Fiscal policy: taxes, spending, deficits and the national debt

Grade 12 Social Studies Worksheet

Circle the best answer.

1. Read this first

   Federal receipts by source, fiscal year 2025

   Source	Billions of dollars
   Individual income taxes	2,656
   Social insurance and retirement receipts	1,748
   Corporation income taxes	452
   Customs duties	195
   Excise taxes	106
   Estate and gift taxes	29
   Miscellaneous receipts	48

   Note: U.S. Treasury, Monthly Treasury Statement, fiscal year 2025 (October 2024 to September 2025), in billions of dollars, retrieved Nov 14, 2026. Parts may not add to the total because of rounding. Social insurance receipts are payroll taxes for Social Security and Medicare and other retirement contributions. Total receipts were 5,235 and total outlays 7,010. Card B (same source, outlays for the year): Social Security 1,581; Medicare 997; net interest 970; national defense 917. Card C (IRS, tax year 2025, single filers, taxable income): 10 percent on income up to $11,925; 12 percent on income from $11,925 to $48,475; 22 percent on income from $48,475 to $103,350. Card D: Customs duties are taxes on imported goods.

2. 1.

   Bo compares total receipts with total outlays in the note. What does the gap show?

   • A deficit of about 1,775 billion, about 25 percent of outlays, met by borrowing
   • A deficit of 1,775 billion, which is the same thing as the national debt owed so far
   • A surplus of 1,775 billion, since outlays are the larger of the two totals for the year
   • A deficit equal to about 34 percent of outlays, since 1,775 is about a third of the 5,235 of receipts
3. 2.

   Esme compares card B's outlays. Which claim do the figures support best?

   • Net interest (970) exceeded national defense (917) but not Social Security plus Medicare
   • Interest costs rose because the government borrowed more, so defense must have been cut to pay for them
   • Net interest was larger than Social Security and Medicare together, since interest compounds on the debt
   • National defense (917 billion) was larger than net interest (970), the opposite of what many expect
4. 3.

   A single filer has taxable income of $60,000. Jun applies card C. Which statement is correct?

   • The tax is $13,200, because the whole $60,000 is taxed at the 22 percent rate
   • The tax is $8,114, and the next dollar is taxed at 12 percent, the rate on most of the income
   • The tax is $8,114, an average of 22 percent, because the top rate sets the average
   • The tax is about $8,114, an average of 13.5 percent, and the next dollar is taxed at 22 percent
5. 4.

   The filer's taxable income rises from $48,000 to $49,000. Kira asks how much more tax is due. Which answer is right?

   • $172.50: $475 is taxed at 12 percent and the other $525 at 22 percent
   • $120: the whole $1,000 is taxed at 12 percent, since the filer started in that band
   • $135: the raise is taxed at the average rate, 13.5 percent
   • $220: the whole $1,000 is taxed at 22 percent, since the raise ends in that band
6. 5.

   A friend says a raise can push you into a higher bracket so you take home less. Luz tests that with card C. What is the best reply?

   • False: the raise is untaxed until it reaches the next full bracket, so take-home pay is unchanged
   • False: only the dollars above the line get the higher rate, so take-home pay still rises
   • True: the tax on the raise is above 20 percent, which is more than the pay rise brings
   • True: a raise across the line moves your whole income to the higher rate, which cuts take-home pay

7. Price and quantity before and after a price rise (made up)

   Good	Price before	Price after	Quantity before	Quantity after
   Bag of salt	$2.00	$2.20	1,000	980
   Concert ticket	$40	$44	500	400

   Note: The goods are made up. Card A: Elasticity of demand by the midpoint rule: percent change in quantity divided by percent change in price, each measured against the average of the two values, ignoring sign. Below 1, demand is inelastic; above 1, elastic. Card B: Total spending on a good is price times quantity. Card C: A city adds a per-unit tax to each good so that the price buyers pay rises by the amount of the tax. Tax revenue is the tax per unit times the quantity bought after the tax. The first tax is $0.20 per bag of salt and $4 per concert ticket.

8. 6.

   Using card B, Noah compares total spending on each good before and after its price rise. Which statement is correct?

   • Spending fell on both goods, since people bought fewer bags and fewer tickets
   • Spending rose on both goods, since each price rose by about 9.5 percent
   • Spending on tickets rose because tickets sell for more per sale, even though fewer sold
   • Spending on salt rose (2,000 to 2,156) but spending on tickets fell (20,000 to 17,600)
9. 7.

   Ren sees salt's spending rise and tickets' fall. Which rule do the two rows illustrate?

   • When demand is inelastic a price rise raises spending; when it is elastic, it lowers spending
   • When demand is inelastic a price rise lowers spending; when elastic, it raises spending
   • A price rise lowers spending on a good, because less is bought at a higher price
   • A price rise leaves spending unchanged, since the loss in sales equals the gain in price
10. 8.

    The $4 ticket tax in card C is added to the price. Tala computes the revenue. Which statement is right?

    • Revenue is $17,600, which is the total spent on tickets after the price rise
    • Revenue is $1,800, since the tax applies to 450 tickets, the average of 500 and 400
    • Revenue is $1,600, not $2,000, because 100 fewer tickets are bought at the higher price
    • Revenue is $2,000, since the tax is $4 and 500 tickets were selling
11. 9.

    The first tax is $0.20 per bag of salt and $4 per ticket. Zee compares revenue from the two taxes. Which statement is right?

    • Salt raises more than the $1,600 from tickets, because its buyers cut back the least
    • Salt raises more, since ticket sales fell 20 percent and revenue falls with sales, to under $196
    • Tickets raise more ($1,600 against $196) even though ticket buyers cut back the most
    • They raise the same, about $196 each, since each tax is about 10 percent of the price
12. 10.

    A councillor says salt demand is inelastic, so taxing salt raises lots of money and costs buyers nothing. Ari checks. What is the best reply?

    • The claim is wrong: the ticket tax raises $1,600, more than the $196 from salt, so buyers lose more
    • The claim is right: inelastic demand means buyers do not notice a price rise of $0.20 a bag
    • Small revenue ($196) and buyers still pay 20 cents more per bag, so they bear the cost
    • The claim is right: salt sales fell just 2 percent, so the tax cost buyers about $20 a year