Induced Taxes

AAA

DEFINITION of 'Induced Taxes'

Within the context of macroeconomics and fiscal policy, a type of tax that changes when an economy's real gross domestic product (GDP) changes. The relationship between induced taxes and GDP is positive; as real GDP rises, taxes will also rise, and visa versa.

INVESTOPEDIA EXPLAINS 'Induced Taxes'

Induced taxes can be used by a government as an automatic economic stabilizer. For example, when the level of real GDP falls substantially, which is indicative of an economic recession, the government can reduce taxes to help spur economic growth.

By reducing taxes in the short-term, an economy's consumption expenditure will increase, causing a rise in the short-term GDP.

RELATED TERMS
  1. Stealth Taxes

    A type of levy that governments use to increase their revenues ...
  2. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  3. Taxes

    An involuntary fee levied on corporations or individuals that ...
  4. Recession

    A significant decline in activity across the economy, lasting ...
  5. Nominal GDP

    A gross domestic product (GDP) figure that has not been adjusted ...
  6. Real Gross Domestic Product (GDP)

    An inflation-adjusted measure that reflects the value of all ...
Related Articles
  1. Options & Futures

    Increase Your Disposable Income

  2. Options & Futures

    Explaining The World Through Macroeconomic ...

  3. Retirement

    How can I easily get ready for next ...

  4. What is GNP?
    Economics

    What's the GNP?

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center