1. What is a budget surplus and a budget deficit? A budget surplus is when extra money is left over in a budget after expenses are paid. A budget deficit occurs when the federal government spends more money that it collects in revenue. A budget surplus is more beneficial to a government.

2. How does the federal budget reflect U.S. economic goals? Two of a government’s primary functions are to protect the nation’s economy and provide assistance and economic security. The ways the federal government collects and spends money reflect many economic goals.

3. What roles do the executive and legislative branches play in creating U.S. spending policies? The executive and legislative branches share in the responsibility of preparing the budget, though Congress has more budgetary power. Each federal agency and department draws up spending plans. Then the president sends the budget proposal to Congress. Congress takes the president’s proposals and makes final budget decisions; Congress must approve all federal spending. Executive branch officials manage the money their departments have been given. Congress has oversight on executive spending.

4. What are the major expenditures of the federal government? Major expenditures for the federal government include: interest payments on the national debt; direct benefits such as Social Security, pensions, Medicare, Medicaid, and veterans’ benefits; entitlement programs such as Social Security; national defense spending; discretionary spending including grants to states and localities.

5. What is the difference between progressive taxes and regressive taxes? A progressive tax requires people with higher incomes to pay a larger share of their income in taxes than people with lower incomes. A regressive tax requires people with lower incomes to pay a larger share of their income in taxes than people with higher incomes.

6. What are the U.S. government’s main sources of revenue? Income taxes, excise taxes, tariffs, duties and fees, and surplus income from the Federal Reserve.

7. What determines who should pay income taxes and how much they should pay? Only people who earn an income or receive money from certain sources (such as investments or lottery winnings) are required to pay income and social security taxes. Income and social insurance tax rates are determined as a percentage of a taxpayer’s income. For-profit corporations are also required to pay taxes on their profits, or income remaining after expenses and deductions.

8. How does the national debt impact the U.S. economy? When the government spends more than it collects in revenue, it results in a budget deficit, which in turn causes the government to borrow money to cover the deficit. Years of spending, budget deficits, and borrowing have created a huge national debt, which affect the nation’s economy; Congress has repeatedly raised the debt ceiling and the government has shut down several times due to lack of funds.

9. What are economic indicators and how do they influence government actions? Economic indicators are markets, scales, reports, or figures that give information about how different areas of the economy are performing. Government officials study economic indicators to get a sense of how healthy the overall economy is. If one or more economic indicators vary from what is expected, the government might take action to try to change the economic conditions.

10. How much influence does the government have over the nation’s economy? The government has the power to influence the nation’s economy in many ways, including what programs money is spent on, to how revenue is raised and taxes are assessed, to how much debt is carried, and how much money and credit is available to borrowers. The government can vary its spending and how much it will collect through taxes and borrowing.

11. What role does the Federal Reserve play in the U.S. economy? The Fed sends money to the nation’s largest banks and controls the interest rates on these loans.

12. How do fiscal and monetary policies affect the U.S. economy? Government policies and actions influence interest rates, taxes, programs, demand for goods and services, business growth, employment levels, foreign investment in the US economy, and Federal Reserve actions including raising or lowering interest rates, encouraging or hindering business growth and resulting employment rates, the amount of money circulating in the economy, prices, and inflation.

13. Why do state government officials often prefer block grants over other types of federal aid? Because the federal government imposes fewer guidelines on block grants, and state officials have more of a choice in how the grant money can be spent.

14. What is the difference between personal property and real property? Personal property includes things such as: car, laptop, jewelry, motorcycle, lawn equipment, tv, clothes, etc… Real property includes things such as: house, apartment building, vacant lot, farm, factory, etc…

15. What are state governments’ main sources of revenue? Texas? A state governments main source of revenue come from income taxes and sales taxes, federal grants, and mandates, and bond sales. Texas gets most of its revenue from sales tax. Texas does not have a state income tax.

16. What are local governments’ main sources of revenue? Local governments get most of their revenue from property taxes, income taxes, sales taxes, fines and fees, municipal bonds, and grants from the state or federal government.

17. How do limits on taxes and expenditures influence the economy at state and local levels? Some taxpayers believe limiting taxes will help the economy by leaving more money in the private sector. Others oppose tax limits, believing it is more important to have adequate funds for government programs.