question
Lesson 16
answer
Taxation
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What impact can taxes have on the economy?
answer
Higher taxes reduce demand because consumers have less money to spend.
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What is an argument against the benefit taxation principle?
answer
People who earn less money simply cannot afford to pay for some benefits.
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How are payroll taxes used?
answer
They are used for entitlement programs like Social Security.
question
Read the sentence.
Some states collect a sin tax on products like alcohol and tobacco.
What outcome would a state expect when levying a sin tax?
Some states collect a sin tax on products like alcohol and tobacco.
What outcome would a state expect when levying a sin tax?
answer
It would expect a decrease in demand.
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Which is an argument against implementing a value-added tax (VAT)?
answer
It places an unfair burden on people with lower incomes.
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Which is a feature of a flat tax?
answer
It is not progressive and remains the same for all consumers.
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What is the purpose of the Internal Revenue Service?
answer
It collects income taxes for the federal government.
question
Read the statement.
_[blank]_ of the Constitution states that the government's collection of income taxes is legal.
Which accurately completes the sentence?
_[blank]_ of the Constitution states that the government's collection of income taxes is legal.
Which accurately completes the sentence?
answer
Amendment XVI
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What is a progressive income tax?
answer
a tax in which the tax rate increases as a person's income increases
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Which criteria for effective taxes is violated by confusing instructions?
answer
simplicity
question
Read the scenario.
Anna says the tax system needs to be simplified. She says it takes the average US taxpayer approximately 14 hours to complete and file federal taxes.
If Anna is correct, which tax would simplify the tax system and maintain equity and efficiency?
Anna says the tax system needs to be simplified. She says it takes the average US taxpayer approximately 14 hours to complete and file federal taxes.
If Anna is correct, which tax would simplify the tax system and maintain equity and efficiency?
answer
a flat tax that does not include deductions
question
Which advantage of a value-added tax is most likely to win Americans' acceptance?
answer
It is much more difficult to evade paying taxes.
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Which disadvantage of the value-added tax (VAT) is most likely to be cited by people with low incomes?
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As a consumption tax, everyone pays the same amount, regardless of ability to pay.
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What is a proportional tax?
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a tax in which the percentage a person pays in taxes stays the same regardless of income
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How does a flat tax differ from a value-added tax (VAT)?
answer
The rate remains the same under a flat tax, whereas the rate changes under a VAT.
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Which government tax policy is most likely to result in an increase in consumer demand?
answer
a decrease in personal income tax
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In what key area does the benefit principle of taxation and the ability-to-pay principle of taxation differ?
answer
who should pay the taxes
question
Read the scenario.
Jill makes $100,000 per year, and Kelly makes $40,000 per year.
Under a flat tax, what would be true?
Jill makes $100,000 per year, and Kelly makes $40,000 per year.
Under a flat tax, what would be true?
answer
The women would pay the same percentage.
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Lesson 17
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Government Spending
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What type of government expenditure is defense spending?
answer
goods and services
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What impact could the opening of a military base have on a local economy?
answer
Businesses would spring up to meet the needs of those on the base.
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Which explains why cutting the federal budget is difficult?
answer
Only discretionary spending can be cut, and it is a smaller portion of the budget.
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Once the federal budget is set, how is money allocated?
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through the appropriations committees
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How do unfunded mandates impact state spending?
answer
The mandates force states to spend money in ways they did not anticipate.
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What is a significant expense for states but not for the federal government?
answer
education
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Which items are primary areas of assistance for social welfare?
answer
food, housing, and medical care
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Which options are the two most commonly held viewpoints about social welfare
(Select all that apply.)
(Select all that apply.)
answer
The government or society should provide social welfare.
Individuals and private groups should assist those in need; there is no place for the government.
Individuals and private groups should assist those in need; there is no place for the government.
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What is a significant health care expense spent by state governments?
answer
funding Medicaid programs
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What reasons would people have to promote social welfare?
answer
to provide for those who cannot afford food, shelter, or medical care
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Which accurately describes how the federal budget is established?
answer
xxxThe Federal Reserve prepares a budget and sends it to both houses of Congress which will pass budget resolutions.
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Which act enacted by President Barack Obama includes expanded access to private and public health insurance for citizens, yet continues to be a point of contention both politically and socially?
answer
Patient Protection and Affordable Care Act
question
Read the sentence.
A few states have adopted a balanced budget amendment.
What is the purpose of the balanced budget amendment enacted by these states?
A few states have adopted a balanced budget amendment.
What is the purpose of the balanced budget amendment enacted by these states?
answer
It prevents states from deficit spending
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Which is an example of a federal government transfer payment?
answer
payment to individuals with disabilities
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What are examples of federal mandatory spending?
(Select all that apply.)
(Select all that apply.)
answer
Social Security
Medicare
Medicare
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What is true of education spending?
answer
It is a significant expense of state governments.
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Which accurately describes differences between state and local government expenditures?
answer
Public welfare programs at the local level make up a small part of the budget compared to the state level.
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Which social welfare government acts and programs were enacted as a result of the Great Depression?
(Select all that apply.)
(Select all that apply.)
answer
Federal Deposit Insurance Corporation (FDIC)
Emergency Banking Act
Emergency Banking Act
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Lesson 18
answer
Deficit
question
Read the scenario.
For three years in a row, the federal government's expenditures exceeded its revenue. As a result, the federal debt grew by $4 billion, and the interest payment on the federal debt increased substantially.
Which are true about the scenario?
(Select all that apply.)
For three years in a row, the federal government's expenditures exceeded its revenue. As a result, the federal debt grew by $4 billion, and the interest payment on the federal debt increased substantially.
Which are true about the scenario?
(Select all that apply.)
answer
The federal government's increase in debt led to an increase in interest payments.
The federal government's deficit spending led to an increase in the federal debt.
The federal government's deficit spending led to an increase in the federal debt.
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Which is a way the United States' federal debt impacts its economy?
answer
It has a negative impact because the federal government has to make large interest payments on that debt.
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What are examples of discretionary government spending?
(Select all that apply.)
(Select all that apply.)
answer
The government allocates discretionary spending for national parks.
The government allocates discretionary spending for space programs.
The government allocates discretionary spending for national defense.
The government allocates discretionary spending for space programs.
The government allocates discretionary spending for national defense.
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What type of spending includes line items on a federal budget that have bypassed normal processes and are used to benefit a small group of people or businesses?
answer
pork barrel spending
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What is the purpose of an expansionary fiscal policy?
answer
to increase the level of aggregate demand to grow the economy
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What is fiscal policy?
answer
the government affecting the economy through tax policies and federal spending
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What are the largest categories of discretionary and mandatory spending?
answer
national defense and Social Security
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How does the national debt impact private investors?
(Select all that apply.)
(Select all that apply.)
answer
The national debt causes a crowding-out effect and increases interest rates for private borrowers.
The national debt requires the government to increase revenue streams and potentially increase taxes.
The national debt requires the government to increase revenue streams and potentially increase taxes.
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What is the purpose of a balanced budget amendment to the US constitution?
answer
The amendment would require the US government to spend no more than it collects in taxes and other revenues, excluding borrowing.
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Which is the largest item in discretionary spending?
answer
defense
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What is the purpose of a contractionary fiscal policy?
answer
xxx to increase the level of aggregate demand to grow the economy
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How can the national debt impact private businesses?
(Select all that apply.)
(Select all that apply.)
answer
Government borrowing can crowd private investors out of the lending market.
Government spending can drive up prices for everyone.
Government spending can drive up prices for everyone.
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Which could be part of a fiscal policy?
answer
The government increases taxes.
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What is true of military spending in the United States?
answer
It is a major portion of discretionary spending.
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How can heavy federal debt lead to higher interest rates?
answer
The government causes increased borrowing competition, which leads banks to increase interest rates.
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Why would the government use an expansionary fiscal policy?
answer
to stimulate aggregate demand
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How does the existence of a large federal debt slow economic growth?
(Select all that apply.)
(Select all that apply.)
answer
The government may raise taxes to eliminate deficits, which could slow down the economy
People are concerned about the future and do not want to invest.
People are concerned about the future and do not want to invest.
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What is true about spending on Social Security?
answer
It cannot be cut because it is part of mandatory spending.
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Lesson 19
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Evolution of Money
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If Jim hides $30 under his mattress and he still has $30 there three weeks later, what function has the money fulfilled?
answer
store of value
question
Read the sentence.
The dollar can be broken down into cents.
What characteristic is the dollar displaying in this example?
The dollar can be broken down into cents.
What characteristic is the dollar displaying in this example?
answer
divisible
question
What is money created by government decree?
answer
fiat money
question
Read the sentence.
The US government issued greenbacks during the Civil War.
What were greenbacks?
The US government issued greenbacks during the Civil War.
What were greenbacks?
answer
paper money printed with green ink on the reverse side
question
Which financial institutions typically have membership requirements, such as belonging to the military?
answer
credit unions
question
What types of banking transactions can be performed through a mobile app?
(Select all that apply.)
(Select all that apply.)
answer
set up automatic bill pay
transfer money between savings and checking accounts
receive automatic payments from an employer
transfer money between savings and checking accounts
receive automatic payments from an employer
question
Which noteworthy legislation limited how much banks could earn from investments, such as the selling of securities, and also established the Federal Deposit Insurance Corporation (FDIC)?
answer
Banking Act of 1933
question
What were results of the Savings and Loan Crisis?
(Select all that apply.)
(Select all that apply.)
answer
The Federal Deposit Insurance Corporation (FDIC) replaced the Federal Savings and Loan Insurance Corporation (FSLIC).
The final cost to taxpayers who had to cover the deposit insurance was more than $100 billion.
People moved their deposits from savings and loan institutions to banks.
The final cost to taxpayers who had to cover the deposit insurance was more than $100 billion.
People moved their deposits from savings and loan institutions to banks.
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What government action occurred due to the Savings and Loan Crisis?
answer
Congress passed legislation transferring insurance coverage for S&Ls to the FDIC.
question
What services do commercial banks provide?
(Select all that apply.)
(Select all that apply.)
answer
Banks offer customers checking and savings accounts.
Banks offer customers investment accounts and services.
Banks offer customers the ability to borrow money through loans.
Banks offer customers investment accounts and services.
Banks offer customers the ability to borrow money through loans.
question
Which characteristic of money makes it possible to make change at stores?
answer
divisibility
question
What are consequences of the Savings and Loan Crisis?
(Select all that apply.)
(Select all that apply.)
answer
United States taxpayers had to pay $100 billion in insurance claims.
Some people who worked at S&Ls were jailed for fraud.
Some people who worked at S&Ls were jailed for fraud.
question
Why is it important that money stores its value?
(Select all that apply.)
(Select all that apply.)
answer
so that sellers will accept it as payment
so that buyers know what their money will buy
so that buyers know what their money will buy
question
Which type of money derives its value from government decree, and not from gold or silver?
answer
fiat money
question
Which is true regarding recent banking innovations?
(Select all that apply.)
(Select all that apply.)
answer
Banking apps can be set to alert account holders of low balances.
People can deposit checks without visiting a bank.
People can deposit checks without visiting a bank.
question
What was the purpose of the Banking Act of 1933?
answer
to improve bank security
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Which legislation led to the creation of a national currency and national banking system?
answer
National Bank Act of 1863
question
What is one way credit unions differ from commercial banks?
answer
Credit unions do not exist to make a profit.
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Lesson 20
answer
Financial System
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How does the circular flow of the financial system work?
answer
Savers deposit funds into financial intermediaries, who then lend a portion to borrowers.
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What is the primary role of a financial intermediary?
answer
to channel funds between savers and borrowers
question
What are the functions of a finance company?
(Select all that apply.)
(Select all that apply.)
answer
purchase installment contracts from merchants
provide loans directly to consumers
provide loans directly to consumers
question
Read the definition.
a regular payment dispersed to an individual during retirement from an investment fund to which an individual or employer has contributed
Which is being defined?
a regular payment dispersed to an individual during retirement from an investment fund to which an individual or employer has contributed
Which is being defined?
answer
pension
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What is the definition of risk?
answer
the possibility of losing value on an investment
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What is the definition of return?
answer
the profit or loss accumulated from an investment
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What is the definition of a stock?
answer
a security sold by a corporation in exchange for shares of ownership in the company
question
What is best defined as a "contract in which an individual loans money to a corporation and earns interest on a fixed schedule in return"?
answer
bond
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