Question 1

The argument that individuals should pay taxes according to how much they can afford is called the

Accepted Answer

A) benefits principle. 
B) equity principle. 
C) ability-to-pay principle. 
D) proportional principle. 
E) egalitarian principle. 
A) benefits principle. 
B) equity principle. 
C) ability-to-pay principle. 
D) proportional principle. 
E) egalitarian principle.

Question 2

Why would the widespread splitting apart of families increase the income inequality in a nation?

Accepted Answer

As families split up, family i

Question 3

Which of the following is not true about the personal income tax?

Accepted Answer

A) It reduces the number of individuals working. 
B) It reduces the amount of labor demanded. 
C) It shifts the labor demand curve. 
D) It reduces the supply of labor. 
E) It drives up wages. 
A) It reduces the number of individuals working. 
B) It reduces the amount of labor demanded. 
C) It shifts the labor demand curve. 
D) It reduces the supply of labor. 
E) It drives up wages.

Question 4

Give two examples of means-tested programs and two examples of social insurance programs.

Accepted Answer

Examples of means-tested progr

Question 5

If the average tax rate rises as income rises, the tax is called a

Accepted Answer

A) proportional tax. 
B) regressive tax. 
C) flat tax. 
D) progressive tax. 
E) sales tax. 
A) proportional tax. 
B) regressive tax. 
C) flat tax. 
D) progressive tax. 
E) sales tax.

Question 6

Under the income tax system in the United States, the portion of personal income that can be taxed is called

Accepted Answer

A) net income. 
B) allowable income. 
C) personal income. 
D) taxable income. 
E) gross income. 
A) net income. 
B) allowable income. 
C) personal income. 
D) taxable income. 
E) gross income.

Question 7

What is the difference between a proportional tax and a flat tax on income?

Accepted Answer

A proportional tax keeps the a

Question 8

Which of the following formulas correctly represents taxable income under the U.S. tax system?

Accepted Answer

A) Total wages + interest 
B) Total personal income- exemptions -deductions 
C) Total personal income + exemptions -deductions 
D) Total personal income + dividends -deductions 
E) Total wages -exemptions - deductions 
A) Total wages + interest 
B) Total personal income- exemptions -deductions 
C) Total personal income + exemptions -deductions 
D) Total personal income + dividends -deductions 
E) Total wages -exemptions - deductions

Question 9

Which of the following has not been proposed as a reform of present-day welfare?

Accepted Answer

A) Stop welfare payments to an individual after two years. 
B) Lower the maximum payment when an individual has no other income. 
C) Phase out welfare payments more slowly as income increases. 
D) Give everyone a welfare check. 
E) Make people work in public jobs as long as they receive welfare. 
A) Stop welfare payments to an individual after two years. 
B) Lower the maximum payment when an individual has no other income. 
C) Phase out welfare payments more slowly as income increases. 
D) Give everyone a welfare check. 
E) Make people work in public jobs as long as they receive welfare.

Question 10

According to the ability-to-pay principle,

Accepted Answer

A) those with lower incomes should pay just as great a percentage of their income in taxes as those with higher incomes. 
B) foreigners who trade with the United States should pay taxes. 
C) those with higher incomes should pay more in total taxes. 
D) those with higher incomes should pay higher tax rates. 
E) those with higher incomes should pay the same amount of taxes as those with lower incomes. 
A) those with lower incomes should pay just as great a percentage of their income in taxes as those with higher incomes. 
B) foreigners who trade with the United States should pay taxes. 
C) those with higher incomes should pay more in total taxes. 
D) those with higher incomes should pay higher tax rates. 
E) those with higher incomes should pay the same amount of taxes as those with lower incomes.

Question 11

Exhibit 14-1  
-Refer to Exhibit 14-1. If an individual is earning $135,000 of gross income and is allowed income exemptions and adjustments in the amount of $12,500, what is this individual's total income tax?

Accepted Answer

A) $36,750 
B) $40,125 
C) $37,150 
D) $36,625 
E) $49,000 
A) $36,750 
B) $40,125 
C) $37,150 
D) $36,625 
E) $49,000

Question 12

One reason why elderly voters fight so hard for increased social security benefits is because the poverty rate among the elderly has been rising.

Accepted Answer

A) True 
 B)False

Question 13

As a result of government taxation and redistribution programs,

Accepted Answer

A) the bottom quintile gains the least income. 
B) the top three quintiles lose income, but the third quintile loses the most. 
C) the two bottom quintiles gain income and the others lose. 
D) only the bottom quintile gains income. 
E) only the top quintile loses income. 
A) the bottom quintile gains the least income. 
B) the top three quintiles lose income, but the third quintile loses the most. 
C) the two bottom quintiles gain income and the others lose. 
D) only the bottom quintile gains income. 
E) only the top quintile loses income.

Question 14

For the most part, the same people stay poor and the same people stay rich in the United States.

Accepted Answer

A) True 
 B)False

Question 15

Payroll taxes and personal income taxes are the same thing.

Accepted Answer

A) True 
 B)False

Question 16

Although the poverty rate has increased somewhat over the past two decades,

Accepted Answer

A) the poverty rate for the elderly has declined. 
B) the number of people in poverty has declined. 
C) wealth among those in poverty has increased. 
D) the poverty rate for children has declined. 
E) the poverty rates for the elderly and children have become zero. 
A) the poverty rate for the elderly has declined. 
B) the number of people in poverty has declined. 
C) wealth among those in poverty has increased. 
D) the poverty rate for children has declined. 
E) the poverty rates for the elderly and children have become zero.

Question 17

Wealth refers to

Accepted Answer

A) the flow of assets. 
B) the size and make of one's car. 
C) human capital. 
D) the value of stocks and bonds in a brokerage account. 
E) the stock of assets. 
A) the flow of assets. 
B) the size and make of one's car. 
C) human capital. 
D) the value of stocks and bonds in a brokerage account. 
E) the stock of assets.

Question 18

If a person's income tax rate decreases by 10 percent when her income increases by 100 percent, then the tax system is

Accepted Answer

A) a head tax system. 
B) progressive. 
C) flat. 
D) proportional. 
E) regressive. 
A) a head tax system. 
B) progressive. 
C) flat. 
D) proportional. 
E) regressive.

Question 19

Which of the following is not a means-tested transfer program?

Accepted Answer

A) Medicaid 
B) Social security 
C) Aid to Families with Dependent Children 
D) Food stamps 
E) Head Start 
A) Medicaid 
B) Social security 
C) Aid to Families with Dependent Children 
D) Food stamps 
E) Head Start

Exam 14: Taxes, Transfers, and Income Distribution

The argument that individuals should pay taxes according to how much they can afford is called the

Why would the widespread splitting apart of families increase the income inequality in a nation?

Which of the following is not true about the personal income tax?

Give two examples of means-tested programs and two examples of social insurance programs.

If the average tax rate rises as income rises, the tax is called a

Under the income tax system in the United States, the portion of personal income that can be taxed is called

What is the difference between a proportional tax and a flat tax on income?

Which of the following formulas correctly represents taxable income under the U.S. tax system?

Which of the following has not been proposed as a reform of present-day welfare?

According to the ability-to-pay principle,

Exhibit 14-1 -Refer to Exhibit 14-1. If an individual is earning $135,000 of gross income and is allowed income exemptions and adjustments in the amount of $12,500, what is this individual's total income tax?

One reason why elderly voters fight so hard for increased social security benefits is because the poverty rate among the elderly has been rising.

As a result of government taxation and redistribution programs,

For the most part, the same people stay poor and the same people stay rich in the United States.

Payroll taxes and personal income taxes are the same thing.

Although the poverty rate has increased somewhat over the past two decades,

Wealth refers to

If a person's income tax rate decreases by 10 percent when her income increases by 100 percent, then the tax system is

Which of the following is not a means-tested transfer program?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

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The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

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