POSI Test 2 Study Guide-1

POSI Test 2 Study Guide-1 - Test 2 Study Guide Which party...

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Test 2 Study Guide - Which party tends to favor spending cuts and Tax Cuts as a method of budgetary control? -Republicans -Which party tends to favor Spending increases and Tax increases ? - Democrats, more money to spend on the budget - Why in the late 1990s did the United States experience budget surpluses? - Mild Tax Increases - Spending Cuts - Burgeoning tax revenues (tax cuts of the 80’s began to generate revenues) - What is the difference between the following: - Classical economic theory - Liaise Fair / Government has a limited role -The market is a self-adjusting mechanism - Keynesian economic theory - Government should play a bigger role, if you get in a spiral the, you cannot help yourself - Create a demand through spending and lower taxes (Creation of deficits to get out of recession) - Supply-side economics (Trickle Down Economics ) - Tax Incentives - Tax Cuts - Reduced government spending - Allows for greater productivity - Monetary economics - Control the money supply by increasing/decreasing interest rates (low rates = more borrowing) - fine-tuning the economy through regulation of the money supply (the fed does this) - Who is Adam Smith? - Wrote the Wealth of the Nations in 1776 (suggested govts’ role should be limited) - Who is the current chairman of the Fed? -Ben Bernake - What was TARP? - An $800 Billion dollar legislation to bailout Financial institutions -What role did Federal Reserve, Fannie Mae, and Freddie Mac play in the financial/housing crisis in 2008? - Made it too easy to get credit and loans higher than they could afford - What is the largest source of federal revenue? - Individual Income Taxes – 42% - Social Security Taxes – 40% - Which tax is the largest for most American taxpayers? - Social Security Taxes, because it is a flat rate up to 106K, where as the income tax is progressive
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- The top 50% of all taxpayers pay __97%__ of what the government takes in with regards to the income tax. - Know the difference between the following: - Progressive taxes – require high income groups to pay larger percentage of their income taxes than low-income groups - Flat taxes – taxes that require all income groups to pay the same percentage of their income in taxes - Be able to identify which taxes are progressive. Individual Income Taxes - What are some of the arguments given for a flat tax? Pros: - Simplicity – it will alleviate the 100,000 pages of rules and regulations - Universality – all income subject to the same tax rates – No Loopholes - Fairness – discourages initiative and enterprise Cons: - Interest groups lobby for tax breaks - Congress receives donations from these interest groups
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POSI Test 2 Study Guide-1 - Test 2 Study Guide Which party...

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