Question 1

The Earned Income Tax Credit provides a tax credit or rebate to

Accepted Answer

A) businesses that undertake investment expenditures. 
B) taxpayers with incomes greater than $100,000. 
C) persons with low incomes who are working. 
D) single parent families when the parent stays home to take care of the children. 
A) businesses that undertake investment expenditures. 
B) taxpayers with incomes greater than $100,000. 
C) persons with low incomes who are working. 
D) single parent families when the parent stays home to take care of the children.

Question 2

Estimates from the U.S. Treasury Department suggest that the typical family in the highest income quintile pays approximately what percent of their total income in federal taxes?

Accepted Answer

A) 6 percent 
B) 25 percent 
C) 50 percent 
D) 76 percent 
A) 6 percent 
B) 25 percent 
C) 50 percent 
D) 76 percent

Question 3

Given the current structure of the Social Security and Medicare programs, the retirement of the baby boom generation during the years following 2010 will be most likely to

Accepted Answer

A) reduce government expenditures on health care and income transfers. 
B) increase government expenditures on health care and income transfers. 
C) result in large budget surpluses. 
D) result in lower tax rates. 
A) reduce government expenditures on health care and income transfers. 
B) increase government expenditures on health care and income transfers. 
C) result in large budget surpluses. 
D) result in lower tax rates.

Question 4

Real (adjusted for inflation) federal spending per person in the United States

Accepted Answer

A) has increased by approximately 10 percent per decade during the last 225 years. 
B) increased more rapidly during the nineteenth century than during the twentieth century. 
C) in 2010 was approximately 80 times the level of 1916. 
D) increased rapidly during the first half of the twentieth century but has changed very little since 1950. 
A) has increased by approximately 10 percent per decade during the last 225 years. 
B) increased more rapidly during the nineteenth century than during the twentieth century. 
C) in 2010 was approximately 80 times the level of 1916. 
D) increased rapidly during the first half of the twentieth century but has changed very little since 1950.

Question 5

Measured as a share of the economy, government spending

Accepted Answer

A) has been between 10 and 15 percent of the U.S. economy since 1930. 
B) has been between 20 and 25 percent of the U.S. economy since 1930. 
C) rose from less than 10 percent in 1929 to over 35 percent in 2010. 
D) declined from more than 50 percent in 1929 to approximately 25 percent in 2010. 
A) has been between 10 and 15 percent of the U.S. economy since 1930. 
B) has been between 20 and 25 percent of the U.S. economy since 1930. 
C) rose from less than 10 percent in 1929 to over 35 percent in 2010. 
D) declined from more than 50 percent in 1929 to approximately 25 percent in 2010.

Question 6

In 1980, the top 1 percent of earners paid 19.1 percent of the federal personal income tax. By 2008, the share of this tax collected from the top 1 percent of earners

Accepted Answer

A) had declined to less than 15 percent. 
B) was still slightly less than 20 percent. 
C) had risen to approximately 25 percent. 
D) had risen to over 35 percent. 
A) had declined to less than 15 percent. 
B) was still slightly less than 20 percent. 
C) had risen to approximately 25 percent. 
D) had risen to over 35 percent.

Question 7

During the quarter of a century prior to 2000, between 66 percent and 71 percent of Americans age 18 and older paid personal income taxes. What happened to the share of adult Americans with a personal income tax liability between 2000 and 2009?

Accepted Answer

A) It rose to nearly 90 percent. 
B) It rose to approximately 80 percent. 
C) It was virtually constant at approximately 70 percent. 
D) It fell to 51 percent. 
A) It rose to nearly 90 percent. 
B) It rose to approximately 80 percent. 
C) It was virtually constant at approximately 70 percent. 
D) It fell to 51 percent.

Question 8

The 18ᵗʰ century Scottish philosopher Alexander Tytler argued that democracy

Accepted Answer

A) would survive indefinitely into the future once it was established. 
B) was the only form of government that would be able to control excessive government spending financed by debt. 
C) would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D) would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits. 
A) would survive indefinitely into the future once it was established. 
B) was the only form of government that would be able to control excessive government spending financed by debt. 
C) would tend to collapse from excessive debt once a majority of voters discovered they could vote themselves benefits at the expense of others. 
D) would lead to persistent government surpluses because elected political officials would find the surpluses attractive relative to budget deficits.

Question 9

Under the progressive income tax system in the United States, as real incomes rise,

Accepted Answer

A) a smaller share of income is taxed at higher rates. 
B) there is no change in the share of income taxed at higher rates. 
C) a larger share of income is taxed at higher rates. 
D) none of the above are true. 
A) a smaller share of income is taxed at higher rates. 
B) there is no change in the share of income taxed at higher rates. 
C) a larger share of income is taxed at higher rates. 
D) none of the above are true.

Question 10

The private sector cost of tax revenues is equal to the

Accepted Answer

A) tax revenue collected by government from individuals in the economy. 
B) income that could have been earned by government employees if they had worked in the private sector. 
C) difference between government expenditures and tax revenues. 
D) tax revenue plus the cost of tax compliance and the excess burden of taxation. 
A) tax revenue collected by government from individuals in the economy. 
B) income that could have been earned by government employees if they had worked in the private sector. 
C) difference between government expenditures and tax revenues. 
D) tax revenue plus the cost of tax compliance and the excess burden of taxation.

Question 11

Which of the following provides the bulk of revenue for the federal government?

Accepted Answer

A) corporate income taxes and grants from state and local governments 
B) personal income and payroll taxes 
C) user charges and funds borrowed from the general public 
D) corporate income and sales taxes 
A) corporate income taxes and grants from state and local governments 
B) personal income and payroll taxes 
C) user charges and funds borrowed from the general public 
D) corporate income and sales taxes

Question 12

Which of the following is true?

Accepted Answer

A) In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B) Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C) Real federal spending per person was approximately 80 times greater in 2010 than in 1916. 
D) All of the above are true. 
A) In 1916, the per person real government expenditures were approximately 60 times greater than in 1800. 
B) Prior to 1929, government expenditures at the state and local levels were substantially smaller than federal expenditures. 
C) Real federal spending per person was approximately 80 times greater in 2010 than in 1916. 
D) All of the above are true.

Question 13

Government expenditures as a share of the U.S. economy are

Accepted Answer

A) the largest in the world. 
B) the smallest in the world. 
C) smaller than most Western European countries but larger than a number of high-growth Asian economies. 
D) larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy. 
A) the largest in the world. 
B) the smallest in the world. 
C) smaller than most Western European countries but larger than a number of high-growth Asian economies. 
D) larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy.

Question 14

Economic analysis indicates that growth in the size of government as a share of the economy will

Accepted Answer

A) always reduce economic growth and reduce the living standards of the citizenry. 
B) enhance economic growth and lead to higher income levels as it becomes larger and larger. 
C) initially promote growth as the government focuses on core functions, but deter growth as government becomes larger and larger. 
D) initially reduce economic growth, but eventually government will enhance growth as it becomes larger and larger. 
A) always reduce economic growth and reduce the living standards of the citizenry. 
B) enhance economic growth and lead to higher income levels as it becomes larger and larger. 
C) initially promote growth as the government focuses on core functions, but deter growth as government becomes larger and larger. 
D) initially reduce economic growth, but eventually government will enhance growth as it becomes larger and larger.

Question 15

During the last four decades, the composition of federal spending has

Accepted Answer

A) been virtually unchanged, but federal spending as a share of GDP has declined substantially. 
B) been virtually unchanged, but federal spending as a share of GDP has increased sharply. 
C) shifted away from national defense and toward spending on income transfers and health care. 
D) shifted away from health care and income transfers and toward spending on national defense. 
A) been virtually unchanged, but federal spending as a share of GDP has declined substantially. 
B) been virtually unchanged, but federal spending as a share of GDP has increased sharply. 
C) shifted away from national defense and toward spending on income transfers and health care. 
D) shifted away from health care and income transfers and toward spending on national defense.

Question 16

OECD data for 1960 through 1999 indicates that a 10 percent increase in government expenditures as a percent of GDP

Accepted Answer

A) increases economic growth by about 5 percent. 
B) increases economic growth by about 2 percent. 
C) has no effect on economic growth. 
D) reduces economic growth by about 1 percent. 
A) increases economic growth by about 5 percent. 
B) increases economic growth by about 2 percent. 
C) has no effect on economic growth. 
D) reduces economic growth by about 1 percent.

Question 17

Government expenditures as a percent of GDP in the United States

Accepted Answer

A) are very high in comparison to the rest of the world. 
B) are smaller than for most other high-income industrial countries. 
C) are much smaller today than they were a century ago. 
D) are none of the above. 
A) are very high in comparison to the rest of the world. 
B) are smaller than for most other high-income industrial countries. 
C) are much smaller today than they were a century ago. 
D) are none of the above.

Question 18

At the federal level, which of the following accounts for almost half of all revenue?

Accepted Answer

A) corporate income taxes 
B) retail sales taxes 
C) personal income taxes 
D) cigarette taxes 
A) corporate income taxes 
B) retail sales taxes 
C) personal income taxes 
D) cigarette taxes

Question 19

In 2010, spending on four items-income transfers (including Social Security), health care, national defense, and interest on the national debt-accounted for

Accepted Answer

A) approximately 25 percent of federal spending. 
B) approximately 40 percent of federal spending. 
C) slightly more than 50 percent of federal spending. 
D) approximately 88 percent of federal spending. 
A) approximately 25 percent of federal spending. 
B) approximately 40 percent of federal spending. 
C) slightly more than 50 percent of federal spending. 
D) approximately 88 percent of federal spending.

Question 20

One dollar of tax revenue ends up costing citizens in the economy

Accepted Answer

A) less than one dollar. 
B) exactly one dollar. 
C) more than one dollar. 
D) nothing. 
A) less than one dollar. 
B) exactly one dollar. 
C) more than one dollar. 
D) nothing.

Exam 16: Appendix: Government Spending and Taxation

The Earned Income Tax Credit provides a tax credit or rebate to

Estimates from the U.S. Treasury Department suggest that the typical family in the highest income quintile pays approximately what percent of their total income in federal taxes?

Given the current structure of the Social Security and Medicare programs, the retirement of the baby boom generation during the years following 2010 will be most likely to

Real (adjusted for inflation) federal spending per person in the United States

Measured as a share of the economy, government spending

In 1980, the top 1 percent of earners paid 19.1 percent of the federal personal income tax. By 2008, the share of this tax collected from the top 1 percent of earners

During the quarter of a century prior to 2000, between 66 percent and 71 percent of Americans age 18 and older paid personal income taxes. What happened to the share of adult Americans with a personal income tax liability between 2000 and 2009?

The 18ᵗʰ century Scottish philosopher Alexander Tytler argued that democracy

Under the progressive income tax system in the United States, as real incomes rise,

The private sector cost of tax revenues is equal to the

Which of the following provides the bulk of revenue for the federal government?

Which of the following is true?

Government expenditures as a share of the U.S. economy are

Economic analysis indicates that growth in the size of government as a share of the economy will

During the last four decades, the composition of federal spending has

OECD data for 1960 through 1999 indicates that a 10 percent increase in government expenditures as a percent of GDP

Government expenditures as a percent of GDP in the United States

At the federal level, which of the following accounts for almost half of all revenue?

In 2010, spending on four items-income transfers (including Social Security), health care, national defense, and interest on the national debt-accounted for

One dollar of tax revenue ends up costing citizens in the economy

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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