Microeconomics Ch 15

A marginal tax rate is

the tax rate paid on a worker's next dollar of income.

Why do wealthy citizens contribute much higher tax revenues to the government than poor citizens?

Wealthy citizens have much more taxable income than poor citizens.

Should we be concerned about a growing federal debt?

Yes, because a large federal debt may slow the rate of economic growth in the future.

A budget is

a plan for spending and earning money

________ outlays comprise government spending that is determined by ongoing government programs like Social Security and Medicare.

Mandatory

Are demographics an important factor when planning the federal budget?

Yes, because many government benefits are received by the fast-growing elderly population, causing implications for future levels of taxation and government benefits for everyone.

In recent years, the growth in foreign-owned debt has

helped the U.S. economy by keeping the supply of loanable funds higher than it would be otherwise.

Budget deficits tend to

increase during recessions.

Budget deficits tend to

increase during wars.

The largest source of tax revenue for the government is ________ taxes.

individual income

The primary source of revenue for the federal government is

individual income taxes.

Which of the following is considered discretionary government spending?

payments to government employees

Which of the following is considered mandatory government spending?

payments to social security recipients

Social Security and Medicare are funded by the collection of ________ taxes.

payroll

Mandatory outlays

require changes in existing laws if those outlays are to be altered.

The United States has a ________ income tax system.

progressive

Which of the following might be a good reason for running a budget deficit?

A budget deficit allows for consumption to be more evenly distributed over time, which can be helpful during times of recession.

Transfer payments refer to funds that are transferred from one group in society to another group,

and these payments represent a growing share of U.S. federal outlays.

Why is foreign government ownership of U.S. debt NOT currently a huge concern among many economists?

The amount of debt held by foreigners is substantially less than the money the United States owes itself.

Discretionary spending is a shrinking part of the federal budget. What is a possible consequence to this development?

There will be more competition for public works and infrastructure projects.

Why are interest payments considered mandatory spending in the federal budget?

They are considered mandatory spending because not making such payments could endanger the government's credit rating, which could make it harder to borrow going forward.

________ are payments made to groups or individuals when no good or service is received in return.

Transfer payments

A progressive income tax system is one in which

income tax rates increase as earned income increases.

The majority of federal spending is comprised of ________ outlays.

mandatory

The largest portion of the federal budget is dedicated to

mandatory outlays

The most relevant tax rate for making decisions about earning additional income is the ________ tax rate.

marginal

If policymakers are concerned about the unequal distribution of income within society, then they should prefer a ________ tax system.

progressive income

The U.S. government could reduce its budget deficit by

raising the eligible retirement age to receive Social Security benefits.

Why is a budget deficit not necessarily a bad thing?

Deficits may allow for tax rate stability during recessions.

________ outlays comprise spending that can be altered when the government is setting its annual budget.

Discretionary

Why is a budget surplus not necessarily a good thing?

It means tax rates may be too high.

Which of the following is an example of discretionary spending?

credit card bill

Which federal budget category's portion of total government outlays has decreased since 1960?

defense

Mandatory outlays are different than discretionary outlays because

discretionary outlays can be changed during the annual budget process, whereas mandatory outlays cannot

Mandatory outlays are sometimes referred to as ________ programs.

entitlement

The part of the government budget that includes both spending and transfer payments is known as ________ outlays.

government

A U.S. federal government budget deficit occurs when

government outlays exceed revenue.

A U.S. federal government budget surplus occurs when

government revenue exceeds outlays.

Reforming entitlement programs is difficult because

reforms require changes to existing law, which takes time.

Which of the following is NOT a revenue source for the U.S. federal government?

sales tax

Discretionary government spending includes payments made for

the Department of Education.

The U.S. national debt is purchased by entities in the form of

treasury securities