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US Government > Chapter 21 - Financing Government > Flashcards

Chapter 21 - Financing Government Flashcards

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1
Q

Which economist argued for more government spending when the economy shrinks?

A

John Maynard Keynes

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2
Q

Which economist warned that more government spending when the economy shrinks would be ineffective and even detrimental?

A

Friedridk A. Hayek

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3
Q

What are the 6 economic goals for government?

A
  1. Economic Freedom
  2. Economic Growth
  3. Full Employment
  4. Economic Equity
  5. Economic Security and price stability
  6. Economic Efficiency
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4
Q

________ believe that the economy functions better without much government regulation.

A

Conservatives

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5
Q

________ believe that economic freedom is more valuable than economic equity.

A

Conservatives

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6
Q

________tend to believe that government has a responsibility to protect workers and consumers from unsafe or unfair business practices.

A

Liberals

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7
Q

Are willing to accept the need for more regulations of the economy to protect workers and consumers.

A

Liberals

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8
Q

This is the nation’s plan for how much revenue it expects to take in and how it plans to spend money.

A

Budget

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9
Q

This is the money a government collects from taxes or other sources.

A

Revenue

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10
Q

When revenue and spending are equal, the budget is said to be __________.

A

Balanced

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11
Q

When the government spends more than it takes in, a ____ is created.

A

Budget Defecit

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12
Q

When there is extra money left, it’s called a _____ .

A

Budget Surplus

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13
Q

The total amount of money the government has borrowed but not paid back is called the _____ .

A

National Debt

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14
Q

T or F. Government leaders consisder 4 to 5 percent unemployment rate to be FULL employment.

A

True. It’s impossible for every single eligible worker to be employed.

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15
Q

Name the Economic Goal

Workers want the freedom to choose their work, and business owners want the freedom to decide what to produce.

A

Economic Freedom.

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16
Q

Name the Economic Goal

An economy that does not grow or even shrinks can result in high unemployment, low productivity, and other negatives.

A

Economic Growth

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17
Q

Name the Economic Goal

When a country uses its workers to full capacity, the economy thrives.

A

Full Employment

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18
Q

Name the Economic Goal

Governments value basic fairness in the distribution of wealth and resources.

A

Economic Equity

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19
Q

Name the Economic Goal

Governments want to reduce economic risks to individuals, groups, and businesses.

A

Economic Security and Price Stability

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20
Q

Name the Economic Goal

The government wants to be sure that its policies lead to efficient and full use of scarce resources.

A

Economic Efficiency

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21
Q

When is the government’s fiscal year?

A

October 1 to September 30 of the next year

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22
Q

Review the “Steps in the Budget Process” on page 640

A
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23
Q

What is the first step in the budget process?

A

The President, executive agency leaders, and economic analysts from the White House start it off.

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24
Q

The department secretaries send their spending plans to ____ .

A

The director of the Office of Management and Budget.

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25
Q

Which three entities confer with the President about his budget proposals?

A
  1. The Office of Managment and Budget
  2. The Council of Economic Advisors
  3. The Secretary of the Treasury
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26
Q

Who submits a complete budget document to the President for final review and approval?

A

The Office of Management and Budget

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27
Q

Who makes the final budget decisions?

A

Congress

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28
Q

What does Article I Section 9 say about the budget?

A

That Congress must approve all spending.

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29
Q

T or F. Only Congress has the power to raise revenue and pass appropriations.

A

True

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30
Q

T or F. No money may be spent and no taxes may be collected until Congress approves.

A

True

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31
Q

This established budget committees in the House and Senate and created the Congressional Budget Office (CBO) that advises the Congress on the potential financial impact of budget decisions.

A

The Budget and Impoundment Act of 1974

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32
Q

Its later amendments required the OMB and CBO to issue a joint report each year estimating how much the proposed budget would exceed income and how much it should be cut to meet deficit reduction targets.

A

The Balanced Budget Emergency Defecit Control Act of 1985 (better known as the Gramm-Rudman-Hollings Act)

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33
Q

This divided the budget into three areas: domestic policy, defense, and international affairs.

A

The Budgetary Enforcement Act of 1990

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34
Q

This required that any spending that exceeded the budgeted limit in any area would come out of the next year’s funding for that area.

A

The Budgetary Enforcement Act of 1990

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35
Q

Review the formal budget-making process Congress uses on the top of page 642

A
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36
Q

T or F. Congress has the power of oversight and can hold hearings or require reports from executive branch officials to make sure the budget is being implemented according to plan.

A

True

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37
Q

If Congress doesn’t pass a budget, it relies on these in order to fund the government.

A

Continuing Resolution

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38
Q

What is a “continuing resolution”

A

A continuing resolution simply carries over the previous year’s budget for a period of time that Congress sets. It is used when Congress can’t pass a budget.

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39
Q

What happens if Congress can’t agree on a continuing resolution after it can’t agree on a budget?

A

The government runs out of money.

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40
Q

Reading Progress Check

Put the steps of the budget-making process in sequence from first to last.

A

Chart on page 640

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41
Q

How much does the government currently spend per year?

A

3.5 Trillion Dollars

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42
Q

These are expenditures required by law or resulting from previous budgetary committments.

A

Uncontrollables

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43
Q

Most uncontrollables are:

A
  1. Direct benefit payments
  2. Interest on the National Debt
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44
Q

These are benefits that Congress must by law provide to individuals that continue form one year to the next.

A

Entitlements

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45
Q

Social security, pensions for retired government employees, Medicare, Medicaid, and veteran’s benefits are all examples of these.

A

Entitlements

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46
Q

What is the biggest entitlement program?

A

Social Security

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47
Q

Discretionary spending is broken down into these two categories:

A
  1. Defense
  2. Non Defense
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48
Q

Much of our non defense discretionary spending comes in this form.

A

Grants to states and localities

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49
Q

These are payments made by individuals and businesses to support government activities and provide government services.

A

Taxes

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50
Q

These are taxes on the manufacture, transportation, sale or consumption of goods and services.

A

Excise Taxes

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51
Q

Gas and cigarette taxes are examples of what kinds of taxes?

A

Excise Taxes

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52
Q

T or F. Most Americans were not required to pay an income tax until World War II.

A

True. The government desperately needed funds to pay for the war.

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53
Q

T or F. Since WWII, the government’s revenue has not kept up with its spending.

A

True

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54
Q

Name the five main types of federal taxes.

A
  1. Excise Taxes
  2. Customs Duties
  3. Estate and Gift Taxes
  4. Income Taxes
  5. Social Security Taxes
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55
Q

These are taxes imposed on gas, tobaco, liquor, airline tickets and luxury goods.

A

Excise Taxes

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56
Q

These are taxes on imported goods.

A

Custom duties or Tariffs

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57
Q

High customs duties are often popular with business, labor, and farm groups. They are often refered to as these.

A

Protective Tariffs.

58
Q

This is a tax on money left to others after someone has died.

A

Estate Tax

59
Q

This requires donors to pay taxes on oney and property that they give to others while they are still living.

A

Gift Tax

60
Q

These two types of taxes bring in the largest share of government revenue:

A
  1. Income Tax
  2. Social Security Taxes
61
Q

T or F. The income tax is a “progessive tax.”

A

True.

62
Q

This means that people with higher incomes pay a larger share of their income in tax than do people with lower incomes.

A

Progressive Tax

63
Q

This type of tax would make people with lower incomes pay a larger share of their income in taxes than people with higher incomes.

A

Regressive Tax

64
Q

Explain why a car registration fee of $100 is a “regressive tax.”

A

Because $100 is a larger share of a poor person’s income than a rich person’s income. But they’re both paying the same amount.

65
Q

This describes the percentage of income taxes an individual pays increases as his or her income increases; the rate of taxation applies to incomes within defined ranges or brackets.

A

Marginal Tax Rate

66
Q

This describes the total income of an individual minus certain deductions and personal exemptions.

A

Taxable Income

67
Q

What does taxable income include?

A
  1. Wages or Salary
  2. Tips
  3. Commission
  4. Investment Income
  5. Lottery or Gambling Winnings
68
Q

T or F. Tax laws allow people to reduce their total taxable income through a variety of deductions and exemptions.

A

True

69
Q

Someone who relies primarily on another person for basic needs such as food, clothing and shelter is called this.

A

A dependent

70
Q

This is the money an employer holds back from workers’ wages as payment of anticipated income taxes.

A

Withholding

71
Q

The deadline for filing taxes is

A

April 15

72
Q

If the withholding is too large, a taxpayer gets this

A

A refund

73
Q

If the withholding was too small, this happens to a taxpayer

A

The taxpayer owes the government money

74
Q

This department collects taxes.

A

The Internal Revenue Service (IRS)

75
Q

These reduce the amount of income that is subject to tax.

A

Deductions. Such as a deduction for interest paid on a mortgage.

76
Q

These are priviliges granted by the government that legally excludes certain types of property, sales, or income from taxpaying obligations.

A

Exemptions. For example, most states exempt religious groups from paying property taxes.

77
Q

These diretly reduce the amount of tax owed.

A

Tax Credits

78
Q

This is a gift or grant of money

A

Subsidy

79
Q

T or F. Exemptions, deductions, and credits result in lost government revenue.

A

True

80
Q

T or F. The top 10% of taxpayers pay about two-thirds of all income taxes.

A

True

81
Q

T or F. Corporations must also pay income taxes.

A

True

82
Q

T or F. Nonprofit organizations such as colleges, labor unions, and religious organizations are exempt from corporate income tax.

A

True

83
Q

Social insurance taxes are also call this.

A

Payroll Taxes

84
Q

T or F. Payroll taxes are considered regressive taxes.

A

True. Because people with lower incomes pay a larger percentage of their incomes for these taxes than people with higher taxes.

85
Q

When the government runs a budget defecit, how does it borrow money?

A

It borrows money by having the Treasury Department issue securities in the form of bonds, notes, and treasury bills.

86
Q

This is a financial instrument, including a bond, note, and certificate, that is sold as a means of borrowing money with a promise to repay the buyer with interest after a specific time period.

A

Security

87
Q

Congress has tried to control the size of the debt by setting this.

A

A debt ceiling

88
Q

What is a “debt ceiling?”

A

A legal limit to the amount the federal government can borrow. It has been raised many times and has not been very effective in limiting government borrowing as a result.

89
Q

What is a “mixed economy?”

A

It means that the control over the economy is divided between government and the private sector.

90
Q

What are “economic indicators?”

A

These are market conditions, reports, or figures that give information about how the economy is performing.

91
Q

Name the five Key Economic Indicators

A
  1. Unemployment rate
  2. Dow Jones Industrial Average, S&P 500, and NASDAQ
  3. Consumer Price Indes
  4. Existing Home Sales
  5. Consumer Confidence Index
92
Q

Name the Key Economic Indicator

This is the number of Americans who are not working but are looking for work.

A

Unemployment Rate

93
Q

Name the Key Economic Indicator

The are the three stock indicies.

A

Dow Jones Industrial Average, S&P 500, and NASDAQ

94
Q

Name the Key Economic Indicator

This is a measure of the average change over time for the prices Americans pay for a list of set goods and services.

A

Consumer Price Index

95
Q

Name the Key Economic Indicator

The National Association of Realtors reports on the number of already-built homes that are sold each month.

A

Existing Home Sales

96
Q

Name the Key Economic Indicator

This is a survey of 5,000 ordinary Americans to gauge how they feel about current economic conditions and their expectations for the future.

A

Consumer Confidence Index

97
Q

What two ways can the government influence the economy?

A
  1. Fiscal Policy
  2. Monetary Policy
98
Q

Define “fiscal policy.”

A

Fiscal policy involves using government spending and taxation to influence the economy.

99
Q

Define “monetary policy.”

A

Monetary policy involves controlling the supply of money and credit.

100
Q

Who exercises monetary policy in the United States?

A

The Federal Reserve

101
Q

This is the market value of all final goods and services produced in a country in a year.

A

Gross Domestic Product

102
Q

This is the central banking system of the United States

A

Federal Reserve System

103
Q

T or F. The Federal Reserve operates independently of the U.S. Government.

A

True

104
Q

Where do banks borrow money from?

A

The Federal Reserve

105
Q

What four things is the Federal Reserve responsbile for?

A
  1. Promote sustainable growth
  2. Promote high levels of employment
  3. Promote stability of prices
  4. Moderate long-term interest rates
106
Q

This describes the increase in consumer prices over time.

A

Inflation

107
Q

Who supervises the Federal Reserve System?

A

A seven member Board of Governors

108
Q

Who selects the Board of Governors

A

The President of the United States

109
Q

T or F. The Senate must approve or ratify the Board of Governors.

A

True

110
Q

How many Federal Reserve Districts are there?

A

12

111
Q

What 3 tools does the Federal Reserve use to control the nation’s monetary policy and ensure the health of the economy?

A
  1. It can raise or lower the discount rate.
  2. It can put money into the economy by buying Government bonds on the open market.
  3. It can raise or lower the reserve requirement for member banks.
112
Q

This is the rate of interest the Fed charges member banks for loans.

A

Discount Rate

113
Q

Understand how lowering or raising the discount rate affects the economy

A

If the Fed lowers the rate, banks borrow more money from it. Banks then lower their rates and they then make more loans to their customers. Customers spend more money, and this stimulates the economy.

114
Q

When the Fed puts money into the economy by buying bonds on the open market, what is that called?

A

Open-market operations

115
Q

This describes the percentage of money member banks must keep in their vaults or on deposit with the Fed as a reserve against their deposits.

A

Reserve Requirement

116
Q

Which taxes account for the majority of STATE revenue?

A
  1. Sales Tax
  2. Income Tax
  3. Property Tax
  4. License Fees
117
Q

Name the three ways the Constiution limits State’s taxing powers:

A
  1. A State cannot tax imports or exports.
  2. A State cannot tax Federal property.
  3. A State cannot tax to deprive someone of equal proteciton of the law or to deprive someone of life, liberty, or property without due process of law.
118
Q

Besides taxes, how else do STATES raise revenue?

A
  1. Federal Grants
  2. Charges for services
  3. Lotteries
  4. Payments into state retirement
119
Q

What are the two types of sales taxes?

A
  1. General sales tax
  2. Selective sales tax
120
Q

Define “general sales tax.”

A

This is imposed on items such as cars, electronics, and other merchandise.

121
Q

Define “selective sales tax.”

A

This is imposed on a narrower range of items, such as gasoline, liquor, or cigarettes.

122
Q

T or F. Many states impose an income tax on the earnings of both individuals and corporations.

A

True

123
Q

What is a “severance tax?”

A

A tax imposed by a state for the extraction of nonrenewable natural resources.

124
Q

What is a “block grant?”

A

A grant of money to a state or local government to be used for a specific purpose.

125
Q

What is an example of a “service charge” that a State uses to raise revenue?

A

The tuition it charges at a public university.

126
Q

What is a “bond?”

A

A contractual promise on the part of the borrower to repay a certain sum plus interest by a specified date.

127
Q

What is the most important source of revenue for LOCAL governments?

A

Property Taxes

128
Q

Property taxes are levied on what two types of property?

A
  1. Real property
  2. Personal property
129
Q

What is “real property?”

A

Land and buildings

130
Q

What is “personal property?”

A

Stocks and bonds, jewlrey, furniture, automobiles

131
Q

Define “market value.”

A

The amount of money a property owner could expect to receive if the property were sold.

132
Q

What is a “special assessment?”

A

A fee that a property owner must pay for services that benefit them.

133
Q

What are the sources of local government revenue?

A
  1. Taxes
  2. State Grants
  3. Federal Grants
  4. Service Charges
  5. Other
134
Q

What are the four criticisms of property taxes?

A
  1. It’s regressive-places a heavier burden on people with lower incomes.
  2. It’s difficult to determine property values on a fair basis
  3. Reliance on property values results in unequal public services-wealthier community gets better public services
  4. Government property and property for educational, religious, or charitable purposes is exempt from property taxes.
135
Q

T or F. The Commerce Clause limits States by preventing them from imposing taxes that “unduly burden” interstate commerce.

A

True

136
Q

What does “CEA” stand for?

A

Council of Economic Advisors

137
Q

Define “sequestration”

A

Automatic spending cuts that occur from the withdraw of funding for certain government programs

138
Q

National Labor Relations Act

A

Also known as the Wagner Act, this bill was signed into law by President Franklin Roosevelt on July 5, 1935. It established the National Labor Relations Board and addressed relations between unions and employers in the private sector.

139
Q

SEC

A

The Securities and Exchange Commission (SEC) is a U.S. government oversight agency responsible for regulating the securities markets and protecting investors.

140
Q

OSHA

A

With the Occupational Safety and Health Act of 1970, Congress created the Occupational Safety and Health Administration (OSHA) to ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance.

141
Q

DOD

A

Department of Defense

142
Q

What is an “unfunded mandate?”

A

Unfunded Mandates are federal laws, regulations, or rules that impose demands on the states without including the funding required to comply.

US Government (8 decks)

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