Unit 6: Government and the Economy

Question 1

Corporate Income Tax Definition

Answer 1

Levied on the profits of corporations earned from business activities.

Question 2

Excise Tax Definition

Answer 2

An additional cost levied onto purchases of specific goods.

Question 3

FICA Definition

Answer 3

A 12.4% tax to fund Social Security.

Question 4

Individual Income Tax Definition

Answer 4

A levy, paid by individuals on their personal earnings from wages, interest, and investments.

Question 5

Medicare Tax Definition

Answer 5

A 2.9% tax to fund Medicare.

Question 6

Payroll Tax Definition

Answer 6

Paid on the wages and salaries of employees.

Question 7

Progressive Tax Definition

Answer 7

A tax designed for the high-income individuals to pay a larger percentage of their earnings compared to low-income individuals.

Question 8

Property Tax Definition

Answer 8

A levy paid to a local government by a landowner, a homeowner, or a business that owns property, usually a percentage of the assessed value of the property.

Question 9

Proportional Tax or Flat Tax Definition

Answer 9

A tax based on a percentage of the item being taxed. High-income individuals pay the same percentage of their earnings as low-income individuals

Question 10

Regressive Tax Definition

Answer 10

A tax where low-income individuals are paying a higher percentage of their earnings on the tax compared to high-income individuals.

Question 11

Revenue Definition

Answer 11

Income that is gained by local, state, and federal governments through taxation.

Question 12

Sales Tax Definition

Answer 12

A tax imposed by state and local governments on the sale of goods and services, usually at the point of sale.

Question 13

Tax Definition

Answer 13

A compulsory payment levied on individuals, corporations, and public enterprises that are enforced through a governing entity.

Question 14

Use Tax Definition

Answer 14

A tax imposed by a state and local government on taxable goods and services purchased in the region when no sales tax was paid at the time of purchase.

Question 15

Discretionary Spending Definition

Answer 15

Federal expenses from annual appropriations, which are under the House and Senate Appropriations Committees.

Question 16

Entitlement Definition

Answer 16

A program or provision in which recipients are provided eligible benefits based on legislation.

Question 17

Interest on the National Debt Definition

Answer 17

The amount the federal government must pay on outstanding debt each fiscal year.

Question 18

Mandatory Spending Definition

Answer 18

Federal expenses that include all payments to people, businesses, and other governments.

Question 19

Medicaid Definition

Answer 19

A government program that provides health coverage based on financial need, regardless of age.

Question 20

Medicare Definition

Answer 20

A U.S. federal government healthcare insurance program for people 65 years or older and those with certain disabilities under age 65.

Question 21

Social Security Retirement Benefits Definition

Answer 21

A federal government program that provides monthly payments to individuals who are at least 62 years of age and have paid into the system for 10 years or more.

Question 22

Contractionary Fiscal Policy Definition

Answer 22

Methods used by government to slow economic growth and inflation to a healthy level.

Question 23

Expansionary Fiscal Policy Definition

Answer 23

Methods used by the government to help stimulate the economy.

Question 24

Fiscal Policy Definition

Answer 24

How government implements its spending and tax policies to change macroeconomic conditions.

Question 25

Balanced Definition

Answer 25

The total expenses in the government are equal to the total revenues.

Question 26

Deficit Definition

Answer 26

The government spends more than the revenue collected.

Question 27

Intragovernmental Debt Definition

Answer 27

Debt held in government accounts.

Question 28

National Debt Definition

Answer 28

The direct liabilities owed by the U.S. Government.

Question 29

Public Debt Definition

Answer 29

Marketable securities issued by the U.S. Treasury that are issued to investors, and state and local governments.

Question 30

Surplus Definition

Answer 30

The government's total revenue exceeds its total expenses.

Question 31

Board of Governors Definition

Answer 31

Seven members of the Federal Reserve who direct monetary policy, and set the discount rate and reserve requirements.

Question 32

Federal Reserve Definition

Answer 32

The central bank of the U.S.

Question 33

Federal Open Market Committee Definition

Answer 33

A group in the Federal Reserve that oversees open market operations and sets the target federal funds rate.

Question 34

Federal Reserve District Banks Definition

Answer 34

A set of 12 district banks that oversees commercial banks and implements the policies from the Board of Governors and the FOMC.

Question 35

Discount Rate Definition

Answer 35

The interest rate the Federal Reserve charges to financial institutions through the discount window.

Question 36

Federal Funds Rate Definition

Answer 36

The interest rate banks charge each other for overnight and short-term lending.

Question 37

Open Market Operations Definition

Answer 37

Purchases and sales of securities by the Federal Reserve with primary dealers.

Question 38

Prime Rate Definition

Answer 38

The interest rate a bank charges its best consumers and businesses.

Question 39

Reserve Requirements Definition

Answer 39

The funds a depository institution must have in reserve against deposit liabilities.

Question 40

Repurchase Agreements Definition

Answer 40

The purchase of treasuries and securities by the Federal Reserve from a primary dealer, subject to the Federal Reserve reselling them back to the primary dealer at a later date.

Question 41

Reverse Repurchase Agreements Definition

Answer 41

The sale of treasuries and securities from the Federal Reserve to a primary dealer, subject to the Federal Reserve repurchasing them back from the primary dealer at a later date.

Question 42

Liquidity Definition

Answer 42

The degree to which assets and securities convert to cash.

Question 43

Monetary Policy Definition

Answer 43

The methods the Federal Reserve uses to manage the nation’s money supply and interest rates.

Question 44

Money Supply Definition

Answer 44

The amount of currency available to the economy, including cash and deposits.

Question 45

Quantitative Easing Definition

Answer 45

The expansion of the Federal Reserve’s existing open market operations through the purchase of treasuries and mortgage-backed securities on a long-term or permanent basis.