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From the Constitution

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Where does the government get the right to tax?

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Tax

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A _____________ is a mandatory payment to government.

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Tax

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What is the most important source of government revenue?

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Revenue

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_____________ is government income from tax and non-tax sources.

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Non-tax sources

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Borrowing and lotteries would be examples of _____________________.

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Benefits-received principle

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_________________ states that people who benefit directly should pay taxes; amount paid = benefits received.

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Ability-to-pay principle

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________________ states that benefits received should not matter; amount taxed should depend on person's ability to pay

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When they have fewer expectations, deductions, and exemptions

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How can taxes be viewed as fairer?

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Fairness

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Equity means ___________________.

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Tax Loopholes

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___________________ are exemptions or oversights in the tax law that allows some people and businesses to avoid paying taxes.

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1. Equity 2.Simplicity 3. Efficiency

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What are the three criteria for taxation?

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Equity

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___________ is when people are taxed uniformly; people in the same situations pay the same amount.

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Simplicty

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_________________ is when it is easy for taxpayer to understand and government to collect.

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Efficiency

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_________________ is how well tax raises revenue with the least administrative cost.

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True

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True/ False: Tax should be easy to administer and reasonably successful at generating revenue.

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True

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True/ False: Tax should raise enough revenue to make it worth while.

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No

answer

Does individual income tax meet efficiency as well as people think it does?

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Tax Base

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A _____________ is when each type of wealth is subject to taxes.

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1. Individual Income 2. Corporate Income 3. Sales 4. Property

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What are the 4 most common tax bases?

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Individual Income

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________________ tax is based on an individual's income from all sources.

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Individual Income tax

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Tax on wages, interest, dividends, and tips would be examples of _________________________.

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Corporation Income

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________________ tax is based on a corporation's profits.

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Sales

answer

_____________ tax is a general tax levied on most consumer purchases based on the value of designated goods or services at the time of sale.

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sale price

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Sales tax is a percentage of ______________.

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Property Tax

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____________________ is a tax on the value of assets.

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Property Tax

answer

Tax on real estate and cars would be examples of ____________________.

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Incidence of Tax

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___________________ is the final burden and impact of tax on a taxpayer.

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Proportional Tax

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____________________ is a tax where all taxpayers pay the same percentage regardless of income.

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Progressive Tax

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__________________ is a tax where higher income earners pay higher percentage of income.

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Progressive Tax

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What kind of tax do we use in our current income tax structure?

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Regressive Tax

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___________________ is a tax where lower income earners pay higher percentage of income.

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1. Resource Allocation 2. Productivity and Growth 3. Economic Behavior

answer

What 3 things do taxes affect?

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Increase

answer

If demand remains the same, prices will ________.

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She would shift production to another more profitable good or service

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What would a supplier do if she was unable to pass increased costs onto the consumer?

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Left/ Less

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When the cost of production rises, the supply curve shifts to the __________ and people buy ______.

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Taxes

answer

What affects the factors of production?

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By changing the incentive to save, invest, and work

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How does productivity and growth affect taxes?

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Less

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When taxes on interest and dividends are high, people save ______.

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Because productivity and growth suffer at some levels of taxes

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Why do people favor lower taxes?

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Because a large percentage of one's income would go to taxes

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Why do some economists think high taxes reduce the incentive to work?

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Reduced incentive to work and promotion of underground economy

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What 2 things are a result of high taxes?

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Tax Incentive

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___________ is the use of taxes to influence economic behavior.

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Tax Incentives

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Tax deductions would be an example of ________________________.

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Home ownership

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What do tax deductions on interest payments on home mortgages encourage?

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Sin Taxes

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_____________ high taxes designed to raise revenue and reduce consumption of a socially undesirable product such as liquor and tobacco.

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True

answer

True/ False: Demand for sin taxed items are relatively inelastic.

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Steep tax increase

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What makes sin taxed items more elastic?

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16th Amendment of 1913

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The _______________allows Congress to levy an income tax and constitutes the majority of governmental revenue.

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1. Individual Income Tax 2.Social Security/Insurance Tax (FICA) 3. Corporate Income Tax 4. Excise tax

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List the 4 largest tax sources in order.

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Withholding

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_____________ is a payroll tax taken before worker gets paycheck.

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Internal Revenue System (IRS)

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______________ collects money and administers taxation.

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Taxable Income

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_______________ taxable portion of income.

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Tax Returns

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______________ are annual reports to IRS summarizing the total income, deductions, and taxes withheld by employers.

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Taxpayer gets refund

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What happens if too much tax is withheld?

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Taxpayer pays rest

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What happens if there is not enough tax withheld?

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Tax Bracket

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____________ is a tax rate for an income span.

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Payroll Withholding System

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_____________________ requires an employer to automatically deduct or withhold income taxes from an employee's paycheck and send it to IRS.

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15

answer

_______% of population lies below poverty line.

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1. Wealthy 2. Upper-middle class 3. Lower-middle class 4. Middle class 5. Poverty

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Name the 5 social classes.

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Blue collar

answer

____________ workers are paid by the hour and typically have lower levels of education.

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Lower-middle

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The _________________ class is composed of lower-level white-collar workers who typically have college educations but not graduate degrees needed to reach high employment levels.

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Upper-middle

answer

The ____________ class workers have post-graduate degrees and work at high-level white-collar positions; paid $100,000.

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Wealthy

answer

The _________ class makes more than $150,000 annually.

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5

answer

The wealthy class is known as the "_____ percent"

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1

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At the very top of the wealthy class is the "___ percent" who earn more than $250,000 a year.

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Social Security and Medicare

answer

What two programs are covered by FICA?

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Federal Insurance Contributions Act (FICA)

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_____________ is a payroll tax that pays for Social Security and Medicare.

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Social Security and Medicare

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What are the 2 types of payroll taxes?

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Social Security

answer

_______________ aids senior citizens, orphans, and disabled.

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1960s by FDR during Great Depression

answer

When was Social Security created?

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Uses highest earning over 35 years

answer

How is Social Security benefit calculated?

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6.2/ 4.2

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Social Security was _____% then Obama reduced it to ___%.

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Medicare

answer

_____________ is the national health insurance for people over 65.

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Johnson/ 1960s

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Who created Medicare? When?

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1.45/ 0.9

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Medicare is taxed at ________% with an increase of __% on earnings over $200,000 single or $250,000 married.

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Both employees and employers

answer

Who pays for Medicare?

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Unemployment Compensation/ Taxes

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________________ is a program that provides benefits for a certain amount of time to employees who lost their jobs through no fault of their own.

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7,000

answer

Unemployment taxes applies to first $ ___________ earned by an employee.

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Employers

answer

Who pays for unemployment compensation?

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States

answer

Who administers unemployment compensation?

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Federal and State governements

answer

Who funds unemployment compensation?

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Social Security Trust Fund

answer

_______________ uses taxes to buy special issue bonds from US Treasury.

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1. How much you earned over your working career 2. The age at which you choose to start receiving benfits

answer

What two factors determine social security monthly benefit?

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Corporate Income

answer

________________ taxes are what a corporation pays on its profits.

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Because a corporation is a separate legal entity

answer

Why do corporations pay a separate tax?

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Regressive

answer

Excise taxes are also ___________ taxes.

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True

answer

True/ False: Luxury and Recreational taxes are real taxes.

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Estate

answer

_____________ taxes are on property transferred to others after owner's death.

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Gift

answer

___________ taxes are levied donations of money given by one living person to another; paid by the person who makes the gift.

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Inelastic

answer

Excise taxes are placed on good with ___________ demand.

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Excise

answer

____________ tax is a tax on the manufacture or sale of specific items.

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Excise

answer

Telephone services, gasoline, tires, legal betting, coal, and liquor would have ____________ taxes on them.

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Customs duty

answer

______________is a charge levied on goods brought in from other countries; tariff.

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Congress

answer

Who decides what will and how much will be taxed?

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User fee

answer

___________ is charged for the use of a good or service.

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user fee

answer

Parking, national parks, and the fee ranchers pay to let their herds graze on federal land would require a ________________.

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Miscellanous

answer

______________ fees account for about 1% of federal revenue collections.

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1. Mandatory Spending 2. Discretionary Spending

answer

What are the two categories that federal government funds go to?

question

Mandatory Spending

answer

_____________ is spending that is required by current laws.

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Discretionary Spending

answer

___________ is spending that the government must authorize each year.

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Mandatory Spending

answer

Funding Social Security and Medicare would be examples of ___________.

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Discretionary Spending

answer

Funding highway construction and maintaining national parks would be examples of ____________.

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Mandatory Spending

answer

________________ spending makes up over half of all federal spending.

question

Entitlements

answer

____________ are social welfare programs with specific requirements.

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Social Security

answer

What is the largest amount of federal spending?

question

Medicare

answer

_______________ provides medical insurance and additional old-age benefits under social security; includes coverage for some prescriptions.

question

Medicaid

answer

______________ is an insurance program for low-income people.

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True

answer

True/ False: Medicare and Medicaid were established at the same time.

question

True

answer

True/ False: Other programs define eligibility requirements funds based on an estimate of how many people meet those requirements.

question

Discretionary Spending

answer

Food stamps, veteran's benefits, homeland security, border protection, and enforcement of immigration on laws are examples of ________________.

question

Discretionary Spending

answer

______________ uses over 1/3 of federal spending.

question

National Defense

answer

_____________ includes salaries, weapons, military budgets, homeland security; takes up half of discretionary budget.

question

National Defense, Interstate Highway System, Transportation, Natural Resources, Environment, Parks, Pollution Clean Up, Education, Research, Justice Administration

answer

List uses for discretionary spending.

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Justice Administration

answer

The ____________________ includes enforcement of FBI, CIA agencies and federal courts.

question

Federal Budget

answer

______________ is the plan for spending revenue.

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Fiscal Year

answer

_____________ 12 month period for which expenditures are planned; October 1- September 30

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Office of Management and Budget (OMB)

answer

Who prepares the President's budget?

question

Congressional Budget Office (CBO)

answer

___________________ helps develop appropriations guidelines.

question

Congress

answer

Who votes on budget?

question

President

answer

Who approves the budget?

question

Can pass resolutions for day-to-day running

answer

What happens if there is not a budget by October 1?

question

Direct Spending

answer

________________ is when government buys goods and services that it needs to operate.

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Transfer Payment

answer

____________________ is money distributed to individuals who do not provide anything in return.

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Mandatory

answer

Transfer payments are usually ___________ spending.

question

Grant-in-aid

answer

________________ is a transfer payment to state and local governments and regions.

Chapter 14: Government Revenue and Spending – Flashcards

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