unit 3: tax notes

Question 1

tax:

Answer 1

charges (by government) for public purposes

Question 2

the government operates on what?

Answer 2

taxes

Question 3

resource allocation:

Answer 3

• shifts supply curve left
• a tax placed on products, raises the cost of production
• if demand remains the same, the equilibrium price goes up

Question 4

what are the 3 types of taxes?

Answer 4

1. proportional taxes
2. regressive taxes
3. progressive taxes

Question 5

what are proportional taxes?

Answer 5

• an individual pays a certain % of their income in taxes
  ex. city taxes

Question 6

what are regressive taxes?

Answer 6

• when income increases, % of tax decreases
  ex. sales tax

Question 7

what are progressive taxes?

Answer 7

• when income increases, % of taxes increases
  ex. income tax

Question 8

what is the incidence of tax?

Answer 8

• the party being taxed does not always pay the tax
  ex. owners can cut part of employees salary so they have to pay the tax

Question 9

fiscal policy:

Answer 9

• governmental spending and taxing
• fiscal = political
• the president and congress work together to create federal budget

Question 10

mandatory spending:

Answer 10

• spending on federal programs that are required by law
• 60% of federal budget
  ex. medicare, social security, medicaid

Question 11

discretionary spending:

Answer 11

• spending on federal programs that are not required by law
  ex. road repairs, police training, public housing

Question 12

monetary policy:

Answer 12

• manages supply and demand of money
• monetary = money
• federal reserve determines if interest rises or drops
  ex. value of money, banking regulations, interest rate

Question 13

entitlements:

Answer 13

social security, medicare, and health care