Question 1

Social Security contributions are

Accepted Answer

A) a voluntary dollar amount that people contribute towards Social Security. 
B) entirely paid by your employer. 
C) mandatory taxes partially paid out of workers' wages and salaries. 
D) collected only from people earning more than $120,000 a year. 
A) a voluntary dollar amount that people contribute towards Social Security. 
B) entirely paid by your employer. 
C) mandatory taxes partially paid out of workers' wages and salaries. 
D) collected only from people earning more than $120,000 a year.

Question 2

A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis?
 Explain why one approach is better than the other.

Accepted Answer

The government should use dynamic tax an

Question 3

Corporate profits are

Accepted Answer

A) taxed at too low a rate. 
B) taxed only when a stockholder sells his or her shares of stock. 
C) taxed twice-once by the corporate tax system, and again by personal tax system when they are paid to stockholders as dividends. 
D) taxed three times-once by the corporate tax system, again by the personal tax system, and again as capital gains. 
A) taxed at too low a rate. 
B) taxed only when a stockholder sells his or her shares of stock. 
C) taxed twice-once by the corporate tax system, and again by personal tax system when they are paid to stockholders as dividends. 
D) taxed three times-once by the corporate tax system, again by the personal tax system, and again as capital gains.

Question 4

Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns $28,000 a year and Family B earns $65,000 a year. Both receive a ten percent raise. What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

Accepted Answer

A) Family A: 10 percent marginal tax rate and $280 in extra taxes; Family B-30 percent marginal tax rate and $1950 in extra taxes. 
B) Family A: 10 percent marginal tax rate and $420 in extra taxes; Family B-30 percent marginal tax rate and $2275 in extra taxes. 
C) Family A: 20 percent marginal tax rate and $360 in extra taxes; Family B-40 percent marginal tax rate and $2100 in extra taxes. 
D) Family A: 20 percent marginal tax rate and $560 in extra taxes. Family B-40 percent marginal tax rate and $2600 in extra taxes. 
A) Family A: 10 percent marginal tax rate and $280 in extra taxes; Family B-30 percent marginal tax rate and $1950 in extra taxes. 
B) Family A: 10 percent marginal tax rate and $420 in extra taxes; Family B-30 percent marginal tax rate and $2275 in extra taxes. 
C) Family A: 20 percent marginal tax rate and $360 in extra taxes; Family B-40 percent marginal tax rate and $2100 in extra taxes. 
D) Family A: 20 percent marginal tax rate and $560 in extra taxes. Family B-40 percent marginal tax rate and $2600 in extra taxes.

Question 5

Which of the following is TRUE about the effects of an excise tax if consumers are totally unresponsive to price changes?

Accepted Answer

A) Consumers pay all of the excise tax. 
B) Producers pay all of the excise tax. 
C) Consumers and producers share the excise tax equally. 
D) Neither consumers nor producers pay the excise tax. 
A) Consumers pay all of the excise tax. 
B) Producers pay all of the excise tax. 
C) Consumers and producers share the excise tax equally. 
D) Neither consumers nor producers pay the excise tax.

Question 6

Suppose Jill has earned more income this year as compared to what she did last year. Her income tax has also increased. Does it necessarily mean that the income tax system is progressive?
 Explain.

Accepted Answer

No, the amount of income tax can increas

Question 7

A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of

Accepted Answer

A) regressive taxation. 
B) proportional taxation. 
C) progressive taxation. 
D) premium taxation. 
A) regressive taxation. 
B) proportional taxation. 
C) progressive taxation. 
D) premium taxation.

Question 8

An example of ad valorem taxation is

Accepted Answer

A) a luxury tax. 
B) the corporate profit tax. 
C) the personal income tax. 
D) the Social Security tax. 
A) a luxury tax. 
B) the corporate profit tax. 
C) the personal income tax. 
D) the Social Security tax.

Question 9

A capital gain is defined as

Accepted Answer

A) the tax paid when one sells an asset. 
B) the positive difference between the sale price and the purchase price of an asset. 
C) the tax rate one pays when one moves into a higher tax bracket. 
D) an unanticipated increase in income. 
A) the tax paid when one sells an asset. 
B) the positive difference between the sale price and the purchase price of an asset. 
C) the tax rate one pays when one moves into a higher tax bracket. 
D) an unanticipated increase in income.

Question 10

How can we anticipate the proportion of a newly imposed unit excise tax that consumers will pay?

Accepted Answer

A) Consumers will pay most of the tax whenever their demand for a product is relatively unresponsive to price changes. 
B) Consumers will always pay 100 percent of an excise tax. 
C) Consumers will pay most of the tax whenever their demand for the product is very price sensitive. 
D) Since producers always pay 100 percent of an excise tax, we know consumers will not pay any of the tax. 
A) Consumers will pay most of the tax whenever their demand for a product is relatively unresponsive to price changes. 
B) Consumers will always pay 100 percent of an excise tax. 
C) Consumers will pay most of the tax whenever their demand for the product is very price sensitive. 
D) Since producers always pay 100 percent of an excise tax, we know consumers will not pay any of the tax.

Question 11

Social Security taxes are paid by

Accepted Answer

A) employers only. 
B) employees only. 
C) both employers and employees. 
D) neither employers nor employees. 
A) employers only. 
B) employees only. 
C) both employers and employees. 
D) neither employers nor employees.

Question 12

In a proportional income tax system

Accepted Answer

A) marginal tax rates are the same regardless of the level of taxable income. 
B) marginal tax rates increase as the level of taxable income increases. 
C) marginal tax rates decline as the level of taxable income declines. 
D) everyone pays the same dollar amount in taxes. 
A) marginal tax rates are the same regardless of the level of taxable income. 
B) marginal tax rates increase as the level of taxable income increases. 
C) marginal tax rates decline as the level of taxable income declines. 
D) everyone pays the same dollar amount in taxes.

Question 13

The marginal tax rate and the average tax rate are the same under a

Accepted Answer

A) progressive income tax system. 
B) regressive income tax system. 
C) proportional income tax system. 
D) none of the above. 
A) progressive income tax system. 
B) regressive income tax system. 
C) proportional income tax system. 
D) none of the above.

Question 14

Local government expenditures depend on which taxes?

Accepted Answer

A) revenues from licenses and permits 
B) local property, sales, and excise taxes 
C) capital gains taxes 
D) Social Security taxes 
A) revenues from licenses and permits 
B) local property, sales, and excise taxes 
C) capital gains taxes 
D) Social Security taxes

Question 15

Some economists argue that corporate income taxes are typically not paid by firms, but by

Accepted Answer

A) stockholders, employees, and consumers. 
B) the government. 
C) bond holders. 
D) the board of directors of the firm. 
A) stockholders, employees, and consumers. 
B) the government. 
C) bond holders. 
D) the board of directors of the firm.

Question 16

Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns $32,000 a year and Family B earns $70,000 a year. Both families each receive a ten percent raise. What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

Accepted Answer

Family A's new income is $35,200 which f

Question 17

An excise tax on gasoline causes

Accepted Answer

A) supply of gasoline to shift to the left. 
B) a reduction in the quantity of gasoline demanded. 
C) the market clearing price of gasoline to rise. 
D) All of the above are correct. 
A) supply of gasoline to shift to the left. 
B) a reduction in the quantity of gasoline demanded. 
C) the market clearing price of gasoline to rise. 
D) All of the above are correct.

Question 18

"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree?
 Explain.

Accepted Answer

Disagree. In all of the three tax system

Question 19

Dynamic tax analysis is based on the recognition that as tax rates are increased

Accepted Answer

A) tax revenue collections will eventually decline. 
B) tax revenue collections will continually increase. 
C) tax revenue collections will change at the same rate as the tax rates. 
D) tax revenue collections will increase at a faster rate than the tax rate change. 
A) tax revenue collections will eventually decline. 
B) tax revenue collections will continually increase. 
C) tax revenue collections will change at the same rate as the tax rates. 
D) tax revenue collections will increase at a faster rate than the tax rate change.

Question 20

A friend tells you he is studying the incidence of the corporate income tax. What is the subject of his study?

Accepted Answer

A) how frequently corporations should be taxed 
B) how inflation affects the amount of tax revenue collected from firms 
C) how corporations can aid the government in collecting delinquent taxes 
D) how the burden of corporate taxation is distributed among stockholders, employees, and consumers 
A) how frequently corporations should be taxed 
B) how inflation affects the amount of tax revenue collected from firms 
C) how corporations can aid the government in collecting delinquent taxes 
D) how the burden of corporate taxation is distributed among stockholders, employees, and consumers

Social Security contributions are

A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

Corporate profits are

Which of the following is TRUE about the effects of an excise tax if consumers are totally unresponsive to price changes?

Suppose Jill has earned more income this year as compared to what she did last year. Her income tax has also increased. Does it necessarily mean that the income tax system is progressive? Explain.

A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of

An example of ad valorem taxation is

A capital gain is defined as

How can we anticipate the proportion of a newly imposed unit excise tax that consumers will pay?

Social Security taxes are paid by

In a proportional income tax system

The marginal tax rate and the average tax rate are the same under a

Local government expenditures depend on which taxes?

Some economists argue that corporate income taxes are typically not paid by firms, but by

An excise tax on gasoline causes

"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain.

Dynamic tax analysis is based on the recognition that as tax rates are increased

A friend tells you he is studying the incidence of the corporate income tax. What is the subject of his study?

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

Exam 6: Funding the Public Sector

Social Security contributions are

A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

Corporate profits are

Which of the following is TRUE about the effects of an excise tax if consumers are totally unresponsive to price changes?

Suppose Jill has earned more income this year as compared to what she did last year. Her income tax has also increased. Does it necessarily mean that the income tax system is progressive? Explain.

A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of

An example of ad valorem taxation is

A capital gain is defined as

How can we anticipate the proportion of a newly imposed unit excise tax that consumers will pay?

Social Security taxes are paid by

In a proportional income tax system

The marginal tax rate and the average tax rate are the same under a

Local government expenditures depend on which taxes?

Some economists argue that corporate income taxes are typically not paid by firms, but by

An excise tax on gasoline causes

"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain.

Dynamic tax analysis is based on the recognition that as tax rates are increased

A friend tells you he is studying the incidence of the corporate income tax. What is the subject of his study?

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