Unit 3: Government and the Economy

What are the criteria for an effective tax? Mark all that apply.

• equitable

• simple

• manageable

• efficient

How can taxes be used to adjust behavior?

• By increasing taxes on all goods and services uniformly
• By randomly changing tax rates without any specific goal
• By reducing taxes on harmful goods or activities
• By imposing higher taxes on harmful goods or activities and providing tax breaks or incentives for beneficial behaviors.

How do taxes redistribute income?

• Taxes have no impact on income distribution
• Taxes collect money from individuals and businesses which is used to fund government programs and services.

• Taxes are used to increase income inequality
• Taxes redistribute income by giving money to the wealthy

How can taxes incentivize people to save and invest?

• By increasing tax rates on savings and investments
• By eliminating all tax benefits related to retirement accounts
• By imposing a tax penalty on individuals who save or invest
• By offering tax deductions or credits for contributions to retirement accounts or investments.

What is the incidence of a tax?

• Who carries the final tax burden (who actually pays the tax)

• Tax evasion by individuals
• Initial burden of the tax on both the producer and the consumer
• Tax revenue generated by the government

What is the benefit principle of taxation?

• Tax rates should be the same for everyone
• Government services should be free for all
• Taxes should be based on income levels
• Individuals should pay taxes based on the benefits they receive regardless of income

What is the ability-to-pay principle of taxation?

• Tax rates should be set randomly each year
• Individuals should be taxed based on their shoe size
• Taxation should be determined by the color of one's hair
• Individuals should be taxed according to their level of income, regardless of benefits received.

Match the following

• Same percentage after meeting threshold

• Flat tax

• Tax added at each stage of production

• Regressive tax

• Higher percentage for higher income

• Progressive tax

• Higher percentage for lower income

• Proportional tax

• Same percentage for all

• Value added tax

Match the following

• tax withheld by employer for Medicare, e

• Sales tax

• Tax paid on real estate owned

• Tariffs

• tax on sale of goods and services

• FICA tax

• Tax paid of assets after death

• Estate tax

• Taxes on imports and exports

• Property tax

Define deficit spending

• Deficit spending is when a government's expenditures are less than its revenues
• Deficit spending is when a government's expenditures equal its revenues
• Deficit spending is when a government's expenditures exceed its revenues.

• Deficit spending is when a government saves more money than it spends