Unit 5 Test Flashcards
1
Q
Three tax structures and what they are
A
- Proportional Tax: tax rate is constant at all income levels
- Progressive Tax: tax where as your income increases, your tax rate also increases
- Regressive Tax: as your income increases your tax rate decreases
2
Q
FICA (what does it pay for)
A
- Federal Insurance Contributions Act tax
- Pays for social security and medicare
3
Q
Excise Tax
A
- tax on sale or production
4
Q
Estate Tax
A
- tax on inheretance
5
Q
Mandatory Spending
A
- Entitlement Programs
6
Q
Entitlement
A
- welfare programs
- social security, medicare, medicaid
7
Q
Discretionary Spending
A
- Defense
- Education
- Foreign Aid
8
Q
Fiscal Policy
A
- The federal government’s use of taxes and spending to influence GDP and inflation
9
Q
Expansionary Fiscal Policy
A
- Changes that cause Deficits
- increase inflation
- increase GDP
- increase AD/AS
10
Q
Contractionary Fiscal Policy
A
- Changes that cause Surplus
- lowers inflation
- lowers GDP
- lowers AD/AS
11
Q
Multiplier Effect
A
- every dollar of govt. spending increases GDP by more than one dollar
12
Q
Balanced Budget
A
- revenues = expenditures
13
Q
Budget Surplus
A
- revenues > expenditures
14
Q
Budget Deficit
A
- revenues < expenditures
15
Q
National Debt
A
- total amount of money owed by the govt.
16
Q
Difference between deficit and debt
A
- deficit borrows money (bonds)
- deficit adds to debt/ creates debt
17
Q
Federal Reserve System
A
- US central bank
18
Q
How many Federal Reserve districts are there
A
- 12 district banks
19
Q
Federal Open Market Committee
A
- set monetary policy
- 12 people (7 governors) (5 bank pres.)
20
Q
Federal Funds Rate
A
- the interest rate banks charge each other
21
Q
Discount Rate
A
- the interest rate the federal reserve charges banks
22
Q
Prime Rate
A
- Interest rate banks charge their best customers on short loans
23
Q
Monetary Policy
A
- The federal reserves use of RESERVE REQUIREMENTS, DISCOUNT RATES, and OPEN MARKET OPERATIONS to influence the money supply, AD/AS, GDP, and inflation
24
Q
Contractionary Money policy
A
- contract money supply to lower inflation
25
Expansionary Money policy
- increase money supply to increase GDP and AD/AS
26
Fractional Reserve System
- system where banks only keep a portion of deposits on hand, and lend out the rest
27
Required Reserve Ratio
- percentage of deposits banks are required to keep on reserve
28
3 tool the Fed uses to adjust the money supply
- Reserve Requirements
- Discount Rates
- Open Market Operations
29
4 Characteristics of a good tax
- simplicity: easy to understand
- certainty: clear when and how much is due
- efficiency: easy to collect and pay
- equity: fair
