Question 1

The federal government of the United States relies heavily on value-added taxes.

Accepted Answer

A) True 
 B)False

Question 2

Figure 18-1
  
-According to the graph in Figure 18-1, the increase in the amount that consumers pay as a result of the tax is

Accepted Answer

A)  1000 
B)  600 
C)  400 
D)  indeterminate 
A)  1000 
B)  600 
C)  400 
D)  indeterminate

Question 3

Briefly and concisely define the following terms:
a.fiscal federalism
b.horizontal equity
c.vertical equity
d.benefits principle of taxation

Accepted Answer

a.Fiscal federalism is a system of inter

Question 4

If two families are identical with respect to size, income, general expenses, etc., and are taxed equally, we say that there is

Accepted Answer

A)  horizontal equity. 
B)  vertical equity. 
C)  observance of the ability-to-pay principle. 
D)  intergenerational equity. 
A)  horizontal equity. 
B)  vertical equity. 
C)  observance of the ability-to-pay principle. 
D)  intergenerational equity.

Question 5

The money for Social Security payments to current retirees comes from

Accepted Answer

A)  payroll taxes collected from those retirees when they were working. 
B)  income taxes collected from the current working population. 
C)  payroll taxes collected from the current working population. 
D)  only the interest earned now by the government on the invested Social Security trust fund. 
A)  payroll taxes collected from those retirees when they were working. 
B)  income taxes collected from the current working population. 
C)  payroll taxes collected from the current working population. 
D)  only the interest earned now by the government on the invested Social Security trust fund.

Question 6

A tax that does not change consumers' behavior creates no

Accepted Answer

A)  economic burden. 
B)  excess burden. 
C)  tax revenue. 
D)  tax incidence. 
A)  economic burden. 
B)  excess burden. 
C)  tax revenue. 
D)  tax incidence.

Question 7

A $10 fee to obtain a driver's license is a

Accepted Answer

A)  regressive tax. 
B)  degressive tax. 
C)  proportional tax. 
D)  progressive tax. 
A)  regressive tax. 
B)  degressive tax. 
C)  proportional tax. 
D)  progressive tax.

Question 8

If demand is more elastic, the portion of an excise tax borne by a buyer will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  be unchanged. 
D)  increase for normal goods, decrease for inferior goods. 
A)  increase. 
B)  decrease. 
C)  be unchanged. 
D)  increase for normal goods, decrease for inferior goods.

Question 9

The concept that describes the situation where the economy has used every available opportunity to make someone better off without making someone else worse off is

Accepted Answer

A)  economic efficiency. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  vertical equity. 
A)  economic efficiency. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  vertical equity.

Question 10

When a tax is imposed on an item, it can generally be said that the incidence of the tax is

Accepted Answer

A)  entirely on the buyer. 
B)  entirely on the seller. 
C)  on both the buyer and seller. 
D)  not determined in this manner. 
A)  entirely on the buyer. 
B)  entirely on the seller. 
C)  on both the buyer and seller. 
D)  not determined in this manner.

Question 11

Which of the following is a direct tax?

Accepted Answer

A)  excise tax 
B)  tax on corporate profits 
C)  property tax 
D)  sales tax 
A)  excise tax 
B)  tax on corporate profits 
C)  property tax 
D)  sales tax

Question 12

The benefits principle states that those who

Accepted Answer

A)  pay the taxes should reap the benefits. 
B)  reap the benefits from government should pay the taxes. 
C)  are best able to pay should pay for what they receive. 
D)  pay taxes get the benefits they deserve. 
A)  pay the taxes should reap the benefits. 
B)  reap the benefits from government should pay the taxes. 
C)  are best able to pay should pay for what they receive. 
D)  pay taxes get the benefits they deserve.

Question 13

Direct taxes are levied on specific economic activities.

Accepted Answer

A) True 
 B)False

Question 14

Define the following terms and explain their importance to the study of economics:
a.regressive tax
b.proportional tax
c.progressive tax
d.direct tax
e.indirect tax

Accepted Answer

a.A regressive tax is one in which the a

Question 15

If Linda' annual income is $160,000 and she pays $35,000 in taxes and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Accepted Answer

A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  degressive. 
A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  degressive.

Question 16

In the spring of 1993, President Clinton proposed an energy tax.At one point in the congressional review of the proposal there was discussion of various exemptions for farmers, truckers, etc.One plan was to dye fuel different colors to better track the appropriate tax on the user of the fuel.Economists would label these exemptions

Accepted Answer

A)  loopholes. 
B)  economically efficient. 
C)  obviously fair. 
D)  all of the above. 
A)  loopholes. 
B)  economically efficient. 
C)  obviously fair. 
D)  all of the above.

Question 17

State and local governments receive money from sales taxes, property taxes, and the federal government.

Accepted Answer

A) True 
 B)False

Question 18

What are tax loopholes and what are their effects?

Accepted Answer

A tax loophole is a special provision in

Question 19

Loopholes have the effect of

Accepted Answer

A)  encouraging particular patterns of behavior and favoring particular types of people. 
B)  eroding the progressivity of the income tax. 
C)  altering the pattern of economic incentives. 
D)  All of the above are correct. 
A)  encouraging particular patterns of behavior and favoring particular types of people. 
B)  eroding the progressivity of the income tax. 
C)  altering the pattern of economic incentives. 
D)  All of the above are correct.

Question 20

Figure 18-1
  
-According to the graph in Figure 18-1, tax collections will be which of the following?

Accepted Answer

A)  14 million 
B)  1.4 million 
C)  12 million 
D)  1 million 
A)  14 million 
B)  1.4 million 
C)  12 million 
D)  1 million

Exam 18: Taxation and Resource Allocation

The federal government of the United States relies heavily on value-added taxes.

Figure 18-1 -According to the graph in Figure 18-1, the increase in the amount that consumers pay as a result of the tax is

Briefly and concisely define the following terms: a.fiscal federalism b.horizontal equity c.vertical equity d.benefits principle of taxation

If two families are identical with respect to size, income, general expenses, etc., and are taxed equally, we say that there is

The money for Social Security payments to current retirees comes from

A tax that does not change consumers' behavior creates no

A $10 fee to obtain a driver's license is a

If demand is more elastic, the portion of an excise tax borne by a buyer will

The concept that describes the situation where the economy has used every available opportunity to make someone better off without making someone else worse off is

When a tax is imposed on an item, it can generally be said that the incidence of the tax is

Which of the following is a direct tax?

The benefits principle states that those who

Direct taxes are levied on specific economic activities.

Define the following terms and explain their importance to the study of economics: a.regressive tax b.proportional tax c.progressive tax d.direct tax e.indirect tax

If Linda' annual income is $160,000 and she pays $35,000 in taxes and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

State and local governments receive money from sales taxes, property taxes, and the federal government.

What are tax loopholes and what are their effects?

Loopholes have the effect of

Figure 18-1 -According to the graph in Figure 18-1, tax collections will be which of the following?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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