Question 1

To make a tax system more progressive,policy makers could

Accepted Answer

A) Raise marginal tax rates for higher incomes. 
B) Narrow the tax base. 
C) Allow all interest expenses to be deductible,not just interest on mortgages. 
D) Raise sales taxes on commonly purchased items. 
A) Raise marginal tax rates for higher incomes. 
B) Narrow the tax base. 
C) Allow all interest expenses to be deductible,not just interest on mortgages. 
D) Raise sales taxes on commonly purchased items.

Question 2

If Luis makes $50,000 per year as a computer programmer and pays $6,000 in taxes while Hector makes $50,000 per year as a roofing contractor and pays $7,000 in taxes,this is an example of

Accepted Answer

A) A regressive tax system. 
B) Horizontal inequity. 
C) A flat tax. 
D) Vertical inequity. 
A) A regressive tax system. 
B) Horizontal inequity. 
C) A flat tax. 
D) Vertical inequity.

Question 3

The size distribution of income in Figure 33.1 reveals that

Accepted Answer

A) Incomes are more equally distributed in Alpha than in Omega. 
B) Incomes are more equally distributed in Omega than in Alpha. 
C) The Gini coefficient for Alpha is larger than for Omega. 
D) People are wealthier in Alpha than in Omega. 
A) Incomes are more equally distributed in Alpha than in Omega. 
B) Incomes are more equally distributed in Omega than in Alpha. 
C) The Gini coefficient for Alpha is larger than for Omega. 
D) People are wealthier in Alpha than in Omega.

Question 4

The tax incidence of a payroll tax results in an increase in net wages.

Accepted Answer

A) True 
 B)False

Question 5

The Bush tax cuts of 2001-2010 reduced

Accepted Answer

A) The top marginal tax rate from 39.6 percent to 35 percent. 
B) The marginal tax rate for the highest income class to 10 percent. 
C) Incentives for education. 
D) Vertical inequities. 
A) The top marginal tax rate from 39.6 percent to 35 percent. 
B) The marginal tax rate for the highest income class to 10 percent. 
C) Incentives for education. 
D) Vertical inequities.

Question 6

Explain the following statement by Arthur Okun: "Insistence on carving the pie into equal slices would shrink the size of the pie.This fact poses the trade-off between economic equality and economic efficiency."

Accepted Answer

An effort to equalize income s

Question 7

One World View article is titled "Top Tax Rates." The highest marginal tax rates in the world in 2015 were found in

Accepted Answer

A) France. 
B) Denmark. 
C) Canada. 
D) Monaco. 
A) France. 
B) Denmark. 
C) Canada. 
D) Monaco.

Question 8

Suppose Ms.Sanchez has a total income of $200,000,has a taxable income of $120,000,and pays $40,000 in taxes.Considering the information,what is Ms.Sanchez's effective tax rate?

Accepted Answer

A) 25.0 percent. 
B) 20.0 percent. 
C) 33.3 percent. 
D) 60.0 percent. 
A) 25.0 percent. 
B) 20.0 percent. 
C) 33.3 percent. 
D) 60.0 percent.

Question 9

If the marginal tax rate is too high,it can cause all of the following except

Accepted Answer

A) Businesses to produce more. 
B) Government tax receipts to decline. 
C) The rate of saving to decline. 
D) Work effort to decrease. 
A) Businesses to produce more. 
B) Government tax receipts to decline. 
C) The rate of saving to decline. 
D) Work effort to decrease.

Question 10

The U.S.federal income tax is classified as a

Accepted Answer

A) Regressive tax only. 
B) Flat tax only. 
C) Progressive tax only. 
D) Regressive or flat tax,but not a progressive tax. 
A) Regressive tax only. 
B) Flat tax only. 
C) Progressive tax only. 
D) Regressive or flat tax,but not a progressive tax.

Question 11

An increase in deductions,exemptions,and credits in the tax code will

Accepted Answer

A) Reduce the tax base. 
B) Allow lower rates to raise the same tax revenues. 
C) Induce economic activity to go underground. 
D) Increase the marginal tax rate. 
A) Reduce the tax base. 
B) Allow lower rates to raise the same tax revenues. 
C) Induce economic activity to go underground. 
D) Increase the marginal tax rate.

Question 12

If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per year as a high school teacher and pays $6,500 in taxes,this is an example of

Accepted Answer

A) Horizontal inequity. 
B) Marginal inequity. 
C) A flat tax. 
D) Vertical inequity. 
A) Horizontal inequity. 
B) Marginal inequity. 
C) A flat tax. 
D) Vertical inequity.

Question 13

A flat tax

Accepted Answer

A) Includes many tax loopholes. 
B) Is a single-rate tax system. 
C) Includes multiple tax brackets. 
D) Encourages economic activity through deductions and credits. 
A) Includes many tax loopholes. 
B) Is a single-rate tax system. 
C) Includes multiple tax brackets. 
D) Encourages economic activity through deductions and credits.

Question 14

A tax system in which tax rates fall as incomes rise is

Accepted Answer

A) Regressive. 
B) Proportional. 
C) Flat. 
D) Progressive. 
A) Regressive. 
B) Proportional. 
C) Flat. 
D) Progressive.

Question 15

Horizontal equity can be determined by comparing the

Accepted Answer

A) Effective tax rate of the taxpayer with the highest nominal income to the effective tax rates of taxpayers with lower nominal incomes. 
B) Marginal tax rate of the taxpayer with the highest nominal income to the marginal tax rates of taxpayers with lower nominal incomes. 
C) Marginal tax rates for two taxpayers with the same nominal incomes. 
D) Effective tax rates for two taxpayers with the same nominal incomes. 
A) Effective tax rate of the taxpayer with the highest nominal income to the effective tax rates of taxpayers with lower nominal incomes. 
B) Marginal tax rate of the taxpayer with the highest nominal income to the marginal tax rates of taxpayers with lower nominal incomes. 
C) Marginal tax rates for two taxpayers with the same nominal incomes. 
D) Effective tax rates for two taxpayers with the same nominal incomes.

Question 16

Which of the following is true about a payroll tax?

Accepted Answer

A) It shifts the labor supply curve to the right. 
B) It reduces the net wage to employees. 
C) It results in more workers being employed. 
D) It reduces the nominal cost of labor. 
A) It shifts the labor supply curve to the right. 
B) It reduces the net wage to employees. 
C) It results in more workers being employed. 
D) It reduces the nominal cost of labor.

Question 17

A tax elasticity of supply equal to zero indicates that

Accepted Answer

A) Employers will not hire any workers if tax rates increase. 
B) Employers will hire more workers if tax rates increase. 
C) Workers will not cut back on the number of hours worked if tax rates increase. 
D) Workers will not work at all if tax rates increase. 
A) Employers will not hire any workers if tax rates increase. 
B) Employers will hire more workers if tax rates increase. 
C) Workers will not cut back on the number of hours worked if tax rates increase. 
D) Workers will not work at all if tax rates increase.

Question 18

The values of the Gini coefficient range from zero to +1.

Accepted Answer

A) True 
 B)False

Question 19

One World View article is titled "Top Tax Rates." The lowest marginal tax rates in the world in 2015 were in

Accepted Answer

A) France. 
B) Denmark. 
C) Canada. 
D) Monaco. 
A) France. 
B) Denmark. 
C) Canada. 
D) Monaco.

Question 20

Why isn't the level of personal income always a good measure of the distribution of goods and services?

Accepted Answer

Personal income does not include goods a

Exam 33: Taxes: Equity Versus Efficiency

To make a tax system more progressive,policy makers could

If Luis makes $50,000 per year as a computer programmer and pays $6,000 in taxes while Hector makes $50,000 per year as a roofing contractor and pays $7,000 in taxes,this is an example of

The size distribution of income in Figure 33.1 reveals that

The tax incidence of a payroll tax results in an increase in net wages.

The Bush tax cuts of 2001-2010 reduced

Explain the following statement by Arthur Okun: "Insistence on carving the pie into equal slices would shrink the size of the pie.This fact poses the trade-off between economic equality and economic efficiency."

One World View article is titled "Top Tax Rates." The highest marginal tax rates in the world in 2015 were found in

Suppose Ms.Sanchez has a total income of $200,000,has a taxable income of $120,000,and pays $40,000 in taxes.Considering the information,what is Ms.Sanchez's effective tax rate?

If the marginal tax rate is too high,it can cause all of the following except

The U.S.federal income tax is classified as a

An increase in deductions,exemptions,and credits in the tax code will

If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per year as a high school teacher and pays $6,500 in taxes,this is an example of

A flat tax

A tax system in which tax rates fall as incomes rise is

Horizontal equity can be determined by comparing the

Which of the following is true about a payroll tax?

A tax elasticity of supply equal to zero indicates that

The values of the Gini coefficient range from zero to +1.

One World View article is titled "Top Tax Rates." The lowest marginal tax rates in the world in 2015 were in

Why isn't the level of personal income always a good measure of the distribution of goods and services?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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