Question 1

Measured as a share of the economy, government expenditures on ____ have declined during the last four decades.

Accepted Answer

A) health care 
B) national defense 
C) transfer payments 
D) Social Security benefits 
A) health care 
B) national defense 
C) transfer payments 
D) Social Security benefits

Question 2

Which of the following is true?

Accepted Answer

A) Real federal spending per person was approximately 50 times higher in 1900 than 1800. 
B) Real federal spending per person was approximately 80 times higher in 2010 than 1916. 
C) Real federal spending per person grew slowly under the Reagan Administration during the 1980s, but it increased rapidly under the Clinton administration in the 1990s. 
D) In recent years, government expenditures at the state and local levels have been greater than government spending at the federal level. 
A) Real federal spending per person was approximately 50 times higher in 1900 than 1800. 
B) Real federal spending per person was approximately 80 times higher in 2010 than 1916. 
C) Real federal spending per person grew slowly under the Reagan Administration during the 1980s, but it increased rapidly under the Clinton administration in the 1990s. 
D) In recent years, government expenditures at the state and local levels have been greater than government spending at the federal level.

Question 3

The share of the personal income tax paid by the bottom half of earners

Accepted Answer

A) rose to an all-time high in 2008. 
B) was substantially higher in 2008 than during the 1960s and 1970s. 
C) was substantially lower in 2008 than during the 1960s and 1970s. 
D) has been relatively constant during the last four decades. 
A) rose to an all-time high in 2008. 
B) was substantially higher in 2008 than during the 1960s and 1970s. 
C) was substantially lower in 2008 than during the 1960s and 1970s. 
D) has been relatively constant during the last four decades.

Question 4

Because of which provision in the tax code did more than one-third of all taxpayers either have a zero tax liability or actually receive money from the IRS in 2006?

Accepted Answer

A) Earned Income Tax Credit 
B) Standard Deduction 
C) Marginal Tax Rate 
D) Families with Low Income Credit 
A) Earned Income Tax Credit 
B) Standard Deduction 
C) Marginal Tax Rate 
D) Families with Low Income Credit

Question 5

Government expenditures for Social Security and unemployment benefits are examples of

Accepted Answer

A) government consumption. 
B) government investment. 
C) government purchases. 
D) transfer payments. 
A) government consumption. 
B) government investment. 
C) government purchases. 
D) transfer payments.

Question 6

Which of the following is the largest source of revenue for the federal government?

Accepted Answer

A) corporate income tax 
B) payroll tax 
C) personal income tax 
D) user charges 
A) corporate income tax 
B) payroll tax 
C) personal income tax 
D) user charges

Question 7

Expansion in the size of government relative to the market sector will eventually retard economic growth because

Accepted Answer

A) larger governments will be more involved in activities for which they are ill-suited. 
B) the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation. 
C) the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector. 
D) all of the above are correct. 
A) larger governments will be more involved in activities for which they are ill-suited. 
B) the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation. 
C) the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector. 
D) all of the above are correct.

Question 8

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level(s).

Accepted Answer

A) a smaller; federal 
B) about the same; federal 
C) a larger; federal 
D) a larger; state and local 
A) a smaller; federal 
B) about the same; federal 
C) a larger; federal 
D) a larger; state and local

Question 9

Which of the following is true regarding U.S. federal government expenditures?

Accepted Answer

A) National defense has fallen from 52.2 percent of the federal budget in 1960 to 21 percent in 2008. 
B) Federal expenditures on income transfers and health care have risen from 21.5 percent of the budget in 1960 to 57.7 percent in 2008. 
C) Corrected for inflation, the average person today pays more federal taxes in one week than the average person in 1900 paid in an entire year. 
D) All of the above are true. 
A) National defense has fallen from 52.2 percent of the federal budget in 1960 to 21 percent in 2008. 
B) Federal expenditures on income transfers and health care have risen from 21.5 percent of the budget in 1960 to 57.7 percent in 2008. 
C) Corrected for inflation, the average person today pays more federal taxes in one week than the average person in 1900 paid in an entire year. 
D) All of the above are true.

Question 10

"I am in favor of increasing the corporate income tax. Businesses should shoulder a larger share of the tax burden." This statement is

Accepted Answer

A) essentially correct. 
B) false; businesses already shoulder most of the tax burden in the United States. 
C) false; economic analysis indicates that the individual should pay more taxes and businesses less. 
D) misleading; all taxes, including those levied on businesses, are paid by people. 
A) essentially correct. 
B) false; businesses already shoulder most of the tax burden in the United States. 
C) false; economic analysis indicates that the individual should pay more taxes and businesses less. 
D) misleading; all taxes, including those levied on businesses, are paid by people.

Question 11

Between 1960 and 2010, the share of federal spending allocated to national defense

Accepted Answer

A) declined sharply, while the share allocated to health care increased substantially. 
B) rose sharply, while the share allocated to health care declined substantially. 
C) was relatively constant, while the share allocated to health care declined modestly. 
D) declined modestly, while the share allocated to health care was relatively constant. 
A) declined sharply, while the share allocated to health care increased substantially. 
B) rose sharply, while the share allocated to health care declined substantially. 
C) was relatively constant, while the share allocated to health care declined modestly. 
D) declined modestly, while the share allocated to health care was relatively constant.

Question 12

During the last four decades, defense expenditures have

Accepted Answer

A) accounted for approximately one-half of federal expenditures. 
B) accounted for less than 10 percent of federal expenditures. 
C) been increasing as a share of federal expenditures. 
D) been declining as a share of federal expenditures. 
A) accounted for approximately one-half of federal expenditures. 
B) accounted for less than 10 percent of federal expenditures. 
C) been increasing as a share of federal expenditures. 
D) been declining as a share of federal expenditures.

Question 13

A tax dollar collected from an individual or a business costs the private economy more than a dollar because

Accepted Answer

A) the administration and enforcement of the tax system is costly. 
B) record keeping and the other elements of compliance cost are sizable. 
C) the taxes will eliminate some productive exchanges (and cause people to undertake some counterproductive activities). 
D) All of the above are correct. 
A) the administration and enforcement of the tax system is costly. 
B) record keeping and the other elements of compliance cost are sizable. 
C) the taxes will eliminate some productive exchanges (and cause people to undertake some counterproductive activities). 
D) All of the above are correct.

Question 14

From the viewpoint of the entire economy, the cost of government is

Accepted Answer

A) equal to the amount of taxes collected. 
B) greater than the amount of taxes collected. 
C) less than the amount of taxes collected. 
D) equal to the level of government expenditures. 
A) equal to the amount of taxes collected. 
B) greater than the amount of taxes collected. 
C) less than the amount of taxes collected. 
D) equal to the level of government expenditures.

Question 15

In 2006, the income tax payments of the richest 1 percent of Americans accounted for approximately what percent of all federal income tax revenue?

Accepted Answer

A) 1 percent 
B) 17 percent 
C) 40 percent 
D) 57 percent 
A) 1 percent 
B) 17 percent 
C) 40 percent 
D) 57 percent

Question 16

The share of Americans who pay no personal income tax

Accepted Answer

A) has been relatively constant at approximately 33 percent throughout 1975-2009. 
B) was relatively constant near 33 percent between 1975 and 2000, but it has increased during the past decade, reaching nearly half of adult Americans in 2009. 
C) was relatively constant near 33 percent between 1975 and 2000, but it has fallen during the past decade, receding to only 18 percent in 2009. 
D) rose steadily from 18 percent in 1975 to nearly 50 percent of adult Americans in 2000, but it receded to less than 40 percent in 2009. 
A) has been relatively constant at approximately 33 percent throughout 1975-2009. 
B) was relatively constant near 33 percent between 1975 and 2000, but it has increased during the past decade, reaching nearly half of adult Americans in 2009. 
C) was relatively constant near 33 percent between 1975 and 2000, but it has fallen during the past decade, receding to only 18 percent in 2009. 
D) rose steadily from 18 percent in 1975 to nearly 50 percent of adult Americans in 2000, but it receded to less than 40 percent in 2009.

Question 17

Discuss how size of government can negatively affect economic growth.

Accepted Answer

First, higher taxes and/or additional bo

Question 18

As government becomes larger and larger as a share of the economy, economic growth is likely to decline because

Accepted Answer

A) taxes are reduced to levels that are inconsistent with economic efficiency. 
B) governments are involved in many activities for which they are ill-suited. 
C) tax-transfer activities are reduced and sometimes virtually eliminated. 
D) governments do not spend enough on the provision of key public goods like education. 
A) taxes are reduced to levels that are inconsistent with economic efficiency. 
B) governments are involved in many activities for which they are ill-suited. 
C) tax-transfer activities are reduced and sometimes virtually eliminated. 
D) governments do not spend enough on the provision of key public goods like education.

Question 19

The overall federal tax structure is

Accepted Answer

A) regressive because the average tax rate of those with low incomes is higher than the rate imposed on those with higher incomes. 
B) progressive because the average tax rate of those with high incomes is greater than the rate imposed on those with lower incomes. 
C) flat because the average tax rate is approximately constant across all income brackets. 
D) progressive for income levels up to approximately $100,000 but regressive for income levels above this figure. 
A) regressive because the average tax rate of those with low incomes is higher than the rate imposed on those with higher incomes. 
B) progressive because the average tax rate of those with high incomes is greater than the rate imposed on those with lower incomes. 
C) flat because the average tax rate is approximately constant across all income brackets. 
D) progressive for income levels up to approximately $100,000 but regressive for income levels above this figure.

Question 20

In a democratic setting, debt financing is attractive to elected political officials because

Accepted Answer

A) it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. 
B) it drives up interest rates, which encourages saving. 
C) it leads to higher taxes in the future, which will tend to slow economic growth. 
D) it makes the cost of government more visible, which will help voters allocate government spending more efficiently. 
A) it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. 
B) it drives up interest rates, which encourages saving. 
C) it leads to higher taxes in the future, which will tend to slow economic growth. 
D) it makes the cost of government more visible, which will help voters allocate government spending more efficiently.

Exam 16: Appendix: Government Spending and Taxation

Measured as a share of the economy, government expenditures on ____ have declined during the last four decades.

Which of the following is true?

The share of the personal income tax paid by the bottom half of earners

Because of which provision in the tax code did more than one-third of all taxpayers either have a zero tax liability or actually receive money from the IRS in 2006?

Government expenditures for Social Security and unemployment benefits are examples of

Which of the following is the largest source of revenue for the federal government?

Expansion in the size of government relative to the market sector will eventually retard economic growth because

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level(s).

Which of the following is true regarding U.S. federal government expenditures?

"I am in favor of increasing the corporate income tax. Businesses should shoulder a larger share of the tax burden." This statement is

Between 1960 and 2010, the share of federal spending allocated to national defense

During the last four decades, defense expenditures have

A tax dollar collected from an individual or a business costs the private economy more than a dollar because

From the viewpoint of the entire economy, the cost of government is

In 2006, the income tax payments of the richest 1 percent of Americans accounted for approximately what percent of all federal income tax revenue?

The share of Americans who pay no personal income tax

Discuss how size of government can negatively affect economic growth.

As government becomes larger and larger as a share of the economy, economic growth is likely to decline because

The overall federal tax structure is

In a democratic setting, debt financing is attractive to elected political officials because

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

Filters

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are share of the economy, and a greater proportion of those expenditures take place at the level(s).