Economics Exam 3 Study Guide

Mandatory outlays

• are another name for discretionary outlays

• cannot be altered once they are made into law

• require changes in existing laws if those outlays are to be altered

• usually change during the budget process

• are a minor component of total outlays, and so are usually ignored

Federal government spending jumped drastically in 2020 primarily because of

• increased interest on debts incurred during the Great Recession

• the costs of government responses to the Covid-19 pandemic

• increased foreign aid to disaster-stricken areas

• the bailout payments made to big banks

• increased spending on the U.S. education system

Which of the following is NOT a revenue source for the U.S. federal government?

• county property taxes

• federal gasoline taxes

• taxes on imported goods

• federal income taxes

• Medicare taxes

Excise taxes are levied on

• imports

• corporate income

• property that is gifted to others

• individual income

• specific goods or commodities

The largest source of tax revenue for the government is ___________ taxes.

• individual income

• excise

• social insurance

• corporate income

• estate

Which type of tax is progressive in the United States?

• excise

• social insurance

• income

• sales

• property

The United States has a(n) ___________ income tax system.

• marginal

• flat rate

• regressive

• average rate

• progressive

A marginal tax rate is _____________

• the tax rate paid on a worker's next dollar of income

• the total tax paid divided by the amount of taxable income

• irrelevant for making decisions about earning extra income

• equal to a worker's income tax bracket

• applied only to high earners under a progressive income tax system

Why do wealthy citizens contribute much higher tax revenues to the government than poor citizens?

• Wealthy citizens have a much lower average tax rate than poor citizens.

• Wealthy citizens work more hours per week than poor citizens.

• Wealthy citizens do not contribute more tax revenues to the government than poor citizens.

• Wealthy citizens consume more government services, so they are taxes at a higher rate.

• Wealthy citizens much more taxable income than poor citizens.

A U.S. government budget deficit occurs when

• government outlays exceed revenue

• government outlays equal revenue

• the United States borrows money from foreign countries

• the United States lends money to foreign countries

• government revenue exceeds outlays