Question 1

Which of the following statements is correct?

Accepted Answer

A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers. 
A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.

Question 2

The idea that people in equal conditions should pay equal taxes is referred to as

Accepted Answer

A)  horizontal equity. 
B)  vertical equity. 
C)  the ability-to-pay principle. 
D)  the marriage tax. 
A)  horizontal equity. 
B)  vertical equity. 
C)  the ability-to-pay principle. 
D)  the marriage tax.

Question 3

Table 12-13
The following table shows the marginal tax rates for unmarried individuals for two years.
  
-Refer to Table 12-13.Suppose one goal of the tax system was to achieve vertical equity.While people may disagree about what is "equitable," based on the marginal tax rates given for the two years,which of the following statements is true?

Accepted Answer

A)  Vertical equity is possible in both years. 
B)  Vertical equity is possible in 2005 but not in 2006. 
C)  Vertical equity is not possible in 2005 but is possible in 2006. 
D)  Vertical equity is not possible in either year. 
A)  Vertical equity is possible in both years. 
B)  Vertical equity is possible in 2005 but not in 2006. 
C)  Vertical equity is not possible in 2005 but is possible in 2006. 
D)  Vertical equity is not possible in either year.

Question 4

Table 12-2
Consider the tax rates shown in the table below.
  
-Refer to Table 12-2.If Max has taxable income of $227,000,his tax liability is

Accepted Answer

A)  $57,220. 
B)  $60,870. 
C)  $64,980. 
D)  $68,770. 
A)  $57,220. 
B)  $60,870. 
C)  $64,980. 
D)  $68,770.

Question 5

Scenario 12-3.A taxpayer faces the following tax rates on her income:
20 percent of the first $40,000 of her income;
30 percent of all her income above $40,000.
-Refer to Scenario 12-3.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000 
A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000

Question 6

Which of the following statements is correct?

Accepted Answer

A)  National defense and health care are the two largest spending categories for the federal government. 
B)  Welfare programs and highways are the two largest spending categories for state and local governments. 
C)  Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D)  Corporate income taxes are the largest source of revenue for the federal government. 
A)  National defense and health care are the two largest spending categories for the federal government. 
B)  Welfare programs and highways are the two largest spending categories for state and local governments. 
C)  Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D)  Corporate income taxes are the largest source of revenue for the federal government.

Question 7

The U.S.federal government collects taxes in a number of ways.Rank the following sources of revenue from the largest to the smallest.

Accepted Answer

A)  Corporate income taxes,individual income taxes,social insurance taxes 
B)  Social insurance taxes,individual income taxes,corporate income taxes 
C)  Individual income taxes,social insurance taxes,corporate income taxes 
D)  Individual income taxes,corporate income taxes,social insurance taxes 
A)  Corporate income taxes,individual income taxes,social insurance taxes 
B)  Social insurance taxes,individual income taxes,corporate income taxes 
C)  Individual income taxes,social insurance taxes,corporate income taxes 
D)  Individual income taxes,corporate income taxes,social insurance taxes

Question 8

Corporate profits are

Accepted Answer

A)  included in payroll taxes. 
B)  exempt from taxes. 
C)  taxed twice,once as profit and once as dividends. 
D)  taxed to pay for Medicare. 
A)  included in payroll taxes. 
B)  exempt from taxes. 
C)  taxed twice,once as profit and once as dividends. 
D)  taxed to pay for Medicare.

Question 9

From the time of Benjamin Franklin to the present,the percentage of the average American's income that goes to pay taxes

Accepted Answer

A)  has decreased from about 20 percent to about 10 percent. 
B)  has remained constant at about 10 percent. 
C)  has risen from less than 2 percent to about 44.4 percent. 
D)  has risen from less than 5 percent to about 33.3 percent. 
A)  has decreased from about 20 percent to about 10 percent. 
B)  has remained constant at about 10 percent. 
C)  has risen from less than 2 percent to about 44.4 percent. 
D)  has risen from less than 5 percent to about 33.3 percent.

Question 10

Table 12-1
  
-Refer to Table 12-1.If Barb has $126,000 in taxable income,her tax liability will be

Accepted Answer

A)  $27,940. 
B)  $28,270. 
C)  $29,650. 
D)  $35,280. 
A)  $27,940. 
B)  $28,270. 
C)  $29,650. 
D)  $35,280.

Question 11

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Accepted Answer

A) True 
 B)False

Question 12

With a lump-sum tax,the

Accepted Answer

A)  marginal tax rate is always less than the average tax rate. 
B)  average tax rate is always less than the marginal tax rate. 
C)  marginal tax rate falls as income rises. 
D)  marginal tax rate rises as income rises. 
A)  marginal tax rate is always less than the average tax rate. 
B)  average tax rate is always less than the marginal tax rate. 
C)  marginal tax rate falls as income rises. 
D)  marginal tax rate rises as income rises.

Question 13

The public welfare spending category for state and local governments includes

Accepted Answer

A)  many programs that are initiated by private foundations. 
B)  contributions in support of public universities. 
C)  some federal programs that are administered by state and local governments. 
D)  All of the above are correct. 
A)  many programs that are initiated by private foundations. 
B)  contributions in support of public universities. 
C)  some federal programs that are administered by state and local governments. 
D)  All of the above are correct.

Question 14

The average tax rate measures the

Accepted Answer

A)  fraction of spending paid in taxes. 
B)  fraction of income paid in taxes. 
C)  incremental rate of tax on income. 
D)  average deadweight loss from all taxes. 
A)  fraction of spending paid in taxes. 
B)  fraction of income paid in taxes. 
C)  incremental rate of tax on income. 
D)  average deadweight loss from all taxes.

Question 15

The government finances the budget deficit by

Accepted Answer

A)  borrowing from the public. 
B)  borrowing solely from the Federal Reserve Bank. 
C)  printing currency in the amount of the budget deficit. 
D)  requiring that budget surpluses occur every other year to pay off the deficits. 
A)  borrowing from the public. 
B)  borrowing solely from the Federal Reserve Bank. 
C)  printing currency in the amount of the budget deficit. 
D)  requiring that budget surpluses occur every other year to pay off the deficits.

Question 16

A budget surplus occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 17

Table 12-9
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
  
-Refer to Table 12-9.For this tax schedule,what is the marginal tax rate for an invidvidual with $212,000 in taxable income?

Accepted Answer

A)  0% 
B)  1% 
C)  2% 
D)  45% 
A)  0% 
B)  1% 
C)  2% 
D)  45%

Question 18

According to the benefits principle,it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Accepted Answer

A) True 
 B)False

Question 19

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Accepted Answer

A)  Medicare 
B)  Income security 
C)  Guaranteed social eligibility 
D)  Social Security 
A)  Medicare 
B)  Income security 
C)  Guaranteed social eligibility 
D)  Social Security

Question 20

Because the marginal tax rate rises as income rises,

Accepted Answer

A)  higher income families,in general,pay a larger percentage of their income in taxes. 
B)  lower income families,in general,pay a larger percentage of their income in taxes. 
C)  a disproportionately large share of the tax burden falls upon the poor. 
D)  higher income families pay the same percentage of their income in taxes as lower-income families. 
A)  higher income families,in general,pay a larger percentage of their income in taxes. 
B)  lower income families,in general,pay a larger percentage of their income in taxes. 
C)  a disproportionately large share of the tax burden falls upon the poor. 
D)  higher income families pay the same percentage of their income in taxes as lower-income families.

Exam 12: The Design of the Tax System

Which of the following statements is correct?

The idea that people in equal conditions should pay equal taxes is referred to as

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Max has taxable income of $227,000,his tax liability is

Which of the following statements is correct?

The U.S.federal government collects taxes in a number of ways.Rank the following sources of revenue from the largest to the smallest.

Corporate profits are

From the time of Benjamin Franklin to the present,the percentage of the average American's income that goes to pay taxes

Table 12-1 -Refer to Table 12-1.If Barb has $126,000 in taxable income,her tax liability will be

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

With a lump-sum tax,the

The public welfare spending category for state and local governments includes

The average tax rate measures the

The government finances the budget deficit by

A budget surplus occurs when government receipts fall short of government spending.

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the marginal tax rate for an invidvidual with $212,000 in taxable income?

According to the benefits principle,it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Because the marginal tax rate rises as income rises,

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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