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Macroeconomics

Real Interest Rate

The real interest rate is found by adjusting a standard interest rate so that the effects of inflation are not present. This allows you to understand the interest rate better by revealing the true yield of to lenders and investors as well as the true cost of funds for borrowers. In other words, it shows the true rate of loans and bonds. Calculating…
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The Lorenz Curve

One of the five major and common macroeconomic goals of most governments is the equitable (fair) distribution of income, which is a crucial element of a functioning democratic society. With regard to this macroeconomic goal, the distribution of income or wealth in an economy is represented by a Lorenz curve. (Note that income and wealth are…
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The Gini Coefficient

The Gini coefficient, or Gini index, is derived from the Lorenz curve, and like the Lorenz curve it measures the degree of economic equality across a given population, and simplifies this reality into a single number. How Does the Gini Coefficient Work? The Gini coefficient can vary from 0 (perfect equality, also represented as 0%) to 1 (perfect…
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Types of Tax Systems

There are three main types of tax systems, each with very different properties: progressive, proportional, and regressive. This article will describe the most important details of each of these systems, and will also provide a comparison of the three to ensure full understanding. Direct and Indirect Taxes Direct taxes are taxes on…
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Regressive Tax

A regressive tax is one that is applied so that the rate of taxation decreases for those who earn higher incomes (so that the rich pay a smaller percentage of their income in taxes than the poor). In such a tax system, those with higher incomes experience a smaller burden of taxation than those with lower incomes. This is particularly true because,…
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Proportional Tax

A proportional tax is a kind of income tax wherein all taxpayers are taxed at the same percentage rate, no matter how high or low their income. A proportional tax system mean that everyone experiences the same tax rate, whether low, middle, or high-income. This form of tax is quite different than a progressive tax system, which involves different…
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