Term
| Tax, Revenu, and Expenditure |
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Definition
Tax - mandatory payment to the gov
Revenue - income the gove recieves from taxes
Expenditure - Where tax money is spent |
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Benefits-Recieved Principle
Ability-to-pay Principle |
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| Takes the same percentage from all incomes |
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| Takes a larger percentage from a higher income |
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Definition
- Progressive
Largest source of revenue for fed. Gov. |
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Definition
| 10% source of fed. gov. Revenue |
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Definition
tax on purchases
-Regressive
-Largest source for state gov. |
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Definition
-Annual tax based on property value
-Largest source of revenue for local gov. |
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Definition
- Funds S.S. and Medicare
- 2nd Largest source for Fed. Gov |
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| - Placed on the assets of someone who has died (if over $5 Million) |
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Definition
Placed on the transfer of certain gifts
(large amounts of money only) |
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- Tax on the manufacture, sale, or consumption of a particular good or service
- Gas, cigarette, gambling, alcohol |
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Definition
- Taxes on goods brought into the U.S.
- Also Known as a tariff Tax |
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- Tax on Capital gains
- % will vary with income |
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Term
| Mandatory & Discretionary Spending |
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Definition
Mandatory
- Required by current law
- Largest is on Entitlements (welfare)
Discretionary
- Money that is left over
- Must by authorized each year |
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Definition
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Term
| Fiscal Policy and two tools |
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Definition
- When the federal government changes taxes and government spending to affect the economy.
- Expansionary & Contractionary Fiscal Policy's |
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Term
| Expansionary Fiscal Policy |
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Definition
• When government wants to boost the economy (increase spending)
• Involves decreasing taxes for businesses & individuals |
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Definition
| • Involves increasing government spending |
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| Contractionary Fiscal Policy |
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Definition
• When the government wants to slow down the economy (decrease spending)
• Involves decreasing government spending (multiplier effect)
• Involves increasing taxes for businesses & individuals |
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Term
| Limitations of Fiscal Policy |
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Definition
• Policy Lags – By the time it’s put into place, it’s too far behind to do what its intended for.
• Timing Issues – At wrong time it’s not as effective
• Rational Expectations Theory – When the plan isn’t effective as it was supposed to be.
• Political Issues – when something should be said but it’s not because political popularity gets in the way
• Regional Issues – may not impact all areas the same |
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Definition
| o Leading supporter is French economist |
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Definition
Lowers taxes on businesses & individuals (wealthy individuals)
Decreases regulation
Decreases gov’t spending |
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| Demand-Side Economics Put forward by John Keynes |
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o Called “Keynesian economics”
Increase gov’t spending
Decrease individuals’ taxes (on lower income)
o Demand-Side favors government involvement |
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| When the Fed. Govn't Spend more than bring in |
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Definition
| When the Fed. Govn't spend less than they bring in |
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Definition
| The total amount owed by the Federal Government |
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| Causes of the Deficit (4) |
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Definition
1. Over Spending
2. Not enough income
3. War
4. Disasters |
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| Federal Reserve System: The central bank |
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| Fractional Reserve banking & RRR |
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Definition
| They order the banks on how much money to reserve |
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Definition
When the Fed changes the Money Supply to influence the economy
Tools:
1. Buying and selling bonds
2. Reserve Requirement (RRR)
3. Interest Rates |
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Definition
To fight a contraction and boost the economy, increase spending...
1. Buy Bonds from banks
2. Decrease Reserve Requirement
3. Decrease Interest Rates |
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Definition
To slow the economy and decrease spending....
1. Sell bonds
2. Increase Reserve Requirments
3. Increase interest Rates |
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