Economics & Personal Finance 1.01-1.05

first quiz

What is human capital?

- The improvement in labor created by knowledge, skills, health, reliability, and experience.

Name three ways people invest in human capital.

- Education (formal or informal), on-the-job training, and gaining work experience.

Higher human capital usually leads to what two outcomes?

- Higher productivity and higher earnings.

Give an example of a career that requires a very high investment in human capital.

- Doctor requires college, medical school, and years of residency.

How is a diesel mechanic’s human-capital investment different from a doctor’s?

- Mechanics typically attend vocational school or special training and learn more on the job.

What are the 3 types of economic resources?

- Human, Capital, and Natural.

Name four of the 16 career clusters.

- Examples: Health Science, Finance, Agriculture/Food & Natural Resources, Information Technology.

What is the difference between earned and unearned income?

- Earned is from working (wages, salary); unearned is from investments or gifts.

Define salary vs. wage.

- Salary is a fixed annual amount paid in regular installments; wage is hourly pay.

What is overtime pay?

- Pay at 1.5 times the regular hourly rate for hours worked over 40 per week.

Tips are taxed the same as what?

- Wages.

What is a commission?

- Payment to a salesperson based on a percentage of sales.

Give two examples of unearned income.

- Interest from savings and inheritance.

Define gross pay and net pay.

- Gross is before deductions; net is what you take home after deductions.

What does FICA fund?

- Social Security and Medicare.

What is the total FICA tax rate for employee + employer?

- 7.65% each (15.3% combined).

Give two examples of voluntary payroll deductions.

- Retirement contributions and health insurance premiums.

On average, benefits add about what percent to total compensation?

- About 30%.

List two common job benefits.

- Health insurance and paid vacation.

Name the four categories of employer incentives.

- Compensation, Recognition, Rewards, and Appreciation incentives.

What is the purpose of Form I-9?

- To verify legal right to work in the U.S.

What is a W-2 form?

- Wage and Tax Statement showing annual earnings and taxes withheld.

What is a W-4 form?

- Employee’s Withholding Allowance Certificate used to set tax withholding.

Largest source of federal revenue?

- Individual income taxes.

Name the main revenue sources for state governments.

- Individual income taxes and sales taxes.

Define progressive, proportional, and regressive tax structures. :

tax rate rises as income rises. Proportional: flat rate for all incomes. Regressive: lower income pays higher % of income.

Give an example of a regressive tax.

- Sales tax.

List the four types of taxes by what is taxed.

- Property, Wealth, Purchases, and Earnings.

What is the federal estate-tax exclusion limit (2021)?

- $11.7 million.

Does Virginia have an inheritance or estate tax?

- No.

What is a sales tax?

- A percentage added to the price of goods or services, collected by the seller.

What is an excise tax?

- A tax on specific goods like gasoline or tobacco.

Virginia’s general state sales tax rate (2022)?

5.3% (plus local add-on, usually total 6.3%).

What is a sales tax holiday?

A period when specific items can be bought tax-free.

How much tax on a $100 purchase at 5.3%?

$5.30

If someone earns $850 in a week, how much FICA tax (7.65%) will be withheld?

 $850 × 0.0765 = $65.03.

 Gross pay is $2,000 with $350 total deductions. What is net pay?

$1,650

A Virginia shopper buys $80 in clothes during a 6% sales tax holiday. How much tax do they pay?

$0, because purchases during the holiday are tax-free.

Why does a progressive tax system mean higher earners pay a larger share of income?

Because tax rates increase as income rises, so people with higher incomes are taxed at higher percentages.

Q

Give one reason an employer might offer non-cash incentives like flexible schedules.

 To attract and retain employees, boost morale, and improve productivity without increasing wages.

Compare gross pay and net pay using an example paycheck.

Gross pay is total earnings before deductions (e.g., $1,000). Net pay is what’s left after taxes and deductions (e.g., $1,000 – $200 = $800 take-home).

List three ways to invest in your human capital and explain how each can increase future income.

• Education – gains advanced skills for higher-paying jobs.

• On-the-job training – builds specialized abilities that increase value to employers.

• Health/fitness care – improves productivity and reduces sick days.

Name two differences between W-4 and W-2 forms

• W-4 is completed when you start a job to tell the employer how much tax to withhold.

• W-2 is sent each January showing the year’s earnings and taxes withheld for filing your tax return.

What is one advantage and one disadvantage of a regressive tax like sales tax?

•  Simple to collect, and everyone pays it.

• Takes a larger percentage of income from low-income people.