Question 1

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 2

If all taxpayers pay the same percentage of income in taxes, the tax system is proportional.

Accepted Answer

A) True 
 B)False

Question 3

Medicaid is

Accepted Answer

A) the government's health plan for the elderly. 
B) the government's health plan for the poor. 
C) another name for Social Security. 
D) Both a and c are correct. 
A) the government's health plan for the elderly. 
B) the government's health plan for the poor. 
C) another name for Social Security. 
D) Both a and c are correct.

Question 4

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

Accepted Answer

A) income security, health, national defense, net interest 
B) health, national defense, net interest, income security 
C) net interest, health, income security, national defense 
D) national defense, income security, net interest, health 
A) income security, health, national defense, net interest 
B) health, national defense, net interest, income security 
C) net interest, health, income security, national defense 
D) national defense, income security, net interest, health

Question 5

An estate tax is an example of a(n)

Accepted Answer

A) individual income tax. 
B) social insurance tax. 
C) corporate income tax. 
D) None of the above is correct. 
A) individual income tax. 
B) social insurance tax. 
C) corporate income tax. 
D) None of the above is correct.

Question 6

A country is using a proportional tax when

Accepted Answer

A) its marginal tax rate equals its average tax rate. 
B) its marginal tax rate is less than its average tax rate. 
C) its marginal tax rate is greater than its average tax rate. 
D) it uses a lump-sum tax. 
A) its marginal tax rate equals its average tax rate. 
B) its marginal tax rate is less than its average tax rate. 
C) its marginal tax rate is greater than its average tax rate. 
D) it uses a lump-sum tax.

Question 7

The principle that people should pay taxes based on the benefits they receive from government services is called the

Accepted Answer

A) pay principle. 
B) tax-benefit principle. 
C) government services principle. 
D) benefits principle. 
A) pay principle. 
B) tax-benefit principle. 
C) government services principle. 
D) benefits principle.

Question 8

Table 12-2  
-Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus will fall from

Accepted Answer

A) $6 to $3. 
B) $7 to $4. 
C) $6 to $2. 
D) $5 to $3. 
A) $6 to $3. 
B) $7 to $4. 
C) $6 to $2. 
D) $5 to $3.

Question 9

In 2010, the co-chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating many tax deductions such as the one for mortgage interest. Economists who favor the proposal argue that it would
(i)correct a misallocation of resources because too much of the economy's capital stock is tied up in residential housing and too little is invested in corporate capital.
(ii)cut both spending and taxes.
(iii)encourage private philanthropy.

Accepted Answer

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

Question 10

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 11

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Accepted Answer

A) the horizontal equity principle. 
B) the benefits principle. 
C) a regressive tax argument. 
D) the ability-to-pay principle. 
A) the horizontal equity principle. 
B) the benefits principle. 
C) a regressive tax argument. 
D) the ability-to-pay principle.

Question 12

The amount of income tax owed by a family is

Accepted Answer

A) not simply proportional to its total income. 
B) unaffected by deductions. 
C) total income minus tax credits. 
D) a constant fraction of income. 
A) not simply proportional to its total income. 
B) unaffected by deductions. 
C) total income minus tax credits. 
D) a constant fraction of income.

Question 13

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will __________ and government spending, as a percentage of GDP, will __________.

Accepted Answer

remain con

Question 14

Scenario 12-5
Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount.
-Refer to Scenario 12-5. Which Senator is advocating taxes based on the benefits principle?

Accepted Answer

A) Senator Filch 
B) Senator Fudge 
C) Senator Malfoy 
D) Senator Moody 
A) Senator Filch 
B) Senator Fudge 
C) Senator Malfoy 
D) Senator Moody

Question 15

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.  
-Refer to Table 12-23. Which of the three tax systems is regressive?

Accepted Answer

A) Tax System A 
B) Tax System B 
C) Tax System C 
D) None of the systems are regressive. 
A) Tax System A 
B) Tax System B 
C) Tax System C 
D) None of the systems are regressive.

Question 16

An advantage of a consumption tax is that it does not distort the incentive to save.

Accepted Answer

A) True 
 B)False

Question 17

Table 12-17
The following table shows the marginal tax rates for unmarried individuals for two years.  
-Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

Accepted Answer

A) proportional tax 
B) progressive tax 
C) regressive tax 
D) vertical tax 
A) proportional tax 
B) progressive tax 
C) regressive tax 
D) vertical tax

Question 18

Table 12-11  
-Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

Accepted Answer

A) 26.6%. 
B) 26.9%. 
C) 27.3%. 
D) 28.5%. 
A) 26.6%. 
B) 26.9%. 
C) 27.3%. 
D) 28.5%.

Question 19

A payroll tax is also referred to as a social insurance tax.

Accepted Answer

A) True 
 B)False

Question 20

In 2011, what percentage of federal government receipts came from corporate income taxes?

Accepted Answer

A) 7% 
B) 12% 
C) 25% 
D) 43% 
A) 7% 
B) 12% 
C) 25% 
D) 43%

Exam 12: The Design of the Tax System

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

If all taxpayers pay the same percentage of income in taxes, the tax system is proportional.

Medicaid is

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.

An estate tax is an example of a(n)

A country is using a proportional tax when

The principle that people should pay taxes based on the benefits they receive from government services is called the

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus will fall from

Vertical equity is not consistent with a regressive tax structure.

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

The amount of income tax owed by a family is

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will __________ and government spending, as a percentage of GDP, will __________.

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

An advantage of a consumption tax is that it does not distort the incentive to save.

Table 12-17 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his average tax rate is

A payroll tax is also referred to as a social insurance tax.

In 2011, what percentage of federal government receipts came from corporate income taxes?

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

Filters

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will and government spending, as a percentage of GDP, will .