A pure market economy is one with only consumers and suppliers. However, the modified market economy is one where the government is involved. In the modified market economy, the government has four economic objectives: sustainable economic growth, price stability, full employment and external balance.

Taxes can be put into two broad categories: direct and indirect tax.

There are three different types of taxes that government uses to help achieve the four economic objectives. These are: progressive tax, regressive tax and proportional tax.