Question 1

The revenue that the federal government collects from payroll taxes is earmarked to pay for

Accepted Answer

A)  national defense and income security (welfare) programs 
B)  national defense and Medicare 
C)  Social Security and public schools 
D)  Social Security and Medicare 
A)  national defense and income security (welfare) programs 
B)  national defense and Medicare 
C)  Social Security and public schools 
D)  Social Security and Medicare

Question 2

The U.S.federal government collects approximately what percentage of the taxes in the economy?

Accepted Answer

A)  10% 
B)  40% 
C)  50% 
D)  67% 
A)  10% 
B)  40% 
C)  50% 
D)  67%

Question 3

The U.S.federal government collects about

Accepted Answer

A)  one-third of the taxes in our economy. 
B)  one-half of the taxes in our economy. 
C)  two-thirds of the taxes in our economy. 
D)  three-fourths of the taxes in our economy. 
A)  one-third of the taxes in our economy. 
B)  one-half of the taxes in our economy. 
C)  two-thirds of the taxes in our economy. 
D)  three-fourths of the taxes in our economy.

Question 4

The federal budget deficit in 2009 was nearly eight times larger than the deficit in 2007.The primary reason for the dramatic increase in the deficit was

Accepted Answer

A)  the recession experienced during this time. 
B)  severe budget tightening by members of Congress. 
C)  the shift in political power from Republicans to Democrats. 
D)  All of the above are correct. 
A)  the recession experienced during this time. 
B)  severe budget tightening by members of Congress. 
C)  the shift in political power from Republicans to Democrats. 
D)  All of the above are correct.

Question 5

Two families who live in Plains,GA have identical incomes.The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year.The Jones family lives in an apartment and is not eligible for a mortgage-interest deduction.This situation exemplifies

Accepted Answer

A)  an application of the benefits principle of taxation. 
B)  a violation of horizontal equity. 
C)  a violation of vertical equity. 
D)  an application of egalitarian tax rules. 
A)  an application of the benefits principle of taxation. 
B)  a violation of horizontal equity. 
C)  a violation of vertical equity. 
D)  an application of egalitarian tax rules.

Question 6

The most efficient tax possible is a

Accepted Answer

A)  lump-sum tax. 
B)  marginal tax. 
C)  proportional tax. 
D)  value-added tax. 
A)  lump-sum tax. 
B)  marginal tax. 
C)  proportional tax. 
D)  value-added tax.

Question 7

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Question 8

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
  
-Refer to Table 12-17.Which of the three tax systems is progressive?

Accepted Answer

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

Question 9

To fully understand the progressivity of government policies,one should only look at the proportion of total income that individuals pay in taxes each year.

Accepted Answer

A) True 
 B)False

Question 10

Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and 2010.
  
-Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What happened to her marginal tax rate between 2009 and 2010?

Accepted Answer

A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question. 
A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question.

Question 11

In 2009,the U.S.federal government collected approximately how much in total tax receipts?

Accepted Answer

A)  $307 million 
B)  $2.1 billion 
C)  $3.2 billion 
D)  $6.8 billion 
A)  $307 million 
B)  $2.1 billion 
C)  $3.2 billion 
D)  $6.8 billion

Question 12

Table 12-7
  
-Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A)  20% 
B)  23% 
C)  40% 
D)  45% 
A)  20% 
B)  23% 
C)  40% 
D)  45%

Question 13

Total taxes paid divided by total income is called the

Accepted Answer

A)  lump-sum tax liability. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  average consumption tax liability. 
A)  lump-sum tax liability. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  average consumption tax liability.

Question 14

Table 12-10
The following table shows the marginal tax rates for unmarried individuals for two years.
  
-Refer to Table 12-10.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 15

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Accepted Answer

A) True 
 B)False

Question 16

Corporate profits distributed as dividends are

Accepted Answer

A)  tax free. 
B)  taxed once. 
C)  taxed twice. 
D)  taxed three times. 
A)  tax free. 
B)  taxed once. 
C)  taxed twice. 
D)  taxed three times.

Question 17

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 18

A tax imposed at every stage of production is a

Accepted Answer

A)  value-added tax. 
B)  lump sum tax. 
C)  corrective tax. 
D)  regressive tax. 
A)  value-added tax. 
B)  lump sum tax. 
C)  corrective tax. 
D)  regressive tax.

Question 19

Which of the following is an example of an excise tax?

Accepted Answer

A)  a tax on the wages that a firm pays its workers 
B)  a tax on tobacco 
C)  a tax on corporate profits 
D)  the portion of federal income taxes earmarked to pay for Social Security and Medicare 
A)  a tax on the wages that a firm pays its workers 
B)  a tax on tobacco 
C)  a tax on corporate profits 
D)  the portion of federal income taxes earmarked to pay for Social Security and Medicare

Question 20

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000,and 50 percent on all additional income.In addition,he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes.Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income.What is his average tax rate?

Accepted Answer

A)  17.19 percent 
B)  46.69 percent 
C)  48.87 percent 
D)  56.01 percent 
A)  17.19 percent 
B)  46.69 percent 
C)  48.87 percent 
D)  56.01 percent

Exam 12: The Design of the Tax System.

The revenue that the federal government collects from payroll taxes is earmarked to pay for

The U.S.federal government collects approximately what percentage of the taxes in the economy?

The U.S.federal government collects about

The federal budget deficit in 2009 was nearly eight times larger than the deficit in 2007.The primary reason for the dramatic increase in the deficit was

Two families who live in Plains,GA have identical incomes.The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year.The Jones family lives in an apartment and is not eligible for a mortgage-interest deduction.This situation exemplifies

The most efficient tax possible is a

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems is progressive?

To fully understand the progressivity of government policies,one should only look at the proportion of total income that individuals pay in taxes each year.

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What happened to her marginal tax rate between 2009 and 2010?

In 2009,the U.S.federal government collected approximately how much in total tax receipts?

Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Total taxes paid divided by total income is called the

Table 12-10 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-10.Which of the following best describes the tax schedule in 2009?

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Corporate profits distributed as dividends are

The amount of income tax owed by a family is

A tax imposed at every stage of production is a

Which of the following is an example of an excise tax?

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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