Unit 10

Question 1

Progressive Tax

Answer 1

one where the average tax burden increases with income.
Examples of progressive tax include investment income taxes, tax on interest earned, rental earnings, estate tax, and tax credits.

Question 2

Laissez-Faire

Answer 2

the government should not intervene in the economy except to protect individuals’ inalienable rights.

Question 3

Regressive Tax

Answer 3

one where the average tax burden decreases with income

Question 4

Public Policy

Answer 4

The process of government decision making that addresses problems affecting many people

Question 5

Fiscal Policy

Answer 5

The government’s use of spending and taxes to achieve a strong, stable economy

Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.

Question 6

Proportional Tax

Answer 6

is a tax in which the percentage of tax taken from a person’s income remains the same, regardless of how much money he or she earns.

Question 7

Exemption

Answer 7

An exact dollar amount that is not taxed, such as a claim for each child who depends on his or her parents

Question 8

Corporate Income Tax

Answer 8

The amount of money a corporation pays the government on money it earns each year

Question 9

Deduction

Answer 9

An expense like a medical expense or interest on a loan that can be subtracted from income taxes

Question 10

How does the Federal Reserve System work to fight inflation?

Answer 10

When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
When inflation is too low, the Federal Reserve typically lowers interest rates to stimulate the economy and move inflation higher.

Question 11

What is the difference between Monetary and Fiscal Policy?

Answer 11

the control of the quantity of money available in an economy and the channels by which new money is supplied. By managing the money supply, a central bank aims to influence macroeconomic factors including inflation, the rate of consumption, economic growth, and overall liquidity.

Fiscal policy refers to the tax and spending policies of the federal government.

Question 12

Provide examples of monopolies.

Answer 12

Standard Oil
Microsoft
Google
Meta
De Beers Group

Question 13

Why would the government allow natural monopolies?

Answer 13

Natural monopolies are allowed when a single company can supply a product or service at a lower cost than any potential competitor but are often heavily regulated to protect consumers.

Question 14

Why is minimum wage a controversial topic?

Answer 14

Increasing it would raise the earnings and family income of most low-wage workers, lifting some families out of poverty—but it would cause other low-wage workers to become jobless, and their family income would fall

Question 15

What is the goal of a tight money policy?

Answer 15

The aim of tight monetary policy is usually to reduce inflation. With higher interest rates there will be a slowdown in the rate of economic growth. This occurs due to the fact higher interest rates increase the cost of borrowing, and therefore reduce consumer spending and investment, leading to lower economic growth

Question 16

Why is encouraging competition in business important to the economy?

Answer 16

it leads to lower prices, higher quality goods and services, greater variety, and more innovation.

Question 17

Provide examples of regressive taxes.

Answer 17

They take a higher percentage of income on the poor than on high-income earners. Taxes on property tax, gas, and Social Security payroll are examples of regressive taxes.

Question 18

Provide examples of progressive taxes.

Answer 18

percentage of income paid in taxes increases as income increases, taxes, tax on interest earned, rental earnings, estate tax, and tax credits

Question 19

Provide examples of proportional taxes.

Answer 19

where everyone pays the same percentage; Sales tax is an example.

Question 20

Why are labor unions important to the members of their groups?

Answer 20

give workers the power to negotiate for more favorable working conditions and other benefits through collective bargaining.

Question 21

What is property tax?

Answer 21

Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation.

Question 22

What is the difference between public and private goods?

Answer 22

Public goods are produced by the government or by nature for the welfare of the people without any cost. But private products are the ones manufactured and sold by private companies to earn a profit.

Question 23

What is income tax?

Answer 23

Income tax is a direct tax that a government levies on the income of its citizens

Question 24

What is social security tax?

Answer 24

Social Security taxes fund the retirement, disability, and survivorship benefits that millions of Americans receive each year from the Social Security Administration.

Question 25

Define externalities. Provide examples of positive and negative externalities.

Answer 25

An externality is a cost or benefit associated with the production or consumption of a product or service.

A positive externality is a benefit of producing or consuming a product. For example, education is a positive externality of school because people learn and develop skills for careers and their lives.

negative externalities are a cost of production or consumption. For example, pollution is a negative externality that results from both producing and consuming certain products. Externalities are often environmental, so it’s important for businesses and consumers to create and enjoy products responsibly.

Question 26

Why would the government stop a merger from happening?

Answer 26

the effect “may be substantially to lessen competition, or to tend to create a monopoly.”

Question 27

What qualities exist during expansion?

Answer 27

GPD increases (standard measure of the value added created through the production of goods and services in a country during a certain period)
More jobs, more people spending money (stimulating the economy)
Inflation is usually present in this stage (expansion isn’t as noticed)
This is because there is a demand for money (increases the price)
Rise in prices of goods and services

Question 28

What qualities exist during contraction?

Answer 28

Sometimes called a Recession
Business activity declines
Unemployment increases
Profits decline
Consumption declines
Can last a short period or long period of time (respond to meet recession)
Extended contractions can turn into an economic depression

Question 29

How has the government regulated business owners to make good choices for their employees and customers?

Answer 29

taxes, labor, employment, antitrust (prohibit businesses from reducing competition in the marketplace), advertising, environmental regulations, privacy, licenses

Question 30

How does the U.S. government use taxes?

Answer 30

Major health programs, such as Medicare and Medicaid
Social security
Defense and security

Question 31

What does the Department of Labor attempt to do?

Answer 31

“to foster, promote and develop the welfare of working people, to improve their working conditions, and to enhance their opportunities for profitable employment.”

Question 32

How does the country measure economic growth?

Answer 32

GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time