| A | B |
|---|
| What are the various philosophies about who should pay taxes called? | principles of taxation |
| Waht is true of discreationary spending? | the government can choose whether or not to fund it |
| If the government wants to expand the economy, what action might it take? | Build a highway, dam, airport, school, etc |
| If the government wants to slow down the economy, what action might it take? | Raise taxes, limit government spending, etc |
| A congressional representative comes from a district with many people living in poverty. To gain more votes in the next election, which tax will the representative most likely support? | progressive income tax |
| Who pays most of the tax when demand for a product is inelastic, and why? | the consumer because there are few substitutes |
| The Fed implements a contractionary monetary policy by | selling bonds on the open market |
| The money supply can be expanded by | changing the required reserve ratio from a higher percentage to a lower percentage |
| Cash is pulled out of circulation when interest rates | Interest rates are high |
| What type of action would the Fed take to slow down inflation? | Selling bonds, increase the RRR |
| Suppose that the economy is in a recession. What are three actions that the government might take to implement an expansionary fiscal policy? | Increase government spending, reduce the individual income tax, decrease the coporate income tax |
| What term is used for a government plan to reduce aggregate demand and slow the economy? | contracionary fiscal policy |
| What are the two basic tools that the federal government uses to influence the economy? | Taxes and spending |
| If the government spends more than it takes in, what is that called? | deficit |
| What is the government doing when it issues bonds? | borrowing money it will have to repay in the future |
| What is a tax base? | wealth that is subject to taxes |
| With what kind of tax does the tax rate (percentage) increase as income increases? | Progressive tax |
| What does the government use to try to influence economic behavior? | Tax incentives |
| What payroll tax is taken out to cover Medicare and Social Security? | FICA |
| Most mandatory funding is used to fund what? | Mandatory spending on entitlements |
| What is the major source of funding for most public schools? | Property tax |
| What is the difference between the budget deficit and the national debt? | the national debt is a total that includes many years of budget deficits. |
| On what principle is the idea of the progressive tax based? | Ability to pay |
| What are examples of automatic stabilizers? | Income tax, unemployment, welfare, food stamps |
| Who contributes the funds to pay for Social Security? | both employers and employees |
| What is the cigarette tax an example of? | Excise tax |
| What problem do Social Security and Medicare have in common? | growing population of retired people |
| A tax that is based on a person's wages, interest, dividends, and tips is a(n) | individual income tax |
| A tax that takes a larger percentage from low-income earners than from high-income earners is a | regressive tax |
| A tax that takes a larger percentage from high-income earners than from low-income earners is a | progressive |
| The Fed provides banking services for | Government and many private banks |
| Check clearing is becoming a less important function of the Fed because | electronic-payment methods are becoming more popular |
| Banks borrow more money from the Fed when the | Discount rate decreases |
| The fraction of the bank's deposits that must be kept in reserve by the bank is called the | required reserve ratio |
| a specific amount of money set aside for a specific purpose | appropriations |
| a social welfare program with specific requirements | entitlement |
| a plan for spending tax money at the national level | federal budget |
| the portion of income subject to tax | taxable income |
| a transfer payment from the federal government to state or local governments | grant-in-aid |
| a government medical insurance program for low income people | Medicad |
| money distributed to taxpayers who do not provide anything in return | transfer payment |
| who ultimately pays the tax | incidence of tax |
| another term for expansionary monetary policy | Easy money policy |
| another term for contractionary monetary policy | tight money policy |
| non-partisan, objective body that advises congress on the budget process and the cost of future programs | Congressional Budget Office |
| interest rates that banks charge their best customers | Prime rate |
