Government LAST BAKKA TEST

Question 0

Matching: I’ll give you a definition, you give me the word

Answer 0

(These are the exact definitions Bakka gave us while reviewing that are most likely going to be on the test, but you might have something different in your notes)

Question 1

Yay! You made it to the last Bakka test!

Answer 1

you are so gonna crush this test. believe in yourself

Question 2

Fee paid for the use of money

Answer 2

Interest

Question 3

Tax placed on imported goods

Answer 3

Tariff

Question 4

Accumulation of government borrowing over a number of years

Answer 4

National debt

Question 5

The prices went up because of the high rate of _________

Answer 5

Inflation

Question 6

Measures quality of lire based on goods and services that can be purchased and leisure time

Answer 6

Standard of living

Question 7

Controlling each level of a good’s production which raises prices

Answer 7

Vertical monopoly

Question 8

Place a heavier tax burden on the poor

Answer 8

Regressive tax

Question 9

For the fiscal year, the government had a _____ because expenses exceeded revenue

Answer 9

Deficit

Question 10

Characterized by low employment and low production which leads to a decline in the economy

Answer 10

Recession

Question 11

The phases of this can help economists predict will happen to the economy

Answer 11

Business cycle

Question 12

Policy where the government lets the economy function on its own

Answer 12

Laissez faire

Question 13

Used to measure the production of a nation within a year

Answer 13

GDP

Question 14

An example would be controlling one aspect in the production process

Answer 14

Horizontal monopoly

Question 15

Main form of revenue for the national government

Answer 15

Income tax

Question 16

The tax was this because the wealthy paid a higher percentage than the middle class

Answer 16

Progressive tax

Question 17

When the nation’s economy slumps for a long time

Answer 17

Depression

Question 18

Must be provided by the government since people can receive the benefit without paying

Answer 18

Public goods

Question 19

The government had this because revenues exceeded expenses

Answer 19

Surplus

Question 20

Multiple Choice and True/False

Answer 20

questions marked * are definitely on the test, everything else is a basic overview of the notes

Question 21

• President known for ending laissez-faire policy during the Great Depression using his “New Deal”

Answer 21

FDR

Question 22

• Current chairman of the Federal Reserve System

Answer 22

Janet Yellen

Grandma Jesus

Question 23

• Father of modern fiscal policy, wrote the book The General Theory of Employment, Interest, and Money, came up with the multiplier effect

Answer 23

John Maynard Keynes

Question 24

* English economist who wrote Wealth of Nations and produced guidelines for taxation

Answer 24

Adam Smith

Question 25

* The national debt in America is approximately...

Answer 25

17 trillion dollars

Question 26

* What was the key event that ended laissez faire policy?

Answer 26

The Great Depression

Question 27

* The right of the government to place an income tax on its citizens is found in which amendment?

Answer 27

The 16th Amendment

Question 28

Three goals for the government

Answer 28

- provide economic benefits - maintain stable growth - solve economic problems

Question 29

Explain the expansion stage of the business cycle

Answer 29

When business a giving is improving :-) - consumer spending increases - production increases - employment increases

Question 30

Explain the peak of the business cycle

Answer 30

At full capacity as a business :D | -unsustainable

Question 31

Explain the contraction stage

Answer 31

The opposite of expansion, business activity declining :/ - consumer spending decreases - production decreases - employment decreases

Question 32

Explain the recession stage

Answer 32

A long lasting contraction :'( - consumer spending very low - very low production - high unemployment

Question 33

What is a depression?

Answer 33

A long lasting, sever economic downturn :'''(

Question 34

How do we measure the economy? (There are a few different ways)

Answer 34

- GDP - income - standard of living (best measurement overall) - inflation - unemployment rate - consumer confidence (important because consumer spending drives economy)

Question 35

What's the difference between personal nico me and disposable income?

Answer 35

Personal income = before taxes | Disposable income = after taxes

Question 36

What's the problem with an annually balanced budget?

Answer 36

Tax revenue decrease -> government spending decrease -> consumer spending decrease Recession will eventually get worse

Question 37

What was Keynes' solution?

Answer 37

During a recession, decrease taxes and increase government spending consumer income increase -> consumer spending increase -> economy goes up

Question 38

What's the problem with this method and how did Keynes solve it?

Answer 38

Problem: consumers might not spend more Solution: Multiplier effect - any change in fiscal policy affects the aggregate demand by more than the original change in spending/taxing

Question 39

Would increasing taxes and decreasing government spending fix an inflation?

Answer 39

In theory, yes, but... politicians want to get reelected | Increasing taxes and decreasing spending isn't very popular with voters

Question 40

How does the government regulate the amount of money in circulation?

Answer 40

Monetary policy and the ~*Federal Reserve System*~

Question 41

What are the Fed's tools?

Answer 41

- interest rate | - reserve rate (% of money banks keep in the Fed)

Question 42

What does the Fed do during a recession?

Answer 42

Decrease interest rates and decrease reserve ratio | banks lending increase -> consumer borrowing increase -> consumer spending increase -> economy goes up

Question 43

What does the Fed do to solve inflation?

Answer 43

Increase interest rates and decrease reserve ratio | banks lending decrease -> consumer borrowing decrease -> consumer spending decrease -> down with inflation

Question 44

What are the advantages of monetary policy?

Answer 44

- faster working - Fed can do whatever the heck they want | - best way to fight inflation

Question 45

What are the basic economic functions of government?

Answer 45

- provide legal/social environment - maintain competition - redistribute income - reallocation of resources - stabilize economy

Question 46

Monopoly, when one/small group of companies control supply to the point of influencing its price, endangers competition. Sellers can influence a product to benefit self-interests at the expense of society (high prices, inferior quality). How can monopolies be created?

Answer 46

- merger - 2+ companies join together and form one large company (government can stop these) - trust - companies remain separate but have one board of directors to make decisions for all companies (Vertical or Horizontal) - growth - happens particularly in new industries - "natural monopolies" - industries where technological and economic realities rule out possibility of competitive markets (so the government creates commissions to regulate prices and service standards - water, electricy, communications)

Question 47

How does the government redistribute income?

Answer 47

- transfer payments (social security, unemployment benefits, welfare) - market intervention (modify prices such as with farm subsidies and minimum wage) - federal income tax (designed to take greater proportion of income from rich)

Question 48

What are a few limits on taxation?

Answer 48

- give all people a voice - tax bills must be introduced in the House of Representatives - any tax must apply uniformly throughout the country - restrictions on states - not allowed to tax interstate and foreign commerce or the federal government - 14th amendment prevents government from taxing one group of citizens more heavily than another, BUT the 16th amendment lets government tax the wealthy more than the poor

Question 49

What are Adam Smith's principles/guidelines for taxation?

Answer 49

1. ) based on person's ability to pay 2. ) clear and straightforward - people should now what they have to pay and be able to figure it out 3. ) collected in most convenient way possible (ex: tax withholding system) 4. ) collected efficiently - keep collection costs low 5. ) must be reasonable for economic growth (added by economists)

Question 50

Where does the government get its revenue?

Answer 50

Income tax Corporate tax Tariffs Fees

Question 51

* What are the government's main expenditures?

Answer 51

Military Social Security Health Care Welfare

Question 52

Why can national debt be a problem?

Answer 52

- it reduces spending on government programs because the government must pay interest on the debt - growing percentage of the debt is owed to foreign investors, which means that interest payments leave the USA and are less likely to help the U.S. Economy - can cause interest rates to increase for consumers

Question 53

Yay, you did it!! you rock

Answer 53

Good luck on the test and thanks for such a great year :-)