Personal Finance Unit 3 Review Copy

Front

Which of the following describes a regressive tax? A tax that takes a higher percentage of income from those who earn more, A tax that takes the same percentage of all incomes, A tax that takes a higher percentage of income from those who earn less, A tax based on receiving the benefits of a particular good or service

Back

A tax that takes a higher percentage of income from those who earn less

Answer explanation

MOST taxes in the US are regressive.

Front

Which of the following describes a progressive tax? A tax that takes a higher percentage of income from those who earn more, A tax that takes the same percentage of all incomes, A tax that takes a higher percentage of income from those who earn less, A tax based on receiving the benefits of a particular good or service

Back

A tax that takes a higher percentage of income from those who earn more

Answer explanation

Progressive income taxes are based on the Ability to Pay principal of fairness.

Front

Which of the following taxes pays for Social Security and Medicare? Federal Income Tax, Sales Tax, FICA/Payroll Tax, Excise Taxes

Back

FICA/Payroll Tax

Front

Which tax is the largest source of revenue for most cities? Options: Corporate income taxes, Sale taxes, Individual Income taxes, Property Taxes

Back

Property Taxes

Answer explanation

In the state of Texas, schools are funded by property taxes.

Front

Which tax structure is the Sales Tax?

Back

Regressive

Front

Which Principal of Fairness applies to the Corporate Income Tax?

Back

Ability to Pay

Answer explanation

Progressive Income taxes are based on the Ability to Pay principal of fairness.

The Ability to Pay principal says that those with higher incomes have the ability to pay more.

Front

Which of the following is an example of a transfer payment? Uniforms for military officers, A new statue in a public park, A senator's salary

Back

An unemployment check

Answer explanation

When the government gives money to a household or a business without getting anything in return, it is a transfer payment -- money is being transferred to those who need it.

Many social programs (Unemployment, Social Security, Medicaid) are examples of transfer payments.

Front

How is the national debt different from the deficit?

Back

Annual deficits contribute to the total debt.

Answer explanation

Each year the government runs a deficit budget, it must borrow to cover the hole, and that adds to the debt.

Each deficit CONTRIBUTES to the debt. The debt is the total of ALL the deficits that have added up over several years.

Front

All of the following are entitlements EXCEPT: Social Security, Medicare, Medicaid

Back

Military Protection

Answer explanation

Entitlements are social programs that people are entitled to receive if they qualify.

The three biggest entitlement programs are Social Security, Medicare and Medicaid.

Front

Fiscal policy can be defined as

Back

the use of government taxing and spending to stabilize the economy.