Economics final review for unit 5

In the top 2 of the worst units you can have in economics.

Federal Reserve

Monetary Policy

Controlling the amount of money in a society. The actions to influence the LEVEL OF REAL GDP and the rate of inflation, plus the unemployment in the economy.

Interest (Rates?)

Money earned from keeping deposits at a bank or paid in loans.

Fiscal Policy

The combination of tax laws and spending laws that has an impact on GDP, unemployment and inflation rates. Similar to monetary but the government controls the economy through TAXES AND GOVERNMENT SPENDING.

This is their way of attempting to control the economy.

Income tax

A tax on the income earned by individuals from things like work, interest and investments. It is the main source of revenue for fed government. As income goes up, you pay a higher percent of tax.

Sale tax

Most commonly a percentage of the value of a good charged when it is sold. Not used by the federal government but it is used by many states.

Excise tax

Taxes that are paid on certain goods. THEY ARE PER UNIT. Per gallon, per pack, etc.

Progressive tax

Taxes for which the percentage of income paid in taxes increase as you income increases.

If you MAKE MORE money = you have to PAY MORE TAXES.

Regressive tax

Result in a person with less income paying a higher percentage of their income in taxes.

If you have less money to spend because you earn less, taxes will affect you MORE HEAVILY.

Mandatory spending

Government spending required by the law

Discretionary spending

Government spending authorized by Congress on an annual basis. Spending about which Congress is free to make choices.

Entitlements

Social welfare programs that people are “entitled to” and benefit from if they meet certain eligibility requirements. Medicaid is for people who need aid but have lower income. They must be entitled to medicaid by being proven they don't make much/enough money.

Budget Deficit

The situation when gov revenues are less than spending in a given period.

Budget Surplus

The situation when government revenue is MORE / exceeds the spending in a given period

National Debt

Adding up of budget deficits. The total amount of $$ the federal government owes to bondholders.