Taxation
This principle says people with higher income should pay more in taxes.
ability-to-pay tax principle
This is a yearly plan for government spending and revenue.
government budget
The maximum amount of output an economy can produce over the long run is called this.
potential output
This describes anything that serves as a medium of exchange, unit of account, and store of value.
money
This is the limit on how much money the federal government is legally allowed to borrow.
debt ceiling
This tax principle says people who get more from a government program should pay more for it.
benefits-received tax principle
These taxes are taken from workers’ paychecks to fund Social Security and Medicare.
payroll taxes
Before the Great Depression, this was the U.S. policy of matching annual spending with annual revenue.
balanced budget
Money is most important for serving this role—allowing people to pay for goods and services.
medium of exchange
This is the U.S. central bank, which supervises banks and makes monetary policy.
In this type of taxation, everyone pays the same percentage of their income, regardless of earnings.
proportional taxation
This government has the largest share of spending going to public welfare, hospitals, and health.
state government
This policy involves Congress or the president deliberately changing spending or taxes to influence the economy.
discretionary fiscal policy
Gold is an example of this type of money, which also has value as a commodity.
commodity money
This economist believed government should help economies out of recessions by spending more or cutting taxes.
John Maynard Keynes
In this system, the percentage of income paid in taxes increases as income rises.
progressive taxation
For this government, the largest share of spending is on education.
local government
These are programs that automatically adjust with the ups and downs of the economy, like unemployment benefits.
automatic stabilizers
This type of money has no value by itself and cannot be exchanged for gold or silver; it is money because the government declares it so.
fiat money
This is the percentage of each additional dollar of income that goes to taxes.
marginal tax rate
This type of taxation takes a larger share of income from lower-income earners than from higher-income earners.
regressive taxation
This occurs when the government spends more money than it collects in revenue.
federal budget deficit
This theory says that changes in government spending or taxing cause a larger change in overall demand.
multiplier effect
This term describes bank notes that could once be exchanged for gold or silver.
representative money
In this banking system, banks keep only part of deposits in reserve.
fractional reserve banking system