Question 1

Table 12-25  
-Refer to Table 12-25. Do any of the plans achieve vertical equity?

Accepted Answer

Yes. People with hig

Question 2

The largest budgetary expense for the federal government in 2011 was

Accepted Answer

A) interest on the national debt. 
B) health. 
C) highways. 
D) income security. 
A) interest on the national debt. 
B) health. 
C) highways. 
D) income security.

Question 3

Citizens expect the government to provide various goods and services making taxes

Accepted Answer

A) inefficient. 
B) equitable. 
C) inevitable. 
D) intolerable. 
A) inefficient. 
B) equitable. 
C) inevitable. 
D) intolerable.

Question 4

The U.S. income tax

Accepted Answer

A) discourages saving. 
B) encourages saving. 
C) has no effect on saving. 
D) will reduce the administrative burden of taxation. 
A) discourages saving. 
B) encourages saving. 
C) has no effect on saving. 
D) will reduce the administrative burden of taxation.

Question 5

Leonard, Sheldon, Raj, and Penny each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A) $50 and tax revenues increase by $30, so there is a deadweight loss of $20. 
B) $35 and tax revenues increase by $30, so there is a deadweight loss of $5. 
C) $20 and tax revenues increase by $20, so there is no deadweight loss. 
D) $15 and tax revenues increase by $20, so there is no deadweight loss. 
A) $50 and tax revenues increase by $30, so there is a deadweight loss of $20. 
B) $35 and tax revenues increase by $30, so there is a deadweight loss of $5. 
C) $20 and tax revenues increase by $20, so there is no deadweight loss. 
D) $15 and tax revenues increase by $20, so there is no deadweight loss.

Question 6

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

Accepted Answer

A) True 
 B)False

Question 7

The U.S. federal government finances budget deficits by

Accepted Answer

A) selling stock, much like a corporation. 
B) printing additional currency. 
C) borrowing from the public. 
D) raising property taxes. 
A) selling stock, much like a corporation. 
B) printing additional currency. 
C) borrowing from the public. 
D) raising property taxes.

Question 8

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Accepted Answer

A) a per person budget surplus of $891. 
B) a per person budget deficit of $891. 
C) horizontal equity. 
D) vertical equity. 
A) a per person budget surplus of $891. 
B) a per person budget deficit of $891. 
C) horizontal equity. 
D) vertical equity.

Question 9

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Accepted Answer

A) ​0% 
B) ​2.67% 
C) ​4% 
D) ​8% 
A) ​0% 
B) ​2.67% 
C) ​4% 
D) ​8%

Question 10

Tax incidence refers to

Accepted Answer

A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues. 
A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues.

Question 11

By law, all states must have a state income tax.

Accepted Answer

A) True 
 B)False

Question 12

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

Accepted Answer

A) less like European tax systems than it otherwise would be. 
B) more like a payroll tax than it otherwise would be. 
C) more like an income tax than it otherwise would be. 
D) more like a consumption tax than it otherwise would be. 
A) less like European tax systems than it otherwise would be. 
B) more like a payroll tax than it otherwise would be. 
C) more like an income tax than it otherwise would be. 
D) more like a consumption tax than it otherwise would be.

Question 13

Which of the following statements is correct?

Accepted Answer

A) A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B) A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C) A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D) A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers. 
A) A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B) A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C) A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D) A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.

Question 14

In which of the following tax systems do taxes increase as income increases?

Accepted Answer

A) both proportional and progressive 
B) proportional but not progressive 
C) progressive but not proportional 
D) neither proportional nor progressive 
A) both proportional and progressive 
B) proportional but not progressive 
C) progressive but not proportional 
D) neither proportional nor progressive

Question 15

In 1789 the percentage of the average American's income that went to pay taxes was about

Accepted Answer

A) 5%. Today it is about 50%. 
B) 5%. Today it is about 25%. 
C) 50%. Today it is about 33%. 
D) 25%. Today it is about 33%. 
A) 5%. Today it is about 50%. 
B) 5%. Today it is about 25%. 
C) 50%. Today it is about 33%. 
D) 25%. Today it is about 33%.

Question 16

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Accepted Answer

A lump-sum tax is the most efficient tax

Question 17

Taxes can be justified if the government uses the revenue to
(i)provide public goods such as national defense.
(ii)clean up negative externalities such as water pollution.
(iii)regulate a common resource such as fish in a public lake.
(iv)provide goods with positive externalities such as medical research.

Accepted Answer

A) (ii) only 
B) (ii) and (iii) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), (iii), and (iv) 
A) (ii) only 
B) (ii) and (iii) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), (iii), and (iv)

Question 18

The federal healthcare spending program that specifically targets the poor is called

Accepted Answer

A) Medicaid. 
B) Medicare. 
C) National Institutes of Health. 
D) Blue Cross/Blue Shield. 
A) Medicaid. 
B) Medicare. 
C) National Institutes of Health. 
D) Blue Cross/Blue Shield.

Question 19

Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income?

Accepted Answer

A) Japan 
B) United States 
C) Mexico 
D) Denmark 
A) Japan 
B) United States 
C) Mexico 
D) Denmark

Question 20

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Table 12-25 -Refer to Table 12-25. Do any of the plans achieve vertical equity?

The largest budgetary expense for the federal government in 2011 was

Citizens expect the government to provide various goods and services making taxes

The U.S. income tax

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

The U.S. federal government finances budget deficits by

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Tax incidence refers to

By law, all states must have a state income tax.

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

Which of the following statements is correct?

In which of the following tax systems do taxes increase as income increases?

In 1789 the percentage of the average American's income that went to pay taxes was about

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

The federal healthcare spending program that specifically targets the poor is called

Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income?

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is: