Unit 10 Flashcards
Progressive Tax
one where the average tax burden increases with income.
Examples of progressive tax include investment income taxes, tax on interest earned, rental earnings, estate tax, and tax credits.
Laissez-Faire
the government should not intervene in the economy except to protect individuals’ inalienable rights.
Regressive Tax
one where the average tax burden decreases with income
Public Policy
The process of government decision making that addresses problems affecting many people
Fiscal Policy
The government’s use of spending and taxes to achieve a strong, stable economy
Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
Proportional Tax
is a tax in which the percentage of tax taken from a person’s income remains the same, regardless of how much money he or she earns.
Exemption
An exact dollar amount that is not taxed, such as a claim for each child who depends on his or her parents
Corporate Income Tax
The amount of money a corporation pays the government on money it earns each year
Deduction
An expense like a medical expense or interest on a loan that can be subtracted from income taxes
How does the Federal Reserve System work to fight inflation?
When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.
What is the difference between Monetary and Fiscal Policy?
the control of the quantity of money available in an economy and the channels by which new money is supplied. By managing the money supply, a central bank aims to influence macroeconomic factors including inflation, the rate of consumption, economic growth, and overall liquidity.
Fiscal policy refers to the tax and spending policies of the federal government.
Provide examples of monopolies.
Standard Oil Microsoft Google Meta De Beers Group
Why would the government allow natural monopolies?
Natural monopolies are allowed when a single company can supply a product or service at a lower cost than any potential competitor but are often heavily regulated to protect consumers.
Why is minimum wage a controversial topic?
Increasing it would raise the earnings and family income of most low-wage workers, lifting some families out of poverty—but it would cause other low-wage workers to become jobless, and their family income would fall
What is the goal of a tight money policy?
The aim of tight monetary policy is usually to reduce inflation. With higher interest rates there will be a slowdown in the rate of economic growth. This occurs due to the fact higher interest rates increase the cost of borrowing, and therefore reduce consumer spending and investment, leading to lower economic growth
Why is encouraging competition in business important to the economy?
it leads to lower prices, higher quality goods and services, greater variety, and more innovation.
Provide examples of regressive taxes.
They take a higher percentage of income on the poor than on high-income earners. Taxes on property tax, gas, and Social Security payroll are examples of regressive taxes.
Provide examples of progressive taxes.
percentage of income paid in taxes increases as income increases, taxes, tax on interest earned, rental earnings, estate tax, and tax credits
Provide examples of proportional taxes.
where everyone pays the same percentage; Sales tax is an example.
Why are labor unions important to the members of their groups?
give workers the power to negotiate for more favorable working conditions and other benefits through collective bargaining.
What is property tax?
Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation.
What is the difference between public and private goods?
Public goods are produced by the government or by nature for the welfare of the people without any cost. But private products are the ones manufactured and sold by private companies to earn a profit.
What is income tax?
Income tax is a direct tax that a government levies on the income of its citizens
What is social security tax?
Social Security taxes fund the retirement, disability, and survivorship benefits that millions of Americans receive each year from the Social Security Administration.
Define externalities. Provide examples of positive and negative externalities.
An externality is a cost or benefit associated with the production or consumption of a product or service.
A positive externality is a benefit of producing or consuming a product. For example, education is a positive externality of school because people learn and develop skills for careers and their lives.
negative externalities are a cost of production or consumption. For example, pollution is a negative externality that results from both producing and consuming certain products. Externalities are often environmental, so it’s important for businesses and consumers to create and enjoy products responsibly.
Why would the government stop a merger from happening?
the effect “may be substantially to lessen competition, or to tend to create a monopoly.”
What qualities exist during expansion?
GPD increases (standard measure of the value added created through the production of goods and services in a country during a certain period)
More jobs, more people spending money (stimulating the economy)
Inflation is usually present in this stage (expansion isn’t as noticed)
This is because there is a demand for money (increases the price)
Rise in prices of goods and services
What qualities exist during contraction?
Sometimes called a Recession
Business activity declines
Unemployment increases
Profits decline
Consumption declines
Can last a short period or long period of time (respond to meet recession)
Extended contractions can turn into an economic depression
How has the government regulated business owners to make good choices for their employees and customers?
taxes, labor, employment, antitrust (prohibit businesses from reducing competition in the marketplace), advertising, environmental regulations, privacy, licenses
How does the U.S. government use taxes?
Major health programs, such as Medicare and Medicaid
Social security
Defense and security
What does the Department of Labor attempt to do?
“to foster, promote and develop the welfare of working people, to improve their working conditions, and to enhance their opportunities for profitable employment.”
How does the country measure economic growth?
GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time
