Question 1

A tax is progressive if the average tax rate rises as income increases.

Accepted Answer

A) True 
 B)False

Question 2

(Consider This) Which of the following claims is not made by opponents of a value-added tax (VAT)?

Accepted Answer

A) Savings and investment is discouraged because future consumption is penalized. 
B) The VAT is regressive, potentially leading to additional progressive taxes to offset the regressive VAT. 
C) Sellers bear a disproportionately large burden of the tax. 
D) The VAT is a hidden tax, and thus easier to raise to support the expansion of government. 
A) Savings and investment is discouraged because future consumption is penalized. 
B) The VAT is regressive, potentially leading to additional progressive taxes to offset the regressive VAT. 
C) Sellers bear a disproportionately large burden of the tax. 
D) The VAT is a hidden tax, and thus easier to raise to support the expansion of government.

Question 3

Which of the following statements about specific excise taxes is true?

Accepted Answer

A) These taxes are levied on a wide range of consumer goods. 
B) These taxes are usually transparent to (and easily reckoned by) the buyers. 
C) A large portion of these taxes are often borne by the sellers, not shifted to the buyers. 
D) In the U.S., these taxes are more common than sales taxes. 
A) These taxes are levied on a wide range of consumer goods. 
B) These taxes are usually transparent to (and easily reckoned by) the buyers. 
C) A large portion of these taxes are often borne by the sellers, not shifted to the buyers. 
D) In the U.S., these taxes are more common than sales taxes.

Question 4

The tax rates embodied in the federal personal income tax are such that

Accepted Answer

A) a rising absolute amount, but a declining proportion, of income is paid in taxes. 
B) the marginal and average tax rates are equal, making the tax progressive. 
C) the average tax rate rises more rapidly than does the marginal tax rate as income rises. 
D) the marginal tax rate is higher than the average tax rate, causing the average tax rate to rise as income rises. 
A) a rising absolute amount, but a declining proportion, of income is paid in taxes. 
B) the marginal and average tax rates are equal, making the tax progressive. 
C) the average tax rate rises more rapidly than does the marginal tax rate as income rises. 
D) the marginal tax rate is higher than the average tax rate, causing the average tax rate to rise as income rises.

Question 5

The efficiency loss of a tax is the idea that

Accepted Answer

A) in addition to taking income from the citizenry, taxes also increase the rate of inflation. 
B) taxes cause a decline in output for which marginal benefit exceeds marginal cost. 
C) taxes diminish incentives to work. 
D) government spends dollars less efficiently than do households and businesses. 
A) in addition to taking income from the citizenry, taxes also increase the rate of inflation. 
B) taxes cause a decline in output for which marginal benefit exceeds marginal cost. 
C) taxes diminish incentives to work. 
D) government spends dollars less efficiently than do households and businesses.

Question 6

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Accepted Answer

A) True 
 B)False

Question 7

In 2013, U.S.governments (local, state, and federal) employed approximately how many million workers?

Accepted Answer

A) 16.0 
B) 19.4 
C) 21.9 
D) 23.5 
A) 16.0 
B) 19.4 
C) 21.9 
D) 23.5

Question 8

Sales taxes on consumer goods are regressive because poor people consume a larger proportion of their incomes than do rich people.

Accepted Answer

A) True 
 B)False

Question 9

About two-thirds of all federal spending is for national defense.

Accepted Answer

A) True 
 B)False

Question 10

(Last Word) In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Accepted Answer

A) zero 
B) 10 
C) 15 
D) 22 
A) zero 
B) 10 
C) 15 
D) 22

Question 11

Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

Accepted Answer

A) True 
 B)False

Question 12

Approximately what percentage of the U.S.labor force works for U.S.governments at the federal, state, and local levels (as of 2013)?

Accepted Answer

A) 8 
B) 11 
C) 14 
D) 22 
A) 8 
B) 11 
C) 14 
D) 22

Question 13

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers) in the U.S.was about

Accepted Answer

A) 10 percent of the economy's total output. 
B) 33 percent of the economy's total output. 
C) 60 percent of the economy's total output. 
D) 75 percent of the economy's total output. 
A) 10 percent of the economy's total output. 
B) 33 percent of the economy's total output. 
C) 60 percent of the economy's total output. 
D) 75 percent of the economy's total output.

Question 14

(Consider This) Proponents of a value-added tax (VAT) claim that a VAT

Accepted Answer

A) is progressive, leading to a more equitable distribution of income. 
B) equalizes the tax burden between buyers and sellers of goods. 
C) is proportional, so all income groups pay a fair share. 
D) penalizes consumption and encourages savings and investment. 
A) is progressive, leading to a more equitable distribution of income. 
B) equalizes the tax burden between buyers and sellers of goods. 
C) is proportional, so all income groups pay a fair share. 
D) penalizes consumption and encourages savings and investment.

Question 15

A regressive tax means that if someone earning $25,000 pays $5,000, someone earning $50,000 must pay

Accepted Answer

A) less than $5,000. 
B) less than $10,000. 
C) more than $10,000 but less than $15,000. 
D) more than $15,000 but less than $20,000. 
A) less than $5,000. 
B) less than $10,000. 
C) more than $10,000 but less than $15,000. 
D) more than $15,000 but less than $20,000.

Question 16

In 2014, the so-called Tax Freedom Day in the U.S.occurred in

Accepted Answer

A) February. 
B) April. 
C) August. 
D) June. 
A) February. 
B) April. 
C) August. 
D) June.

Question 17

Which is the most important source of tax revenue for local governments?

Accepted Answer

A) property taxes 
B) corporate income taxes 
C) sales and excise taxes 
D) personal income taxes 
A) property taxes 
B) corporate income taxes 
C) sales and excise taxes 
D) personal income taxes

Question 18

"Transfer payments" may be thought of as

Accepted Answer

A) wages and salaries. 
B) purchases of services. 
C) taxes in reverse. 
D) expenditures on products. 
A) wages and salaries. 
B) purchases of services. 
C) taxes in reverse. 
D) expenditures on products.

Question 19

The progressive structure of the income-tax system is based on the

Accepted Answer

A) benefits-received principle. 
B) principle of diminishing returns. 
C) ability-to-pay principle. 
D) principle that "taxes are the price we pay for civilization." 
A) benefits-received principle. 
B) principle of diminishing returns. 
C) ability-to-pay principle. 
D) principle that "taxes are the price we pay for civilization."

Question 20

The benefits-received principle of taxation is used to support corporate and personal income taxes.

Accepted Answer

A) True 
 B)False

Exam 20: Public Finance: Expenditures and Taxes

A tax is progressive if the average tax rate rises as income increases.

(Consider This) Which of the following claims is not made by opponents of a value-added tax (VAT)?

Which of the following statements about specific excise taxes is true?

The tax rates embodied in the federal personal income tax are such that

The efficiency loss of a tax is the idea that

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

In 2013, U.S.governments (local, state, and federal) employed approximately how many million workers?

Sales taxes on consumer goods are regressive because poor people consume a larger proportion of their incomes than do rich people.

About two-thirds of all federal spending is for national defense.

(Last Word) In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

Approximately what percentage of the U.S.labor force works for U.S.governments at the federal, state, and local levels (as of 2013)?

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers) in the U.S.was about

(Consider This) Proponents of a value-added tax (VAT) claim that a VAT

A regressive tax means that if someone earning $25,000 pays $5,000, someone earning $50,000 must pay

In 2014, the so-called Tax Freedom Day in the U.S.occurred in

Which is the most important source of tax revenue for local governments?

"Transfer payments" may be thought of as

The progressive structure of the income-tax system is based on the

The benefits-received principle of taxation is used to support corporate and personal income taxes.

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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