Spending |
Expenditures on goods, services, and transfer payments. (Infrastructure, education, defense) |
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Taxation |
Levying taxes to generate revenue and influence economic activity. |
Fiscal Policy Stances
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Expansionary Fiscal Policy |
Increases government spending or reduces taxes to stimulate economic growth. Used during recessions. |
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Contractionary Fiscal Policy |
Decreases government spending or increases taxes to curb inflation. Used to cool down an overheating economy. |
Automatic Stabilizers
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These are features of the economy that automatically moderate economic fluctuations. Examples include unemployment benefits (increase during recessions) and progressive income taxes (decrease tax burden during recessions). |
Monetary Policy
Monetary Policy Tools
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Open Market Operations |
Buying and selling government securities to influence the money supply and interest rates. |
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Reserve Requirements |
The fraction of deposits banks are required to keep in reserve at the central bank. |
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Discount Rate |
The interest rate at which commercial banks can borrow money directly from the central bank. |
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Interest on Reserves |
The interest rate paid by the central bank on commercial banks’ reserve balances held at the central bank. |
Monetary Policy Stances
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Expansionary Monetary Policy |
Lowering interest rates or increasing the money supply to stimulate economic growth. |
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Contractionary Monetary Policy |
Raising interest rates or reducing the money supply to curb inflation. |
Inflation Targeting
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A monetary policy strategy where the central bank announces an explicit inflation target and commits to adjusting monetary policy to achieve that target. This enhances transparency and accountability. |