Question 1

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if static tax analysis is used?

Accepted Answer

A) Panel 1 
B) Panel 2 
C) Panel 3 
D) Panel 4 
A) Panel 1 
B) Panel 2 
C) Panel 3 
D) Panel 4

Question 2

If a tax system is progressive, then

Accepted Answer

A) the average and the marginal tax rates are equal. 
B) the marginal tax rate is greater than the average tax rate as income rises. 
C) the marginal tax rate is lower than the average tax rate as income rises. 
D) the average tax rate is constant, but the dollar amount paid in taxes increases as income increases. 
A) the average and the marginal tax rates are equal. 
B) the marginal tax rate is greater than the average tax rate as income rises. 
C) the marginal tax rate is lower than the average tax rate as income rises. 
D) the average tax rate is constant, but the dollar amount paid in taxes increases as income increases.

Question 3

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,500 in income taxes. In this situation, the income tax system is

Accepted Answer

A) progressive. 
B) regressive. 
C) proportional. 
D) one of the above but we cannot tell which one without more information. 
A) progressive. 
B) regressive. 
C) proportional. 
D) one of the above but we cannot tell which one without more information.

Question 4

The average tax rate can be calculated by which of the following formulas?

Accepted Answer

A) the change in taxes due divided by the change in taxable income 
B) the change in taxable income divided by the change in taxes due 
C) total taxes due divided by total taxable income 
D) total taxable income divided by total taxes due 
A) the change in taxes due divided by the change in taxable income 
B) the change in taxable income divided by the change in taxes due 
C) total taxes due divided by total taxable income 
D) total taxable income divided by total taxes due

Question 5

If a state government wants to collect the maximum tax revenue from a unit excise tax, which of the following would they tax?

Accepted Answer

A) cigarettes 
B) beef hamburgers 
C) luxury cars 
D) concert t-shirts 
A) cigarettes 
B) beef hamburgers 
C) luxury cars 
D) concert t-shirts

Question 6

Tax incidence refers to

Accepted Answer

A) determining who sends the taxes into the government. 
B) the tendency of some people to avoid paying taxes at all. 
C) the distribution of tax burdens among groups, or who really pays a tax. 
D) determining the marginal tax rate applied to any increase in income. 
A) determining who sends the taxes into the government. 
B) the tendency of some people to avoid paying taxes at all. 
C) the distribution of tax burdens among groups, or who really pays a tax. 
D) determining the marginal tax rate applied to any increase in income.

Question 7

The average tax rate is defined as

Accepted Answer

A) total tax due/change in taxable income. 
B) total tax due/total taxable income. 
C) change in taxes due/change in taxable income. 
D) change in taxes due/total taxable income. 
A) total tax due/change in taxable income. 
B) total tax due/total taxable income. 
C) change in taxes due/change in taxable income. 
D) change in taxes due/total taxable income.

Question 8

The Mayor of Stuckeyville is considering increasing the tax on bowling. He is confident that tax revenues will increase but recognizes the possibility that they may decrease. The mayor is engaging in

Accepted Answer

A) dynamic tax analysis. 
B) static tax analysis. 
C) a policy that will cause the tax base to increase. 
D) a policy that will cause the tax base to remain unchanged. 
A) dynamic tax analysis. 
B) static tax analysis. 
C) a policy that will cause the tax base to increase. 
D) a policy that will cause the tax base to remain unchanged.

Question 9

-Using the above table, a unit tax of $2 is imposed on the product. How much of the tax is paid by the consumer?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) unable to determine 
A) $1 
B) $2 
C) $3 
D) unable to determine

Question 10

The marginal income tax rate is equal to

Accepted Answer

A) the total tax payment divided by total income. 
B) the change in the tax payment divided by the change in income. 
C) the average tax payment divided by the total tax payment. 
D) the percent of total income that goes to taxes. 
A) the total tax payment divided by total income. 
B) the change in the tax payment divided by the change in income. 
C) the average tax payment divided by the total tax payment. 
D) the percent of total income that goes to taxes.

Question 11

The largest share of federal government tax receipts is derived from

Accepted Answer

A) corporate income taxes. 
B) excise taxes. 
C) social insurance contributions. 
D) individual income taxes. 
A) corporate income taxes. 
B) excise taxes. 
C) social insurance contributions. 
D) individual income taxes.

Question 12

Explain how corporate profits are taxed twice.

Accepted Answer

Corporate profits are taxed by the corpo

Question 13

When a unit tax of $2 is levied on a product

Accepted Answer

A) the entire $2 is paid by the consumer. 
B) the entire $2 is paid by the producer. 
C) both the consumer and producer pay $2 each. 
D) the consumer pays part of the $2 and the producer pays the rest. 
A) the entire $2 is paid by the consumer. 
B) the entire $2 is paid by the producer. 
C) both the consumer and producer pay $2 each. 
D) the consumer pays part of the $2 and the producer pays the rest.

Question 14

A current concern about Social Security is that

Accepted Answer

A) funds set aside by past generations to pay benefits for future generations are growing too rapidly and may trigger inflation. 
B) promised benefit payouts are growing more rapidly than likely sources of revenues, indicating a future inability to keep the system operating. 
C) continued political bickering between the president and Congress could lead to an end to any funding of the program. 
D) the payroll taxes used to fund the program are being eliminated as part of an effort to generate employment increases, thus leaving the program bankrupt. 
A) funds set aside by past generations to pay benefits for future generations are growing too rapidly and may trigger inflation. 
B) promised benefit payouts are growing more rapidly than likely sources of revenues, indicating a future inability to keep the system operating. 
C) continued political bickering between the president and Congress could lead to an end to any funding of the program. 
D) the payroll taxes used to fund the program are being eliminated as part of an effort to generate employment increases, thus leaving the program bankrupt.

Question 15

The reason a corporation has retained earnings is to

Accepted Answer

A) pay unemployment taxes. 
B) make investments that will increase the value of the stock. 
C) avoid the double taxation of corporate profits. 
D) be able to make unemployment payments. 
A) pay unemployment taxes. 
B) make investments that will increase the value of the stock. 
C) avoid the double taxation of corporate profits. 
D) be able to make unemployment payments.

Question 16

All of the following are possible funding sources for the government EXCEPT

Accepted Answer

A) user charges. 
B) taxes. 
C) interest income collected from government bonds. 
D) borrowing. 
A) user charges. 
B) taxes. 
C) interest income collected from government bonds. 
D) borrowing.

Question 17

Social Security taxes are regressive because

Accepted Answer

A) they apply only to rich people. 
B) they are not applied to income beyond a certain amount. 
C) they are applied to welfare recipients. 
D) they are applied to retired people only. 
A) they apply only to rich people. 
B) they are not applied to income beyond a certain amount. 
C) they are applied to welfare recipients. 
D) they are applied to retired people only.

Question 18

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be

Accepted Answer

A) $39,200. 
B) $16,800. 
C) indeterminate without knowing the inflation rate. 
D) indeterminate without knowing the personal income tax rate. 
A) $39,200. 
B) $16,800. 
C) indeterminate without knowing the inflation rate. 
D) indeterminate without knowing the personal income tax rate.

Question 19

Which of the following statements about taxation is TRUE?

Accepted Answer

A) Increasing taxes will always increase tax revenues. 
B) Static tax analysis recognizes that an increase in taxation could lead to a decrease in tax revenues. 
C) Dynamic tax analysis assumes that an increase in taxation will leave the tax base unchanged. 
D) There is a tax rate at which tax revenues are maximized. 
A) Increasing taxes will always increase tax revenues. 
B) Static tax analysis recognizes that an increase in taxation could lead to a decrease in tax revenues. 
C) Dynamic tax analysis assumes that an increase in taxation will leave the tax base unchanged. 
D) There is a tax rate at which tax revenues are maximized.

Question 20

A unit tax of $1 will always

Accepted Answer

A) shift the supply curve upward by more than $1. 
B) shift the supply curve upward by less than $1. 
C) shift the supply curve up by exactly $1. 
D) leave the supply curve unchanged. 
A) shift the supply curve upward by more than $1. 
B) shift the supply curve upward by less than $1. 
C) shift the supply curve up by exactly $1. 
D) leave the supply curve unchanged.

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if static tax analysis is used?

If a tax system is progressive, then

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,500 in income taxes. In this situation, the income tax system is

The average tax rate can be calculated by which of the following formulas?

If a state government wants to collect the maximum tax revenue from a unit excise tax, which of the following would they tax?

Tax incidence refers to

The average tax rate is defined as

The Mayor of Stuckeyville is considering increasing the tax on bowling. He is confident that tax revenues will increase but recognizes the possibility that they may decrease. The mayor is engaging in

-Using the above table, a unit tax of $2 is imposed on the product. How much of the tax is paid by the consumer?

The marginal income tax rate is equal to

The largest share of federal government tax receipts is derived from

Explain how corporate profits are taxed twice.

When a unit tax of $2 is levied on a product

A current concern about Social Security is that

The reason a corporation has retained earnings is to

All of the following are possible funding sources for the government EXCEPT

Social Security taxes are regressive because

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be

Which of the following statements about taxation is TRUE?

A unit tax of $1 will always

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 6: Funding the Public Sector

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if static tax analysis is used?

If a tax system is progressive, then

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,500 in income taxes. In this situation, the income tax system is

The average tax rate can be calculated by which of the following formulas?

If a state government wants to collect the maximum tax revenue from a unit excise tax, which of the following would they tax?

Tax incidence refers to

The average tax rate is defined as

The Mayor of Stuckeyville is considering increasing the tax on bowling. He is confident that tax revenues will increase but recognizes the possibility that they may decrease. The mayor is engaging in

-Using the above table, a unit tax of $2 is imposed on the product. How much of the tax is paid by the consumer?

The marginal income tax rate is equal to

The largest share of federal government tax receipts is derived from

Explain how corporate profits are taxed twice.

When a unit tax of $2 is levied on a product

A current concern about Social Security is that

The reason a corporation has retained earnings is to

All of the following are possible funding sources for the government EXCEPT

Social Security taxes are regressive because

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be

Which of the following statements about taxation is TRUE?

A unit tax of $1 will always

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters