1. Aim: Review US tax and banking systems Do Now: V.Finkelshteyn Staten Island Tech HS – Economics Lesson 51 What makes a $100 bill worth $100? A $100 bill is an example of fiat money and it has worth because the government has declared that it does. It works as money because it is durable, portable, divisible, uniform, scarce, and accepted by all

2. Matching Terms 1.Regressive tax 2.Proportional tax 3.Individual income tax 4.Deductions 5.Withholding 6.Commodity money 7.Federal Reserve System 8.Fiat money 9.Interest 10.Principal 11.Representative money 12.Default A.Failure to pay back a loan B.Objects that have value because the holder can exchange them for something else of value C.A tax for which the percentage of income paid in taxes decreases as income increases D.Variable amounts that you can subtract from your gross income E.The central banking system of the United States F.A tax for which the percentage of income paid in taxes remains the same for all income levels G.Taking tax payments out of an employee’s pay before he/she receives it H.The amount of money borrowed I.A tax on the amount of money a person earns J.The price paid for the use of borrowed money K.Objects that have value in themselves and that are also used as money L.Money that has value because the government has ordered that it is an acceptable means of payment

3. Start of YrPrincipal $Interest 5%End of Yr $ -1005105 1 5.25110.25 2 5.51115.76 3 5.79121.55 4 6.08127.63 5 6.388134.01 6 6.70140.71 7 7.04147.75 8 7.39155.14 9 7.76162.90 10162.908.14171.04 11171.048.55179.59 12179.598.98188.57 Compound Interest on savings

4. Questions: Questions: 1. After 12 years, how much money would the $100.00 be worth? 2. Explain the concept of compound interest. 3. If you added $50.00 to this account every year, what effect would it have on the interest rate that you earned? 4. After ten years, how much would the $100.00 be worth? 5. If you took your money out of this account 6 months into year 2, would you receive $115.76? Why or why not? 6. If you added another $100.00 to this account every year, what effect would it have on the interest rate that you earned? 7. How much would you have in this account at the end of the first year if you had originally deposited $1,000.00?

5. Give one example of each of the following: 1.Barter system 2.Money used as a unit of account 3.Representative money 4.Fiat money 5.Withholding 6.Deductible 7.Progressive tax 8.M1 money

6. Practice questions about banking: 1.What is the purpose of the Federal Deposit Insurance Corporation (FDIC)? 2.What did the Federalists believe about banking? 3.What was true about currency during the Free Banking Era? 4.What is mortgage used to purchase? 5.What are liquid assets? 6.What conditions is necessary for a fiat money system to work? 7.Who pays providers for purchases bought with a credit card? 8.What is the largest source of income for banks?

7. Practice questions about tax: 1.What do taxes collected under Federal Insurance Contribution Act fund? 2.Who generally bears most of a sales tax when the demand for the good taxed is inelastic? 3.What do SS taxes pay for? 4.What are the reasons federal government collects income taxes? 5.What is the major source of tax revenue for local governments? 6.What is the major source of tax revenue for state and federal governments? 7.What is the difference between progressive and regressive tax?