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ECONOMICS
Taxes and Government Spending - Ch 14
1)
Why do governments impose taxes? (10 points)
To provide goods and services and to fund the functions of the government.
2)
What is the difference between a progressive tax and a regressive tax? (10 points)
A progressive tax causes the percentage of income paid in taxes to increase as income increase. A regressive tax is
one which the percentage of income paid in taxes goes down as income increases.
3)
4)
What are the four characteristics of a good tax? (10 points)
1.
Simplicity
2.
Efficiency
3.
Certainty
4.
Equity
Explain “pay-as-you-earn” taxation.
(10 points)
It means that individuals usually pay most of what they owe over the year as they earn income.
5)
Describe withholding and explain how it would affect a student with a part time job. (10 points)
Withholding is a portion of income taken out of an employee’s paycheck. It is forwarded to the federal government as
an installment payment on the person’s annual tax. A student with a part time job would have a portion of salary
withheld.
6)
What is the purpose of FICA? (10 points)
It funds two large government programs – Social Security and Medicare
7)
How does discretionary spending differ from mandatory spending?
(10 points)
Discretionary Spending is spending about which government planners make choices. Mandatory spending is
spending that is required by law.
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8)
What is an entitlement program?
(10 points)
It is a social welfare program that people are “entitled to” if they meet certain eligibility requirements.
9)
Why is the cost of the Social Security program expected to increase in the next decades?
(10 points)
Because the “baby boomer” generation (a large segment of our society) is reaching retirement age.
10) What is the largest category of discretionary spending? (10 points)
Defense is the largest category of discretionary spending.
11) Identify three examples of discretionary spending?
1.
Education
2.
Training
3.
Scientific Research
4.
Student Loans
5.
Technology
6.
National Parks and Monuments
7.
Law Enforcement
8.
Environmental Cleanup
9.
Housing
(10 points)
10. Land management
11. Transportation
12. Disaster Aid
13. Foreign
14. Aid
15. Farm Subsidies
16. Salaries of civilian employees and federal government
12) Describe the difference between a state’s operating budget and its capital budget. (10 points)
Operating budget covers day to day expenses. A capital budget covers major expenditures such as buildings and
other permanent improvements.
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13) What is a balanced budget?
(10 points)
Revenues are equal to spending
14) What are the main sources of state revenue?
(10 points)
Sales taxes and individual income taxes
15) Describe the difference between real property and personal property.
(10 points)
Real property is physical property, such as land and buildings.
Personal Property consists of possessions such as jewelry, furniture and boats.
The 2
Taxes and Government Spending - Ch 14
nd
Week 15 of 21.
quiz towards your Final
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