Chapter 11

Question 1

deficit

Answer 1

equal to the amount of spending minus the amount of taxes

Question 2

the federal debt

Answer 2

the total amount the state owes

Question 3

net public debt

Answer 3

the portion of the debt that the U. S. government owes to others, not to itself

Question 4

Congressional Budget Office (CBO)

Answer 4

the chief forecaster of how new taxes and spending will affect the budget

Question 5

static scoring

Answer 5

assumes that individuals will not change their behavior if taxation or spending changes (used by Congressional Budget Office)

Question 6

Dynamic scoring

Answer 6

looks at the effects of past changes on behavior to forecast the effects of new legislation

Question 7

GDP spending breakdown

Answer 7

• 60% on transfers such as Social Security, Medicare, Medicaid, Unemployment Insurance and other welfare programs
• 20% on national defense
• 5% on interest on the debt
• 15% on everything else, such as roads, education, prisons, judicial system, department of energy, agriculture, environmental protection, NASA, etc.

Question 8

Today, Social Security retirement benefits average $_____ per retiree

Answer 8

$1,200

Question 9

presidents who lowered/raised tax rates

Answer 9

Kennedy lowered from 90% to 70%
Reagan lowered from 70% to 50% then 28%
Clinton raised from 28% to 40%
Bush lowered from 40% to 35%
Obama raised from 35% to 40%

Question 10

Hauser’s Law

Answer 10

no matter how high rates go, tax revenues stay in that range

Question 11

proportional tax

Answer 11

the tax rate is the same at all income levels

Question 12

progressive tax

Answer 12

the tax rate rises as income rises

Question 13

regressive tax

Answer 13

the tax rate rises as income falls

Question 14

Friedman says if a government leader wished to improve the economy, should she advocate reforms in which 3 ways?

Answer 14

1. spending
2. taxes
3. deficits