GOVERNMENT AND THE MARKET TEST

money

a “medium of exchange”; commonly accepted in exchange for goods and services

Federal Reserve

the central bank of the United States

inflation

the rise of prices over time

investment

money spent in order to make more money

credit reporting bureaus

companies that keep track of your credit history

economy

the way goods and services are produced and consumed

consumer

someone who acquires goods and services

producer

someone who makes goods or offers services to others

profit

the financial gain received by selling something for more than it cost to make

innovation

the process of developing newer, better things

supply

the amount of something that is available

demand

the quantity of a good that consumers want to purchase

opportunity cost

the benefit you give up by choosing to do one thing instead of another

scarcity

a limited amount of resources available

tax

an amount of money citizens and businesses are required to pay so that the government can function and provide services

excise tax

a tax that only applies to certain products, such as alcohol and tobacco

income tax

the tax you pay on profits you earned from various sources, such as your job

corporate income tax

a tax on profits made by corporations

progressive tax

the more income or profit a person or company has, the high tax rate they have to pay

Social Security

the basic retirement program run by the federal government

social security tax

a percentage of your earnings that gets put into the Social Security system

Medicare

the federal government’s health care system for people age 65 and over

property tax

taxes people pay on the land they own

estate tax

a tax the government collects when a person dies; often called “death taxes”

tariffs

taxes on goods that are imported to the U.S. from other countries

market economy

the type of economy in which most goods and services are offered by private companies

command economy

the type of economy in which the government owns and offers all the goods and services and decides what those goods and services will cost

mixed economy

a market economy in which the government owns some property, offers some kinds of goods and services, and makes some rules that affect how businesses can compete

monopoly

one company controls an entire industry without any competition

anti-trust laws

prohibit monopolies and other activity that reduces competition

Sherman Anti-Trust Act of 1890

prohibits companies from any activity “in restraint of trade,” meaning activity that reduces competition

Clayton Antitrust Act of 1914

gives the U.S. government the power to prevent companies from merging together if the merger will reduce competition

Federal Trade Commission

government agency created to carry out the powers in the Clayton Act

budget

a plan for spending

mandatory spending

spending that is required by law

discretionary spending

spending that Congress decides on each year

deficit spending

spending more money than is brought in

surplus

bringing in more money than spent

April 15

What day of the year are federal income tax returns generally due?

Private Property

Markets & Prices

Incentives/Self-Interest

Freedom of Choice

Competition

Limited Government Role

Name the six traits of a Market Economy