Answer to Question #135181 in Macroeconomics for Srushty Kalangutkar

Question

What does transfer payment mean?
What does proportional taxes and Lump sum taxes mean ??
How to Solve the equation of proportional taxes ?

Answer 1

Transfer payment is a amounts of money spent without a attribution to any good or service given in exchange. 

Proportional taxes is one which is computed in a manner to make the tax rate fixed and hence regarded as flat while lumpsum taxes mean that in which the person paying the tax is assessed the same amount regardless of the situation. 

The proportion tax is given by the formula Income × percentage of income paid in tax = amount of tax.