Archives: Terms

Definition of the Theory of the Second Best The Theory of the Second Best is a concept in economic theory that asserts, if one optimality condition in an economic model cannot be met, then the next-best solution might require deviating from all the other optimality conditions. This means that achieving […]

Definition of Thatcherism Thatcherism refers to the political and economic policies advocated by the former Prime Minister of the United Kingdom, Margaret Thatcher, who was in office from 1979 to 1990. Characterized by a strong belief in free-market capitalism, deregulation of the economy, privatisation of state-owned industries, and a reduction […]

Definition of Terms of Trade Terms of Trade (ToT) refer to the ratio between the prices at which a country exports goods and services and the prices of imports. It is a measure that indicates the relative strength or weakness of a country’s international trading position. Essentially, Terms of Trade […]

Definition of the Taylor Rule The Taylor Rule is an economic principle that provides guidelines on how central banks, like the Federal Reserve in the United States, should set interest rates to stabilize the economy. Formulated by economist John B. Taylor in 1993, this rule ties the central bank’s interest […]

Definition of Tax Rate The tax rate is the percentage at which an individual or corporation is taxed. The term refers to the rate charged on various forms of income, such as wage income, capital gains, or corporate profits, as well as the rate applied to the value of property, […]

Definition of Tax Deduction A tax deduction is an expense that can be subtracted from an individual’s or corporation’s income to reduce the amount of taxable income. This decrease in taxable income means that taxpayers pay less in taxes to the government. There are various types of deductions available, including […]

Definition of Tax Credit A tax credit is a component of a country’s tax system designed to reduce the amount of taxes owed by individuals and businesses. Unlike deductions, which reduce the amount of taxable income, a tax credit directly reduces the amount of tax owed, dollar for dollar. Tax […]

Definition of Tax Benefits of Debt The tax benefits of debt refer to the financial advantages that companies or individuals gain from using debt as a form of financing rather than equity. In many tax jurisdictions, the interest payments on debt can be deducted from taxable income, reducing the total […]

Definition of Tax-Benefit Model The tax-benefit model is an analytical framework used by economists and policy analysts to assess the impact of taxes and public benefits on individuals, families, and the economy as a whole. It involves simulating how different tax policies and benefit programs, such as social security, unemployment […]

Definition of Tâtonnement Tâtonnement, a term derived from French meaning “to grope or to feel one’s way,” is a concept in economics that reflects the process of trial and error by which market prices adjust to a new equilibrium. The concept is closely associated with the work of Léon Walras, […]