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Question 1

The Internal Revenue Service (IRS)

Answer 1

a. Enforcing the tax law

b. Collecting taxes

c. Processing tax returns

d. Issuing tax refunds

Question 1

16th Amendment

Answer 1

Established Congress’s right to impose a Federal income tax

Question 2

Revenue Act

Answer 2

signed by President Woodrow Wilson, it provided a progressive tax structure

Higher income earners pay higher rates

Question 3

FICA

Answer 3

1. Payroll Tax (FICA) – payroll tax imposed on both federal employees and employers to fund Social Security and Medicare

   a. Social Security benefits include old-age, survivors and disability insurance (created during the New Deal)

2. The current FICA rate is 7.65%
3. Medicare provides hospital insurance benefits for the elderly

Question 4

Progressive Tax

Answer 4

takes a larger percentage of income from high-income groups than from low-income groups and is based on the concept of ability to pay.

Question 5

Adjusted Gross Income (AGI)

Answer 5

your gross income minus specific
reductions

Question 6

“write offs”

Question 7

W4, W2

Answer 7

Once you are hired, you fill out a W-4 form, which
lists all withholding information

a. Ex) Number of dependents, child care expenses

Toward the end of the year, the company you work
for sends you a W-2 form

a. This form details how much money was made the
previous year and how much federal tax was withheld

Question 8

debt

Answer 8

The United States debt is the
amount owed by the federal
government.

Question 9

Deficit

Answer 9

The federal deficit is when the
amount of spending exceeds the
level of income.

Question 10

Mandatory Spending

Answer 10

government spending
that is required by law
and not subject to annual
limits.

b. the amount spent on
mandatory programs is
based on formulas
already written into law.

c. it is not decided upon
on yearly basis.

Question 11

Discretionary spending

Answer 11

a. the portion of federal
government spending that is decided
upon by Congress each year.

b. it is usually divided into two
categories: defense and non-defense.

c. the non-defense categories
consist of healthcare, education,
welfare, transportation, and
pensions, etc.

d. the largest percentage of
spending is given to healthcare.

Question 12

non-defense

Answer 12

non-defense categories
consist of healthcare, education,
welfare, transportation, and
pensions, etc.

Question 13

Contractionary Spending

Answer 13

a. enacted by the government to reduce the money
supply and the spending in the country.

b. This is done primarily through increasing
interest rates.

Question 14

deficit spending

Answer 14

When the government
continues to spend money that it
doesn’t have

Question 15

Expansionary Spending

Answer 15

a. expanding the money supply to encourage
economic growth.

b. this is done through lowering interest rates,
offering rebates, and government spending.

Question 16

Causes of the recession

Answer 16

a. The Federal Reserve Bank offered very low interest
rates for mortgages.

b. Banks were offering loans and mortgages to
anyone,
even those considered “high risk”. (subprime
lending)

c. As a result, the demand for houses skyrocketed.

d. As people began buying houses, the value of these
homes increased dramatically.

Question 17

“opening the window”

Answer 17

When the country is in
economic crisis, The Fed will
lower interest rates to
encourage spending and
borrowing.

Question 18

subprime lending

Answer 18

Banks were offering loans and mortgages to
anyone, even those considered “high risk”.

Question 19

TARP (Troubled Assets Relief Program)

Answer 19

they gave over $900
billion plus interest to
banks to save them from
failing.

c. many were upset and
believed the banks should
be held accountable for
issuing high risk loans.

Question 20

Obama’s Stimulus Plan

Question 21

Results of the Great Recession

Answer 21

1. The Gross Domestic
   Product fell by 4.3%
2. This was the longest lasting
   recession in American history
   – 18 months.
3. The unemployment rate
   rose to 10%.
4. The recession ended in June
   of 2009 but economic issues
   continued for years.
5. Republicans believed
   Obama’s stimulus plan did
   little to end the recession.