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What are five economic goals for the government?
- promote economic security
- Invest in our future
- promote market competition
- stabilize the economy
When does a fiscal year begin and end?
begins Oct. 1st, ends Sept. 30th
Whata re the top five categories government spends on?
- defense and security
- medicade, medicare
- social security
- saftey net programs
- interest on debt
Where does government get the most money from taxes?
Personal income taxes
What is another name for payroll tax?
What do local government spend the most on?(1)
What are the highest sources of tax revenue for local governments?(3)
- state and federal money
- property taxes
- user charges
What do state governments spend the most on? (3)
- aid to local gov'ts
- social services
What are state gov'ts highest sources of tax revenue?(4)
- federal aid
- sales taxes
- user charges
- personal income tax
What are the five characteristics of a good tax?
- effiecient to collect
- there should be a good reason
What are the two approaches to taxes?
- benefits-recieved principle: you pay in proportion to what you recieve
- ability to pay principle: those with lower incomes pay less
What are regressive taxes?
rich people pay lower % of income
What are progressive taxes?
poor people pay lower % of income
What are the three functions of money?
- medium of exchange
- store of value
- measure of value
medium of exchange
accepted by all as payment
store of value
can be saved
measure of value
describes relative value of goods and services
What are the three kinds of money?
- commodity money
- representitive money
- fiat money
anything that serves as money and commodity
- declared money by gov't decree
- no value in itself
is credit card money?
no it is a loan
What are the two types of money in the US?
- currency (dollar bills, coins)
- checkable deposits (checks, debit cards)
How do banks create money?
fractional reserve banking system
What does the FED do for us?
- clears checks
- prevents bank runs w/ FDIC
What is the Gross Domestic Product (GDP)?
value of all goods and services produced in an economy in a year
decline in GDP for at least six months
steep decline in GDP for at least 1 year
phase of economic activity during which economy's total output increases
increase in economy's general price level
purchasing power of money
amounts of goods and services people can buy with their money
What is the monetary policy?
increasing/decreasing money supply
What is fiscal policy?
increasing/decreasing spending, taxes
what are three actions the gov't takes with expansionary monetary policy?
- buys back gov't bonds
- lowers required reserve ratio
- reduces interest it charges banks
what are three actions the gov't takes with contractionary monetary policy?
- sells gov't bonds
- increases required reserve ratio
- increases interest it charges banks
what is the problem with monetary policy?
problem with fiscal policy?
- leads to a burden on future generations
- increases national debt
What is budget deficit?
annual (yearly) result of deficit spending
What is Deficit Spending?
Government spends more than it collects in tax revenue.
Why do businesses not produce enough public goods on their own?
There is little profit in doing so
what is required reserve money?
the portion of money required by gov't to stay in the bank