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The Government Gets Involved

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| 5.5.3 Test (TS): The Government Gets Involved | Test | | | | | U.S. and Global Economics | | | Points possible: 50 | Due date: | Date: ____________ | |

1. Define each of the terms in the table below. (10 points) Term | Definition | Excise tax | Tax on a personal good like a cigarette. | Income tax | Tax on one’s income, normally on a graduated scale with an ability to pay theme. | Tax breaks | Any cost reduction for an individual or company that reduces the amount of money paid in taxes | Regressive taxation | Taxing the poor more. | Ability-to-pay principle | Those who earn more have more expendable income generally, and so have a greater ability to pay more than someone of low income. |
2. Define a tariff and describe the purpose of two of these types of tariffs: retaliatory, revenue, or protective. (7 points)
Description: A tax on imported goods, set in place by the government of the country importing.

Purpose: Retaliatory:
A tariff which is used as a way of bartering or forcing another country into doing something.
Purpose: Protective:
A tariff set in place so that the global market doesn’t undercut the country’s local products to a significant margin.

3. List in their correct order the four steps involved in creating the federal budget. (10 points) 1. Each federal agency sends the president a budget request

2. The president drafts a budget which is sent to congress

3. Congress scrutinizes and revises the budget, and sends it back to the president

4. The president signs off on the budget, and it’s put into place

4. Define merit goods and describe how they are similar to and different from public goods. (7 points)
Definition of merit goods:
Goods which the government thinks should be given free, and so they’re not on an ability to pay type system.

Similarities with public goods:
Public goods

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