2. Taxes should be
 Simple, easy to understand and keep records of.
 Efficient, easy to pay and collect without wasting time.
 Certain, they should be clear when how much, and how it should be paid.
 Equal, no one has to pay too little or too much.
The different types of taxes are
 Excise tax, or sin tax, a tax on the sale and manufacture of goods such as
gasoline or alcohol
 Gift tax, a tax on something given to another person.
 Import tax, or tariff, a tax on foreign goods coming into the country
 Sales tax, a tax on goods
 Income tax, a tax on individuals and corporations
 Estate tax, a tax on some persons worth after they have died.

3.  Property tax, a tax on property such as a car, house or boat
Taxes can be any of the following
 Proportional, or flat tax, where you pay a constant percentage of your
income
 Progressive, where you pay more as your income increases
 Regressive, where you pay less as your income increases.

4. The Federal Reserve is made up of
 The board of governors, which makes decisions for the Fed
 12 district banks that are responsible for monitoring economic and
banking conditions in their region
 4,000 banks and 25,000 other institutions.
The functions of the Fed are
 To serve the government by
1. Acting as the governments banker
2. Selling, transferring, and redeeming government bonds
3. Issuing the national currency
 To serve the banks by
1. Clearing checks
2. Supervising lending practices and enforcing truth-in-lending laws

5.  To serve banks by
1. Lending banks money in a emergency
 To regulate the banking system by
1. Controlling reserves
2. Examining banks to make sure they are lawful
 To regulate the money supply by reducing or increasing reserve
requirements

6.  Sole proprietorship: business owned by one person
 sole = one
 partnership: business owned by two or more people
 partner(s) = two or more
 corporation: business owned by many people and acts as a legal
entity
 con = together
 -tion = state of
 (corporation is a business owned by many people who
work together and act in a state of a legal entity)

7. There are three different types of mergers
 Horizontal – Two or more companies in the same industry merging. Ex.
Verizon and Sprint
 Vertical – When two or more companies that are in similar businesses
join together. Ex. Shell and Mazda
 Conglomerate – When two or more companies that are very different in
the products or services they produce join together. Ex. McDonalds and
Petsmart

8. Business organization are put into three different categories
 Sole Proprietorships
1. Owned and operated by one person
2. Unlimited Liability
3. Has a relatively short lifespan, usually limited to that of the owner
4. Little government regulation
5. All profits go directly to the owner
6. Private funds are needed to start it, usually from the founders saving
account
 Partnership
1. Owned and operated by more than one person
2. Unlimited Liability between the partners
3. Relatively short lifespan
4. Little Government regulation
5. All profits go to the owners
6. Private funds needed to start it

9.  The last type of business organization is called a corporation
1. Owned and operated by many people
2. Limited Liability
3. Has a long lifespan
4. A great deal of government regulation
5. Profits are split up between all the members
6. It is relatively easy to obtain funds

10.  Countries try to take advantage of each others specialties
 Exports are goods sent to another county
 Imports are goods taken sent by another country
 A tariff is a tax on goods brought in from another country
 Countries often make free trade agreements to work with one another
without tariffs
 Free trade is the restriction of tariffs
 A trade surplus is when a country exports more than it imports
 A trade deficit is when a country imports more than it exports
 Comparative advantage is when countries specialize to increase
productivity
 Goods and services being supplied by someone outside the company is
called outsourcing.

11. There are four phases in the business cycle
 Expansion, where GDP rises and unemployment falls
 Peak, the height of the expansion and growth
 Contraction, economic decline with falling GDP and higher
unemployment
 Trough, where the economy bottoms out and won’t go any lower.
A contraction can be classified as one of the following:
 Recession, a period of economic contraction of at least 6 months
 Depression, a especially long and severe recession
 Stagflation, a rise in inflation with a decline in real GDP

12. The different types of unemployment are:
 Employed, actively working or temporarily on leave
 Unemployed, not actively working but looking for a job
 Not in labor force, where you neither have a job or are looking for one
Types of unemployment are:
 Frictional, where you are taking your time finding your job
 Seasonal, caused by a change in seasons
 Structural, caused by a mismatch between job openings and job seekers
such as
1. New Technology
2. New Resources
3. Changes in demand
4. Globalization
5. Education, or lack thereof

13. Other types of unemployment are:
 Cyclical, which follows the business cycle
 Full employment, when there s no cyclical unemployment