Vocab
What is a bank?
A bank is a financial institution that stores and lends money.
Why do banks charge interest to their customers?
Banks need to charge interest in order to make money. Banks must make a profit to stay in business.
Why is it important for governments to collect taxes?
Governments collect taxes in order to fund necessary programs and ensure that citizens contribute appropriately to meeting needs in their society. Taxes affect the way resources are used, consumer behavior, and people’s desire to save, invest, and work.
What is interest?
Interest is a fee in exchange for borrowing money.
What was the first central bank in the U.S.?
The Federal Reserve
Corporations are taxed twice; what exactly does the government tax them on?
Ex: Individuals are taxed on their income earned from their jobs.
1. Profits
2. Dividends
What is a tax shelter?
A tax shelter is a vehicle used by an individual or organization to decrease their taxable income and, therefore, their tax liabilities. Legal tax shelters range from investment accounts that provide favorable tax treatment to activities that lower taxable income through deductions or credits.
How many Federal Reserve districts are there in the U.S.?
*Double points if you can name the district we are in!*
12
New York
What is the difference between a progressive and a regressive tax rate?
A progressive tax charges individuals with higher incomes a higher percentage of their total income
A regressive tax charges individuals with high incomes a lower percentage of their total income
When do banks earn interest, and when do they pay interest?
Earn
Banks gain interest on repaid loans, helping the bank earn a profit.
Banks return profits to their investors and stockholders.
Pay
Banks pay interest to customers who store their money in the bank.
Customers can earn interest through savings accounts (low interest) and certificates of deposit (CDs) (high interest).
What is the difference between monetary and fiscal policy?
Monetary policy refers to the actions of central banks, including the Federal Reserve, to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth.
Fiscal policy refers to the tax and spending policies of a national government.
List 3 responsibilities of the Fed.
Creating policies within the economic system
Managing a nation’s currency and money supply
Serving as the bank for banks
Regulating and supervising the banking industry
Carrying Out Consumer Laws
Maintaining Currency
Government Financial Services
When is Contractionary and Expansionary monetary policy used by the Fed?
Contractionary monetary policies are used when inflation becomes a concern as the economy gets overheated. (Slow down the economy)
Expansionary monetary policies are used to help spur growth when there's a recession or slowdown. (Heat up the economy)