Government and the Economy

Question 1

Define progressive taxes.

Answer 1

higher rate on higher incomes

Question 2

define proportional taxes.

Answer 2

same rates for all tax payers

“Flat Tax”

Question 3

define regressive taxes

Answer 3

larger rate on lower incomes

-Portion of income for taxes falls as income rises

Question 4

define budget deficit

Answer 4

occurs when the government spends more than it brings in

Question 5

define balanced budget

Answer 5

when revenue equals expenditures

Question 6

define discretionary spending

Answer 6

-government spending implemented through a bill.

about 1/3 of the national budget

Question 7

define mandatory spending

Answer 7

-Spending on certain programs that are required by existing law
1/2 of all federal spending and includes entitlements (food stamps, medicare, etc.)

Question 8

Define budget surplus

Answer 8

occurs when the government takes in more than it spends

Question 9

define National debt

Answer 9

the total amount of money a government owes

Question 10

define deficit spending

Answer 10

practices of spending more than what is taken in for a specific budget

Question 11

reserved requirement ratio

Answer 11

The portion (expressed as a percent) of depositors’ balances banks must have on hand as cash.

Question 12

discount rate

Answer 12

the minimum interest rate set by the Federal Reserve for lending to other banks

Question 13

what is the government doing when it issues bonds?

Answer 13

borrowing money from citizens

Question 14

How can the government slow down the economy?

Answer 14

using a contractionary tool

Question 15

how can the government expand the economy?

Answer 15

using an expansionary tool

Question 16

What are public goods and services?

Answer 16

provided by givers and consumed by the public as a whole

Question 17

What are examples of automatic stabilizers?

Answer 17

public transfer system, progressive income taxes

Question 18

What are 4 examples of deficit spending?

Answer 18

• National Emergencies (wars, natural disasters)
• Public Goods and Services
• Stabilization of the Economy
• Entitlements

Question 19

What is the difference between contractionary fiscal policy and expansionary fiscal policy

Answer 19

contractionary try to reduce demand and slow the economy, and expansionary try to increase demand and stimulate the economy.

Question 20

What is the difference between national debt and deficit spending?

Answer 20

national debt is the total amount of money the government owes and deficit spending is the practice of spending more than what is taken in for a specific budget year

Question 21

What happens when monetary policy coordinates well with the business cycle?

Answer 21

provides a stable economic environment