Module 9 Review

Which of the following statements accurately describes the national debt?

• The debt has generally been going down since the end of World War II.

• The national debt is the amount of money that the government has to borrow each year.

• The national debt is less than the yearly national budget of the United States.

• The national debt has been growing since 2001.

Answer explanation

The national debt is the amount of money that the federal government has borrowed and still needs paid back. This number has been consistently increasing. The last year that the federal government had a spending surplus was in 2001.

In which of the following categories does the United States government usually spend the most on?

• Social Security

• Education

• Interest on the national debt

• National Defense

Answer explanation

Social Security is a mandatory spending item and mandatory spending accounts for the largest portion of the national budget.

What is the primary method all three levels of government use to raise revenue?

• Tariffs

• Selling on commodities

• Taxes

• Volunteerism

What word is used to describe money that the federal governments brings in, and is then able to spend?

• Revenue

• Income

• Profit

• Outlay

Which of the following taxes apply to the benefits received principal?

• Shawn received a raise at work but had to pay a higher tax rate, which cut into his new raise.

• Jamie paid $2 in taxes for $40 worth of gasoline.

• Carol's net income was roughly 30% lower than her gross income as a result of taxes paid.

• Sam pays $52 each year in local service tax.

Answer explanation

Benefits received principal applies when someone pays a tax for making a purchase. The only time someone pays that tax is if they buy that product.

Which of the following applies to the ability to pay principle?

• Susan got a new job where she'll be making $15,000 more each year but this puts her into a higher tax bracket so she'll have to pay a higher percentage in income tax.

• Domonique paid $2.67 in tax when she went out to eat at a restaurant for lunch.

• Anthony purchased a new TV and paid $24 in tax.

• Liam rented a car and paid a $2 fee for each day on top of the 6% sales tax.

Answer explanation

Ability to pay principle means that the more someone makes, the more they will pay in tax. In all of the other examples, if that person did not make the purchase, they would not be paying the tax.

Which of the following is an example of paying a government fine?

• Sandra got a $155 fine for driving 55 miles per hour in a 35 mile per hour zone.

• Rose and Sam applied for a marriage license at their county courthouse.

• Bill paid $39 to get his driver's license renewed.

• Lucy had to pay $100 to her bank for bouncing a check.

Answer explanation

A fine is a money that someone has to pay when they break the law.

Which of the following statements accurately describes a government bond?

• Only the federal government can issue bonds.

• The government has as long as they need to pay off the bond.

• Bonds are generally considered a safe way to invest.

• Interest is only paid on the bond when it reaches the maturity date.

Answer explanation

Bonds are used a way to raise money by all levels of government. The person buying the bond will receive periodic interest payments until they expire, which is a set date. The maturity date is when the entire amount loaned must be paid back.

What does it mean to have a progressive tax?

• Everyone except for those with the lowest incomes, pay the same rate of tax.

• The higher a person's salary, the higher the percentage that a person will pay in taxes.

• The lower a person's salary, the higher the percentage that a person will pay in taxes.

• A person's tax rate will change every year.

Which of the following statements correctly describes modern income taxes?

• Even if you only make $200, you must pay federal income tax.

• Corporations do not have to pay income taxes.

• On top of income taxes, employees will have to pay other taxes from their incomes.

• The majority of Americans will have to pay about 25% of their gross income in taxes.

Answer explanation

Because of the standard deduction, anyone making less than a certain amount of money will have any federal income tax withheld refunded.

The majority of Americans pay about 30% of their income in taxes.