Economics Final 15 – Flashcards
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The Constitution places which two limits on the government's power to tax?
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Federal taxes must be for the common defense and general welfare, and they must be the same in every state
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To what category do a person's earnings, the dollar value of a good or service, the value of a property, and the value of a company's profits belong?
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Tax bases
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What is a progressive tax?
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A tax where the tax rate rises, which means a larger % of your income is taken in taxes, as your income increases
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What are the differences between Medicaid and Medicare?
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Medicare provides health care for people over 65, and Medicaid offers benefits for low-income families and individuals
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Entitlement programs such as Social Security, Medicare, and Medicaid fall into what type of federal spending category?
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Mandatory spending programs
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Which two types of taxes provide the largest amount of revenue to states?
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Sales taxes and Individual income taxes
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What is the role of the Congressional Budget Office (CBO) in the federal budgetary process?
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The CBO gives Congress independent economic data to help members fully understand and make decisions about the President's proposed budget
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How does expansionary fiscal policies affect the economy?
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The government increases spending to raise output of goods and services and create jobs in the short term
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What is one important distinction between Classical economics and Keynesian economics?
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Classical economics teaches that free markets regulate themselves, Keynesian economics teaches that government action affects the economy
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How did economic events during World War II demonstrate the principles of Keynesian economics?
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As government spending increased, America came out of the Great Depression and moved toward higher productivity
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How does the "crowding-out effect" influence businesses?
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The federal government makes it harder for private businesses to borrow
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How did the federal reserve system hold up during the Great Depression?
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The federal reserve system did not work well because the twelve regional banks each acted independently
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What is the difference between a scarcity and a shortage?
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A scarcity occurs when there are limited quantities to meet unlimited wants, and a shortage occurs when a good or service is unavailable.
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Ben's family purchased a dishwasher so that the family members could save time for more productive activities. What kind of production factor is this?
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Physical capital
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According to the "guns and butter" example, if a country decides to spend more on military goods, what will happen?
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The country will have less money to devote to consumer goods.
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By the end of the summer, Jason had saved enough money for college from his job as a waiter. He even had some money left over. Although he wanted both, he decided to buy a DVD player rather than a digital camera. What was the opportunity cost in this scenario?
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The digital camera
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How does a society answer the three economic questions about the production and consumption of goods and services?
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It's answer is based on the importance it attaches to various economic goals and societal values.
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What economy relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it.
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Traditional economy
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In a free market economy, the factor market involves which type of exchange?
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Firms purchase factors of production from households.
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Self-interest is the motivating force driving the free market. What is the regulating force?
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The invisible hand
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Centrally planned economies can work effectively toward explicitly stated goals, but what is one disadvantage of such a system?
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It's performance almost always falls short so it's ideals.
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How has market economies evolved since Adam smiths time?
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Government intervention in the economy has become greater.
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China, like many other nations, is undergoing a period of transition in which many of its state firms are being privatized. What statement describes the change in China's mixed economy system?
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The economy is moving away from central planning toward a market-based system.
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The purpose of free enterprise is to..
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Give consumers freedom to make economic choices.
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What are some of the basic principles of free enterprise?
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Profit motive, legal equality, private property rights, free contract and competition.
