Types of Taxes
• Proportional Tax: Same % rate of tax on
everyone, regardless of income (Social
Security)
• Progressive Tax: Higher % rate of tax on
persons with higher incomes (Personal income
tax)
• Regressive Tax: Higher % rate of tax on people
with lower incomes (Sales tax)
Examples of Taxes
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Taxes
Income
Taxes Paid
% of Income
Proportional Tax-aka Flat Tax
1
$10,000
2
$50,000
3
$100,000
$1,000
$5,000
$10,000
10%
10%
10%
Regressive Tax
1
2
3
$10,000
$50,000
$100,000
$500
$2,000
$3,000
5%
4%
3%
Progressive Tax
1
2
3
$10,000
$50,000
$100,000
$300
$2,000
$5,000
3%
4%
5%
Just For Fun
1. The town of Mableton charges a tax of 1.2%
of household income for each property. This
is a ____________ tax.
2. Both millionaires and poor people pay a 6%
sales tax when they go shopping. This is a
__________ tax.
3. People who make $100,000 pay a higher % of
income tax than people who make $10,000.
This is a __________ tax.
Exchange Rates
Exchange rate – the price of one
nation’s _________ (money) in terms
of another nation’s _________.
Exchange Rate
• Chart of Exchange Rates for the American
Dollar (as of October 2007)
Value of $1 U.S. (in foreign
country)
Canadian Dollar
0.97
Mexican Peso
10.84
Japanese Yen
113.94
Euro
0.70
http://www.xe.com/ucc/convert.cgi?Amount=
1&From=USD&To=EUR&x=39&y=15
Exchange Rates
• Dollar (Appreciated)
– When ____________
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_______ increase and are cheaper for us to buy
Traveling is ________ for U.S. tourists
U.S. _________ decline
The trade deficit increases
Exchange Rates
• Dollar (Depreciation)
– When _______________
• _________ increase and the prices of exports go up
• Travel abroad is more expensive
• U.S. _________ decline and _______ of importing
increase
Using Credit
• Simple Interest – you are charged interest ONLY on the original amount of
the loan.
First year:
$1,000
(10% interest rate)
+ (1,000 * .10)
--------------------1,000 + 100
=
$1,100
Second year:
$1,000
+ (1,000 * .10)
+ (1,000 * .10)
------------------------------------1,000 + 100 + 100
=
$1,200
Compound Interest
• Most credit card companies, however, use
compound interest
• Compound Interest – interest is charged not
only on the original amount you borrowed,
but on the existing amount you owe (so
INTEREST on-top-of INTEREST as well)
Compound Interest
First year:
$1,000
+ (1,000 * .10)
--------------------1,000 + 100
=
$1,100
Second Year:
$1,100
+ (1,100 * .10)
----------------------1,100 + 110
=
$1,210
Simple vs. Compound
(Interest on $1,000 borrowed)
Years Passed
Simple Interest
Compound Interest
1
100 (1,100)
100
(1,100)
2
100 (1,200)
110
(1,210)
3
100 (1,300)
121
(1,331)
5
100 (1,500)
279.51 (1,610.51)
10
100 (2,000)
983.23 (2,593.74)
15
100 (2,500)
1583.51 (4,177.25)
Pg. 102
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Certificate of Deposit (CDs)
Savings Bond
Mutual Fund
Stocks