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Unit 6 – Government Finances Block Class Pacing Unit Essential Question 1) How does the government try to influence the economy? Day 1 Economics Document - Government Budgeting & Spending Review Government Spending & Budgeting Day 2 Economics Document - Federal & State Government Revenue & Expenditures Review - Federal & State Government Revenue & Expenditures Day 3 Principles & Types of Taxation How Income Taxes Affect the Economy Day 4 Unit 6 Test Review Government Finances Unit 6 Test Government Finances Unit 6 – Government Finances: Fiscal Policy, Taxing and Spending NCSCOS 2.08, 3.08, 3.09, 5.05, 8.08, 9.07 Chapter 25, Section 1 (pgs. 677-680) 1. How does the federal government prepare its budget? Prepared by the ______________________________ and approved by _____________________ 2. Government spending is divided into two types: a. Mandatory spending _________________________________________ i. Examples _____________________________________________ b. Discretionary spending _______________________________________ i. Examples _____________________________________________ 3. What is a appropriations bill? _________________________________________ __________________________________________________________________ 4. What is the federal government’s budget year? ____________________________ 5. Where does the government get its money? ______________________________ 6. Identify each of the following forms of taxation: Type of Taxation Description Examples Progressive Tax Regressive Tax Proportional Tax 7. Federal Government revenue (2007) Source of Federal Revenue Individual Income Tax Payroll Tax Corporate Profits Tax Other Percentage of Federal Revenue 45.5% 36.6% 10.8% 7.2% 8. Federal Government Expenditures (2007) Source of Federal Expenditures Percentage of Federal Expenditures Social Security 21.2% National Defense 17.4% Income Security 14.0% Medicare 13.5% Health 10.5% Interest on the Debt 8.2% Other 15.2% Chapter 25, Section 2 (pgs. 682-685) 9. From the pie charts answer the following questions: According to the graphs what is the largest source of revenue for state governments? _____________________________________________________ What is the largest source of local revenue? ______________________________ What tax brings in the most money for: o State Governments ___________________________________________ o Local Governments ___________________________________________ What is the number one expense for state governments? ____________________ What is the number one expense for local governments? ____________________ Which level of government is most responsible with funding education? _________________________________________________________________ 10. What does intergovernmental revenue mean? __________________________________________________________________ 11. What services do local governments provide with the revenue they take in? __________________________________________________________________ __________________________________________________________________ 12. What are entitlement programs? ______________________________________ __________________________________________________________________ Chapter 25, Section 3 (pgs. 688-692) 13. When the government spends more than it collects in revenue it has a _____________ and when it collects more than it spends it has a _____________. 14. How does the federal government borrow money to help pay for services it doesn’t have the money to pay for? _____________________________________ 15. What is the national debt? ___________________________________________ __________________________________________________________________ 16. What is the current national debt of the United States? ______________________ 17. What is the impact of the national debt? a. Interest _____________________________________________________ ____________________________________________________________ b. Interest Rates ________________________________________________ ____________________________________________________________ 18. What is a balanced budget? __________________________________________ __________________________________________________________________ 19. What are the two ways the government can try and reduce the national debt? a. ____________________________________________________________ b. ____________________________________________________________ Why is it sometimes necessary for the federal government to go into deficit spending? _________________________________________________________ __________________________________________________________________ Unit 6 – Government Finances Test Review Test Format 10 Multiple Choice 20 Matching Info to Know budget – balanced budget, budget surplus, budget deficit national debt types of taxation (progressive, regressive, proportional) Federal Taxes (revenue) – income (#1 source), payroll, social security, excise tax State Taxes (revenue) – intergovernmental revenue (#1 source), sales tax, income tax Local Taxes – intergovernmental revenue (#1 source), property tax mandatory spending, discretionary spending fiscal policy, fiscal year Levels of Government – Major Services Provided Bonds How Income Taxes Affect the Economy Below you will find the 2008 Federal Income Tax Brackets. This shows the percentage of tax that single and married citizens pay the federal government on their income. Use the table below to do this sheet, and see how taxes impact the individual and the economy as a whole. In doing the math, each part of your income is taxed as it applies to the tax bracket. For example a single person earning $30,000 would pay 10% on the first $8,025 which is $802.50, and 15% on the remaining $21,975 which is $3,296, for a total of $4,098.50 in federal income tax. Use Single Bracket to calculate Income Tax amounts. 2008 Federal Income Tax Brackets Tax Rate Single Married Filing Jointly 10% Not over $8,025 Not over $16,050 15% $8,025-$32,550 $16,050-$65,100 25% $32,550-$78,850 $65,100-$131,450 28% $78,850-164,550 $131,450-$200,300 33% $164,550-$357,700 $200,300-$357,700 35% Over $357,700 Over $357,700 Directions: Calculate the income tax paid using the single income bracket. 1) $40,000 2) $15,000 3) $60,000 4) $300,000 – What might happen to the US economy if people were able to keep more of their income? Tell how each of these areas would be impacted. 1) Demand for products and services 2) Unemployment 3) Savings Accounts