Question 1

Government purchases of goods and services are

Accepted Answer

A) nonexhaustive because they do not directly absorb resources and account for production. 
B) exhaustive because they directly absorb or employ resources and account for production. 
C) both exhaustive and nonexhaustive because in some cases they do directly absorb resources or account for production and in other cases they do not. 
D) neither exhaustive nor nonexhaustive because of the tax revenues that finance these purchases. 
A) nonexhaustive because they do not directly absorb resources and account for production. 
B) exhaustive because they directly absorb or employ resources and account for production. 
C) both exhaustive and nonexhaustive because in some cases they do directly absorb resources or account for production and in other cases they do not. 
D) neither exhaustive nor nonexhaustive because of the tax revenues that finance these purchases.

Question 2

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

Accepted Answer

A) transfer payments such as social security benefits. 
B) subsidies to farmers, airlines, and others. 
C) proprietary income generated by public utilities and state lotteries. 
D) salaries to military personnel, public school teachers, and government inspectors. 
A) transfer payments such as social security benefits. 
B) subsidies to farmers, airlines, and others. 
C) proprietary income generated by public utilities and state lotteries. 
D) salaries to military personnel, public school teachers, and government inspectors.

Question 3

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

Accepted Answer

A) entirely on the buyer. 
B) mostly on the buyer. 
C) entirely on the seller. 
D) mostly on the seller. 
A) entirely on the buyer. 
B) mostly on the buyer. 
C) entirely on the seller. 
D) mostly on the seller.

Question 4

The addition of government to the circular-flow model illustrates that government

Accepted Answer

A) purchases resources in the resource market. 
B) provides services to businesses and households. 
C) purchases goods in the product market. 
D) does all of the things stated in the other possible answers. 
A) purchases resources in the resource market. 
B) provides services to businesses and households. 
C) purchases goods in the product market. 
D) does all of the things stated in the other possible answers.

Question 5

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1).If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

Accepted Answer

A) supply of X is highly inelastic. 
B) supply of X is highly elastic. 
C) demand for X is highly inelastic. 
D) demand for X is highly elastic. 
A) supply of X is highly inelastic. 
B) supply of X is highly elastic. 
C) demand for X is highly inelastic. 
D) demand for X is highly elastic.

Question 6

Excise taxes of the federal government include the following items, except a(n)

Accepted Answer

A) alcoholic beverage tax. 
B) tobacco tax. 
C) general sales tax. 
D) gasoline tax. 
A) alcoholic beverage tax. 
B) tobacco tax. 
C) general sales tax. 
D) gasoline tax.

Question 7

Which of the following is correct about the U.S.tax system?

Accepted Answer

A) The primary federal tax system is regressive, while the primary state and local tax systems are progressive. 
B) Both the primary federal tax system and the primary state and local tax systems are regressive. 
C) The primary federal tax system is progressive, while the primary state and local tax systems are regressive. 
D) Both the primary federal tax system and the primary state and local tax systems are progressive. 
A) The primary federal tax system is regressive, while the primary state and local tax systems are progressive. 
B) Both the primary federal tax system and the primary state and local tax systems are regressive. 
C) The primary federal tax system is progressive, while the primary state and local tax systems are regressive. 
D) Both the primary federal tax system and the primary state and local tax systems are progressive.

Question 8

Most economists believe that property taxes

Accepted Answer

A) should be eliminated. 
B) are progressive. 
C) are regressive. 
D) should become an important source of revenue for the federal government. 
A) should be eliminated. 
B) are progressive. 
C) are regressive. 
D) should become an important source of revenue for the federal government.

Question 9

The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax.

Accepted Answer

A) True 
 B)False

Question 10

Transfer payments are about percent of U.S.domestic output (as of 2015).

Accepted Answer

A) 35 
B) 8 
C) 15 
D) 22 
A) 35 
B) 8 
C) 15 
D) 22

Question 11

(Last Word) Which of the following statements about taxes and government spending is correct?

Accepted Answer

A) Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive. 
B) The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional. 
C) The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional. 
D) The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households. 
A) Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive. 
B) The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional. 
C) The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional. 
D) The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households.

Question 12

(Advanced analysis) The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q.The efficiency loss of this tax is

Accepted Answer

A) $125.00. 
B) $62.50. 
C) $87.50. 
D) $1.00. 
A) $125.00. 
B) $62.50. 
C) $87.50. 
D) $1.00.

Question 13

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Accepted Answer

A) True 
 B)False

Question 14

Sales and excise taxes are levied on retailers, but retailers add these taxes to the prices of their products.This illustrates the

Accepted Answer

A) equal sacrifice theory of taxation. 
B) shifting of taxes to consumers. 
C) ability-to-pay principle of taxation. 
D) benefits-received principle of taxation. 
A) equal sacrifice theory of taxation. 
B) shifting of taxes to consumers. 
C) ability-to-pay principle of taxation. 
D) benefits-received principle of taxation.

Question 15

(Advanced analysis) The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q.Government's revenue from this tax is

Accepted Answer

A) $750. 
B) $1,500. 
C) $875. 
D) $800. 
A) $750. 
B) $1,500. 
C) $875. 
D) $800.

Question 16

The probable incidence of the tax on business property is on consumers.

Accepted Answer

A) True 
 B)False

Question 17

The basic tax rate on taxable corporate income is

Accepted Answer

A) 15 percent. 
B) 22 percent. 
C) 35 percent. 
D) 52 percent. 
A) 15 percent. 
B) 22 percent. 
C) 35 percent. 
D) 52 percent.

Question 18

A federal excise tax on tires for cars and trucks would be an example of the

Accepted Answer

A) benefits-received principle of taxation. 
B) ability-to-pay principle of taxation. 
C) proportional tax. 
D) progressive tax. 
A) benefits-received principle of taxation. 
B) ability-to-pay principle of taxation. 
C) proportional tax. 
D) progressive tax.

Question 19

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Accepted Answer

A) constant at 10 percent. 
B) lower than the marginal tax rate. 
C) equal to the marginal tax rate. 
D) higher than the marginal tax rate, which is equal to zero. 
A) constant at 10 percent. 
B) lower than the marginal tax rate. 
C) equal to the marginal tax rate. 
D) higher than the marginal tax rate, which is equal to zero.

Question 20

Which of the following is not an important source of revenue for the federal government?

Accepted Answer

A) corporate income taxes 
B) property taxes 
C) payroll taxes 
D) personal income taxes 
A) corporate income taxes 
B) property taxes 
C) payroll taxes 
D) personal income taxes

Exam 20: Public Finance: Expenditures and Taxes

Government purchases of goods and services are

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

The addition of government to the circular-flow model illustrates that government

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1).If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

Excise taxes of the federal government include the following items, except a(n)

Which of the following is correct about the U.S.tax system?

Most economists believe that property taxes

The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax.

Transfer payments are about percent of U.S.domestic output (as of 2015).

(Last Word) Which of the following statements about taxes and government spending is correct?

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Sales and excise taxes are levied on retailers, but retailers add these taxes to the prices of their products.This illustrates the

The probable incidence of the tax on business property is on consumers.

The basic tax rate on taxable corporate income is

A federal excise tax on tires for cars and trucks would be an example of the

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Which of the following is not an important source of revenue for the federal government?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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