Economics 42505 www.msu.edumilewsk6

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Economics 4/25/05www.msu.edu/milewsk6

• OBJECTIVE Examine the role of taxes.
• I. Journal 35 pt.A
• -Read Win-win program for docs, patients 1E-2E
• -Read Hybrid car sales rose 81 in 2004 1E-5E
• -What are the advantages to the new Blue Cross
  program?
• -How has Ford other American cars faired in
  the growing hybrid market?
• II. Journal 35 pt.B
• -notes on taxes
• III. Homework due Friday 4/29/05
• 1.) Read Chapter 7 section 3 p.178-183
• -Answer questions (3-6) p.183
• 2.) Read Chapter 9 section1 p.222-229
• -Answer questions (3-6) p.229
• 3.) Chapter 79 Review

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Homework due Friday 4/29/05

• 1.) Read Chapter 7 section 3 p.178-183
• -Answer questions (3-6) p.183
• 2.) Read Chapter 9 section1 p.222-229
• -Answer questions (3-6) p.229
• 3.) Chapter 79 Review
• Notice Chapter7 9 Test Thursday
• -Chapter7 sections (1-3) Chapter9 sections
  (14)

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Taxes?

• Read Cover Story p.223
• May 3rd Tax Freedom Day
• In 2001 federal, state, and local governments
  collected around 3.3 trillion in taxes
• That was about 11,800 for every man, woman, and
  child in the nation!
• Adjusted for population growth and inflation,
  taxes have risen 800 since 1940!

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What does the govt do with all the money?

• They spend it. Actually they spend more than is
  collected, so the govt is technically broke.
• The govt spends money in the following ways
• 1.) Consumer of goods and services (tanks,
  planes, office buildings, labor) These are
  consumed in the production of govt services. The
  more the govt supplies (education, military,
  transportation) the more it consumes.
• 2.) Transfer payments (social security, welfare,
  unemployment)

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Economics 4/26/05www.msu.edu/milewsk6

• OBJECTIVEExamine current tax structures
  reforms.
• I. Journal 36 pt.A
• -Read Business Week Newsclip p.243
• -Answer questions (1-2) p.243
• II. Journal 36 pt.B
• -notes on tax reforms
• III. Chapter 7 9 Review
• VI. Homework due Friday 4/29/05
• 1.) Read Chapter 7 section 3 p.178-183
• -Answer questions (3-6) p.183
• 2.) Read Chapter 9 section1 p.222-229
• -Answer questions (3-6) p.229
• 3.) Chapter 79 Review

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Current Tax Structure

• Progressive tax the more you make, the more
  they take. This is how the Federal Government
  collects income taxes
• Proportional tax everyone pays the same amount
  regardless of income. (City of Detroit income
  taxes)
• Regressive tax imposes a higher percentage rate
  of taxes on people with lower incomes (state
  sales tax)

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Republican Revolution

• In 1981 Ronald Regan began to enact his campaign
  pledge of lowering taxes.
• The Economic Recovery Act lowered taxes on
  individuals and businesses
• It lowered the number of tax brackets and capped
  personal income taxes
• It also created a business tax credit that
  encouraged businesses to invest in new equipment.

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Tax Reforms in 1986 1993

• By the mid-1980s the notion that the new tax
  laws favored the rich was challenged.
• Congress It raised taxes on the wealthiest
  Americans and made it difficult for individuals
  to avoid paying taxes all together.
• The alternative minimum tax personal income tax
  rate that made everyone have to pay at least 20
  regardless of tax loopholes.

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VAT Tax

• Value Added Tax taxing producers at each step
  of a manufacturing process.
• Figure 9.10 p.248
• The U.S. doesnt have a VAT tax
• Advantages easy to collect, hard for firms to
  avoid paying the tax, and it spreads out the tax
  burden. (could cause people to save money)
• Disadvantages it is invisible to consumers and
  it is like adding a Federal Tax to a state sales
  taxes already in place

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Flat Tax

• A proportional tax on individual income.
• Advantages simplicity, closes tax loopholes,
  and reduces the need for most of the IRS.
• Disadvantages removes the incentives to own
  your own home, attend college, and donating to
  charities. The rich will benefit the most from
  this proposal.

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Economics 4/27/05www.msu.edu/milewsk6

• OBJECTIVE Review for Chapter7- Market
  Structures Chapter9- Taxes.
• I. Mindjogger
• -video quiz on Chapter7
• II. Chapter 7 9 Review
• III. Homework due Friday 4/29/05
• 1.) Read Chapter 7 section 3 p.178-183
• -Answer questions (3-6) p.183
• 2.) Read Chapter 9 section1 p.222-229
• -Answer questions (3-6) p.229
• 3.) Chapter 79 Review
• REMINDER Chapter7 9 Test Tomorrow!!!
• -Ch7 sec(1-3) and Ch9 (14)

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Essays

• 1. Making Comparisons How do competition, product
  variety, and price vary between monopolistic
  competitors and a monopoly?
• 2. Evaluating Information What are three
  advantages and two disadvantages of implementing
  a value added tax (VAT)?

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Economics 4/28/05www.msu.edu/milewsk6

• OBJECTIVE Demonstrate mastery of Chapter7-
  Market Structures Chapter9- Taxes.
• I. Chapter 7 9 Test
• II. Homework due tomorrow!
• 1.) Read Chapter 7 section 3 p.178-183
• -Answer questions (3-6) p.183
• 2.) Read Chapter 9 section1 p.222-229
• -Answer questions (3-6) p.229
• 3.) Chapter 79 Review

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Economics 4/29/05www.msu.edu/milewsk6

• OBJECTIVE Examine where money comes from.
• I. Journal 37 pt. A
• -Read Profiles in Economics p.291
• -Answer question 1 p.291
• II. Journal 37 pt. B
• -notes on money
• III. Homework due next week
• 1.) Read Chapter 11 section1 p.284-290
• -Answer questions (3-6) p.290
• 2.) Read Chapter 11 section2 p.292-298
• -Answer questions (3-6) p.298

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Next Week

• Monday- 5/2/05 Journal38
• Tuesday- 5/3/05
• Wednesday- 5/4/05 Journals Due
• Thursday- 5/5/05 Homework Due
• Friday- 5/6/05 Progress Reports End

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In the beginning

• People traded stuff for other stuff. It was
  good, but it was inconvenient to carry around a
  bunch of heavy stuff hoping that the person you
  wanted to trade with would trade with you.
• This was the barter economy.

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A new medium of exchange

• Something accepted by all parties as payment for
  goods and services
• It included Gold, Silver, and even Salt (these
  are commodities)
• For something to serve as money it MUST have value

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Now we use

• Fiat money money by government decree. It is
  money because the government says it is.