Macro Economics 18Th Edition Chptr 4

Front 1

1.What is the functional distribution of income?

Back 1

P73
indicates how the nations income is apportioned among wages, rents, interest and profits.

Front 2

2.What is the personal distribution of income?

Back 2

P73
indicates how the nations total income is divided among individual households.

Front 3

3.How do households statistically dispose of their incomes?

Back 3

P74
Personal consumption expenditures 86%
-durable goods-expected lives of 3 or more years 11%
-nondurable goods- live less than 3 years 29%
-Services-work done by lawyers, barbers, doctors, lodging
personnel 60%
Personal taxes 13%
Pesonal savings 1%

Front 4

4.What is the difference between a plant, a firm, and an industry?

Back 4

P75
Plant is a physical establishment, a factory, farm, mine, store or ware house
Firm- is an organization that employs resources to produce goods and services and operates one or more plants
Industry- is a group of firms that product the same, or similair products

Front 5

5.What is the difference between a sole proprietorship, a partnership, and a corporation?

Back 5

P75
sole- owned and operated by one person
partnership- two or more individuals agreee to own and operate a business together.
corporation- a legal creation that can acquire resources, own assets, produce and sell products. Is distinct and separate from the individual stock holders who own it.

Front 6

6.Which group constitutes the largest segment of firms? Which one accounts for the largest amount of sales?

Back 6

P76
1. Sole Proprietorships- 72%
2. Corporations 84%

Front 7

7.Why is the concept of "limited liability" important?

Back 7

Pg 76
Owner (stockholders) who risk only what they paid for their stock,

Front 8

8.Describe the "principle-agent problem".

Back 8

Pg 77
They represent the corporation and they have nothing at risk besides their salaries.

Front 9

9.What is the difference between be "private sector" and the "public sector"?

Back 9

pg 77

Front 10

10.Identify some of the major functions that governments provide in support of economic activities.

Back 10

Pg 78, 79, 81
Establishes the legal system, competition, redistribute income or taxes, reallocating resources, promoting stability,

Front 11

11.What is a monopoly?

Back 11

P78
A single firm that controls the entire industry.

Front 12

12.What is a transfer payment?

Back 12

P79

Front 13

13.What do economists mean by "market failures"?

Back 13

P79 1st column

Front 14

14.What is an externality?

Back 14

P79
occurs when some of the costs or benefits of a good are passed on to or "spill over to" someone other the the immediate buyer.

if water is polluted by an industry who pays for the doctor bills? The individual infected. This is an example.

P79 negative

P80 positive- imunizations

Front 15

15.What is the difference between a negative externality and a positive externality?

Back 15

q

Front 16

16.Identify two characteristics of private goods.

Back 16

P80

Front 17

17.Identify two characteristics of public goods

Back 17

P80

Front 18

18.Describe the "free-rider problem".

Back 18

P80

Front 19

19.What is a quasi-public good?

Back 19

P81
sort of done by the government but they still charge a fee.

Front 20

20.How do governments promote economic stability?

Back 20

P81-82
employment and inflation
constant level of employment.

Front 21

21.What new element is introduced into the circular flow of money when the public sector is included?

Back 21

Pg 83 chart

Front 22

22.What is Tax Freedom Day?

Back 22

p 2007 apr 30th

Front 23

23.What are the major expenditure categories of the federal government?

Back 23

Pg 85 Fig 4.8
Pension and income security 34%
Health 24%
National defense 21%
All other 12%
Interest and public debt 9%

Front 24

24.What are some of the major sources of revenue for the federal government?

Back 24

P85 Fig 4.8

Personal income tax 45%
Payroll Tax 34%
Corporate income tax 14%
all other 4%
excise tax 3%

Front 25

25.What is taxable income?

Back 25

P 85 1st column 2nd paragraph

Front 26

26.What is a progressive tax?

Back 26

P85
meaning that people with higher incomes pay larger percentage of their incomes as taxes than do people with lowwer incomes

Front 27

27.What is the difference between a marginal tax rate and an average tax rate?

Back 27

Pg 85
margnal- is the rate at which the tax is paid on each additional unit of taxable income.
average- is the total tax paid divided by total taxable income

Front 28

28.How do you sales taxes and excise taxes differ?

Back 28

p86-87
the difference between the two is mainly on of coverage. Sales tax fall on a wide range of products whereas excises are levied individually on small, select commodities.

Front 29

29.Identify the major sources of revenue and the major expenditures for state governments.

Back 29

P87-88
sales and excise 47%
State personal income tax 35%
corporate income tax-18%

education- 36%
public welfare-28%
health and hospitals 7%
highway maintenance and construction-7%
public safety-4%
other 18%

Front 30

30.Identify the major sources of revenue and the major expenditures for local governments.

Back 30

P88
Property tax 72%
sales and excise 16%
intergovernmental grants from Fed and state 12%


education 44%
welfare, health and hospitals 12%
public safety- 11%
housing, parks and sewarage 8%
streets and highways-4%

Front 31

31.What is the current financial status of the Social Security program? What are the financial projections for the program? What changes have been proposed for the Social Security program? Be prepared to express your views.

Back 31

pg 86-87 Last Word