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Economics > H-chap 16-17 > Flashcards

H-chap 16-17 Flashcards

1
Q

5 characteristics of a good tax

A
  1. Justifiable Reason
  2. Equitably applied
  3. Certitude regarding amt. of tax
  4. Convenient to levy
  5. Economical to collect compared to revenue generated
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2
Q

Contends that taxes should be paid in portion to cost of service received

A

Cost-Service Theory

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3
Q

Individuals should pay taxes based on benefits received

A

Benefit-Received Theory

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4
Q

Individuals should pay an amount of taxes consistent with their ability to pay

A

Ability-to-Pay Theory

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5
Q

Individuals should pay pay taxes according to their marginal utility of income

A

Equality-of-Sacrifice Theory

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6
Q

Type of tax rates that always remain the same, regardless of size of the base

A

Proportional Tax Rate

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7
Q

Tax rates increase based on the size of the base

A

Progressive Tax Rate

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8
Q

Tax rates decrease as the size of the base increases

A

Regressive Tax Rate

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9
Q

What are the largest sources of federal tax revenues?

A

Personal income and Social insurance

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10
Q

Increasing dissatisfaction with personal income has brought forth proposals to replace 4 types of taxes.
What are they?

A

Personal Income Tax
Flat Tax
Consumption Tax
VAT/National Sales Tax

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11
Q

3 major purposes of taxation are

A
  1. Covering government costs
  2. Redistributing Income
  3. Economic Stabilization
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12
Q

Theoretically if there is a surplus of tax revenues the government can

A

Reduce taxes
and
Expand its services / repay debt

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13
Q

When tax revenues continue decreasing

A

Government can reduce spending.

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14
Q

Taxes and government spending are used to try to..

A

Stabilize total income and outpue

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15
Q

What can be used as a stabilizer of total output bc it can moderate business cycles and help stablize economy

A

Federal Budget

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16
Q

A surplus of budget (federal) helps

A

Prevent inflation during peak period

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17
Q

A deficit budget (federal) helps

A

Offset unemployment during a trough

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18
Q

True or False
A nation will be bankrupt if the federal debt becomes too large unless a majority of share is held by foreign banks and government.

A

False

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19
Q

The federal government borrows from

A

Individuals
Businesses
Banks in the Economy
Foreign Institutions

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20
Q

What percentage do foreign and international institution represent in the total national debt?

A

40%

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21
Q

`The government’s ability to repay is governed by only the

A

economy’s total assets and government’s ability to tax

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22
Q

Tax base x total tax that must be paid

A

Tax Rate

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23
Q

Value of the object upon which tax is levied

A

Tax Base

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24
Q

True or False

Based on the Supply and Demand curve the burden of taxes can be shifted –except for personal income

A

True

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25
Q

2 Main types of tax levies

A

Direct Tax: CAN’T be shifted, ex. income

Indirect Tax: CAN be shifted ex. excise tax on g/s

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26
Q

Tax shifting is passing tax burden from the taxpayer to another, what are its 3 main aspects?

A
  1. Impact of T: Financial burden entailed
  2. Incidence of T: Point which burden of tax ultimately rests
  3. Effect of T: Economic consequence of paying tax
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27
Q

Which is higher, marginal or average tax rate?

A

Marginal the top being 35%

28
Q

What are known as employment/payroll taxes and make up 36% of federal budget

A

Social Security and Social Insurance

29
Q

Major Tax Proposals (Identify):

a. Collects taxes only at the time the consumer buys the product
b. Collects taxes on each stage of production
d. Single tax rate on incomes
e. Tax on incomes + savings

A

a. National Sales Tax
b. VAT / Value Added Tax
d. Flat Tax
e. Consumption Tax

30
Q

Max. amount of federal debt that can be accumulated without going back to Congress to approve advancement on

A

Debt Ceiling

31
Q

Deficit Budget is used to cause fiscal stimulus this is a good or bad thing?

A

Good

32
Q

Surplus Budget spends less than you have which is supposed to

A

Bring down the economy

33
Q

How many deficits since 1997-

A

70 Deficits

34
Q

Called for reducing federal deficit by $500 billion

A

Budget Reduction Act 19

35
Q

Measure of the potential revenue and spending that would result if what existed?

A

Full – employment balanced budget

36
Q

Monetary policies have been what three economic objectives?

A

Econ. Stability
Econ. Growth
Price Stability

37
Q

Monetary policy involves…

A

Regulation of the money supply by the Feds

38
Q

Increasing the money supply can raise

A

Aggregate Expenditure during period of unemployment

39
Q

The goal of fiscal policy

A

Promote max. income w/ full employment in closed economy

40
Q

Automatic Stabilizers

A 
Social Security 
Pension 
Unemployment compensation 
Farm price support 
Federal personal income tax
41
Q

What activate the economy as a result of a budget deficit

A

Fiscal stimulus

42
Q

What slows the economy aw a result of a budget surplus

A

Fiscal Drag

43
Q

3 ways the government can pay for its spending

A

Tax financing
Debt financing (Borrowing from Banks
Creating Money by selling bonds

44
Q

If the government increases it spending but does not increase the taxes

A

Total spending for the economy as a whole should increase

45
Q

If gov decreases taxes

A

It results in a deficit budget

46
Q

If gov spending is held but taxes are decreases

A

Less revenue for government which the has to borrow

47
Q

2 Forms of discretionary government spending that can raise level of total income and employment

A

Transfer payments

Public works

48
Q
  1. A persistent decline in level of prices
  2. Slowdown in rate of inflation (usually considered good)
  3. Persistent increase in level of prices
  4. When inflation and higher employment are higher at same time
  5. Inflation that goes out of control and makes currency worthless
A 
A. Deflation 
B. Disinflation 
C. Inflation
D. Stagflation 
E. Hyperinflation
49
Q
  1. Results from spiral wage and price benefit cost/price increase. Is a backward shift of the aggregate supply curve
  2. Occurs when aggregate demand exceed aggregate supply
A

A. Cost-Push inflation

B. Demand - Pull inflation

50
Q

Wartime inflation involves

A

Taxation
Voluntary/Forced savings
Wage/Price/Credit controls
Number of other tools

51
Q

Curve showing relationship between unemployment and inflation

A

Phillips Curve

52
Q

Take that a one-time dose of gov spending puts the economy on the road to recovery

A

Pump Priming

53
Q

One of the primary causes for the Great Depression

A

Accumulate consumer and commercial debt fueled by cheap credit

54
Q

Most serious problem to discretionary government spending

A

It is difficult to begins = how long it takes to end

so gov deficit grows

55
Q

Public works is to the

A

Multiplier effect (one chain reaction will start another which will project the growth of the economy)

56
Q

3 methods of increasing gov spending:

  1. Involves increasing money spent by gov. And taxes remain constant
  2. Referred to as “tax rebate plan” results in deficit budget
  3. Maintains balanced budget but effect is limited that taxes are raised and private funds are absorbed (eliminating multiplier effect)
A
  1. Increase Gov spending hold taxes
  2. Hold gov. Spending and decrease taxes
  3. Increase gov spending and taxes proportionately
57
Q

Monetary and fiscal policies that are used to try increase the equilibrium level of income and output

A

Expansionary Policies

58
Q

Monetary and fiscal policies used to try to lower aggregate demand for output to level that can be achieved with full employment of resources

A

Contractionary Policies

59
Q

Forces within economy that naturally counteract recession and inflation

A

Auto Stabilizers

60
Q
  1. Activating effect on the economy resulting from budget deficit
  2. Slowing effect on economy resulting from budget surplus
A
  1. Fiscal Stimulus

2. Fiscal drag

61
Q

Occurs when deficit spending by gov. force private investment spending to contract

A

Crowding Out

62
Q

4 general fiscal policies developed to promote max. income and full employment

A
  1. Consumption stimulated, marginal propensity increased
  2. Investment encouraged
  3. Gov spending increases aggregate expenditures
  4. Taxes reduced increase in disposable income
63
Q

Aggregate expenditure remains constant and no increase in total output and employment results.
Idle funds are taxed

A

Tax Financing

64
Q

More desirable for raising funds for gov. spending
Aggregate expenditure will show no net increase and interest rates will rise.
Keyword: borrowing

A

Debt Financing

65
Q

Treasury sells bonds to Federal Reserve
A.k.a. Printing money or monetizing debt bc. it removes gov. Spending from hands of the public and replaces it with deposits

A

Financing Creating Money

Economics (6 decks)

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