TAX Basics

What kind of tax is our federal income tax?

• regressive

• progressive

• proportional

• retrograde

Entitlement programs such as Social Security fall into what type of federal spending category?

• discretionary spending

• variable spending

• mandatory spending

• deficit spending

The sales tax charged by most states is technically proportional, but has a ________ effect.

• progressive

• returnable

• comprehensive

• regressive

What do the taxes collected under FICA fund?

• Medicaid

• Medicare

• Social Security

• Unemployment Compensation

Of the categories of federal spending, which one is the largest?

• Defense spending

• Social Security

• Interest on the national debt

• Foreign aid

Keynesian economics seeks to

• increase the role of government to stimulate an economy during a recession

• emphasizes the importance of strong businesses for creating jobs

• relies more heavily on the law of supply and demand

• reduce regulations so the economy can be healthy

When the federal government spends more than it receives in revenue in a given year, it's called a

• shortfall

• debt

• surplus

• deficit

During a period of inflation and full employment the government uses _______policy to slow the economy down

• expansionary policy

• contractionary policy

• progressive

• proportional

Unemployment has risen to 8.5%, and GDP has dropped for the second quarter in a row. Inflation is 2%. Where are we on the business cycle, and what type of action should be taken?

• expansion... we should raise taxes and lower spending

• recession...we should lower taxes and increase spending

• expansion...we should lower taxes and increase spending

• recession...we should raise taxes and lower spending

An example of contractionary fiscal policy would be

• raise taxes

• raise government spending

• raise production of consumer goods

• increase unemployment payments