Fiscal Policy
What is the main goal of fiscal policy?
To influence the economy through government spending and taxation.
What is the role of businesses in the U.S. economy?
To produce goods and services for consumers.
What legal protections does the government provide for property owners?
Property rights and contract enforcement.
What do taxes help pay for?
Public goods and services like roads, schools, and defense.
What kind of tax is taken directly from your paycheck?
Income tax.
Which government body controls monetary policy in the U.S.?
The Federal Reserve
What is the function of nonprofit organizations in the economy?
They provide services without seeking profit.
Why does the government enforce contracts?
To ensure fair and reliable business transactions.
What is the difference between a fee and a tax?
A tax is mandatory; a fee is usually tied to a specific service (like a park entrance).
What type of tax is added to the price of most goods?
Sales tax.
What tool does the Fed use to lower interest rates during a recession?
Lowering the discount rate or buying government bonds (open market operations).
How do financial institutions contribute to the economy?
By lending money, facilitating investments, and supporting economic growth.
Give one example of government regulation in the market.
Minimum wage laws, environmental regulations, or safety standards.
What is a progressive tax system?
A system where higher incomes are taxed at higher rates.
Which level of government collects property tax?
Local government.
If the government wants to slow inflation, what fiscal action might it take?
Decrease government spending or increase taxes.
What does the Federal Reserve do?
It regulates the money supply and stabilizes the financial system.
How do government regulations impact businesses?
They can increase costs but also protect consumers and the environment.
What does the government use income taxes to fund?
Public services like education, defense, infrastructure, and welfare.
What is the purpose of excise taxes?
To reduce use of specific goods, like tobacco or alcohol, or fund related services.
How do monetary and fiscal policies each influence employment levels?
They aim to stimulate or slow economic activity, which in turn affects job creation.
How do labor unions impact the economy?
They negotiate for better wages and working conditions, which can influence labor markets and costs.
What happens when the government does not enforce property rights?
It can lead to reduced investment and economic instability.
How do local taxes differ from federal taxes?
Local taxes fund community services; federal taxes fund national programs.
Name one way federal tax money is used.
Social Security, national defense, infrastructure, etc.