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Econ Ch. 16


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demand in which buyers are completely unresponsive to changes in price
perfectly inelastic demand
the differenc between federal gov't spending and federal gov't tax revenue in any one year
budget deficit
the difference between federal gov't tax revenue and fedral gov't spending in any one year
budget surplus
the total amount of money owed by the federal gov't. it represents the accumulation of all funds borrowed by the federal gov't that have not yet been repaid
national debt
a tax applied to the purchase of a specific good or service
excise tax
supply in which producers are completely unresponsive to changes in price
perfectly inelastic supply
income, earnings, sales, property, or other valued item that has a tax rate applied to it. in the case of the personal income tax, the tax base is incremental income
tax base
an amount of money that can be deducted from household income before tax rates are applied
a fixed amount of income that taxpayers can deduct from their taxable income when calculating their personal income taxes, if other deductions are not claimed
standard deduction
an amount of money by which the amount of income taxes payable to the gov't can be directly reduced. A person or business must meet certain criteria to be eligible for the credit
tax credit
gov't bonds and treasury bills
gov't securities
the percentage of the tax base that must be piad to the gov't as tax
tax rate
a tax on an imported good
a federal tax credit for eligible low-income working individuals and families
earned income tax credit (EITC)
a refund is available even if an income-earner does not pay taxes, as long as he or she files a tax form
taxes based on earnings from work and usually deducted directly from the paycheck
payroll taxes
a tax that takes a greater percentage of income from high-income people that from low-income people
progressive tax
a tax that takes the same percentage of income from people of all income levels
proportional tax
a tax that takes a greater percentage of income from low-income people than from high-income people
regressive tax
the impact of the tax that is felt by producers and consumers. consumers bear the burden in the form of higher prices paid for the product; producers bear the burden in the form of lower profits
burden of the tax
the percentage of borrowed funds that must be paid to the lender (or investor) for the privilege of using the funds
interest rate
money that is borrowed and lent
loanable funds
a situation in which gov't spending, financed by borrowing, causes interest rates to rise, which results in less spending by the private economy
crowding out

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