Unit 4, Activity 1, Domestic Policy Vocabulary Word + - Example Definition domestic policy revenue expenditures taxation benefits received principle ability to pay principle progressive tax proportional tax regressive tax budget surplus budget deficit deficit spending national debt social welfare programs Social Security Medicare Medicaid Supplemental Security Income (SSI) Temporary Assistance for Needy Families welfare Income redistribution Blackline Masters, Civics Page 4-1
Unit 4, Activity 1, Domestic Policy Vocabulary government bonds user fees inflation deflation monetary policy loose monetary policy tight monetary policy fiscal policy reserve banks member banks fractional reserve banking reserve requirements public goods merit goods demerit goods public works projects Blackline Masters, Civics Page 4-2
Unit 4, Activity 2, Sources of Revenue Sources of Revenue Ways to collect revenue Description Example Taxation Sum of money demanded by a government to pay for services Income tax User Fees Selling government bonds Government fines Blackline Masters, Civics Page 4-3
Unit 4, Activity 3, Types of Taxation Type of Revenue tariffs (custom duties) sales tax Description Taxes on imported goods Types of Taxation Level of Government Federal Incidence (how collected) At customs paid by importer Example 5% tariff on tires from China income tax excise tax property tax value added tax pay roll tax estate tax severance tax inheritance tax FICA-Federal Insurance Contributions Act gift tax sin tax Blackline Masters, Civics Page 4-4
Unit 4, Activity 4, Expenditure Categories Social Security is the largest single expenditure category and provides income for the old and the sick. Medicare is the fourth largest expenditure category and provides health care for the elderly. Income Security includes pension payments to retired federal employees and government assistance to poor American families. Health includes Medicaid which provides health care for the poorest American families and funding for medical research. National Defense is the second largest expenditure category and maintains the United States army, navy, air force, and coast guard. Interest on Debt includes payments made on the interest from the national debt. Other Expenditures include spending for education, highways, and natural resources. Blackline Masters, Civics Page 4-5
Unit 4, Activity 7, Policy Decisions Policy Decisions Anticipation Guide Instructions: Using your prior knowledge of the impact that changes in fiscal and monetary policy have on the United States economy, distinguish the following statements as either being true or false by circling a T for true and F for false. Be prepared to discuss and defend your answers. 1. Reducing taxes stimulates growth in the economy. T or F 2. Building bridges, dams, and roads is a function of monetary policy. T or F 3. Unemployment benefits and government assistance to needy families do not stimulate growth in the economy. T or F 4. Raising the discount interest rate makes credit easier to obtain and increases the supply of money. T or F 5. Reducing reserve requirements increases inflation. T or F As you discuss the impact of fiscal and monetary policy on the United States, review your responses and explain any changes you make. If you make changes, state what caused your position to change below. 1. 2. 3. 4. 5. Blackline Masters, Civics Page 4-6
Unit 4, Activity 7, Effects of Policy Decisions Monetary Policy Fiscal Policy Policy change Impact Policy change Impact Reducing interest rates Increasing reserve requirements Reduces cost of credit, increases economic activity, increases the money supply, and leads to inflation Increasing spending on public work projects Increasing taxes on demerit goods such as tobacco Reduces unemployment, long- term economic growth, and may lead to increase in taxes if deficit spending is occurring Raising interest rates Giving all citizen a $1000 tax rebate Decreasing reserve requirements Canceling the production of a major military project such as the M-1Abrams Tank Blackline Masters, Civics Page 4-7