Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

If a tax takes a constant fraction of income as income rises, it is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  based on the ability-to-pay principle. 
A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  based on the ability-to-pay principle.

Question 3

The three largest categories of spending by the Federal government in order from first to third would be

Accepted Answer

A)  income security, net interest, and national defense 
B)  national defense, net interest, and income security 
C)  income security, health, and national defense 
D)  health, income security, and national defense 
A)  income security, net interest, and national defense 
B)  national defense, net interest, and income security 
C)  income security, health, and national defense 
D)  health, income security, and national defense

Question 4

Over the past 100 years, as the U.S. economy's income has grown,

Accepted Answer

A)  tax rates have decreased, while tax revenues have increased. 
B)  tax rates have increased, while tax revenues have decreased. 
C)  both tax rates and tax revenues have increased. 
D)  both tax rates and tax revenues have decreased. 
A)  tax rates have decreased, while tax revenues have increased. 
B)  tax rates have increased, while tax revenues have decreased. 
C)  both tax rates and tax revenues have increased. 
D)  both tax rates and tax revenues have decreased.

Question 5

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 6

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Accepted Answer

A) True 
 B)False

Question 7

In 1789 the percentage of the average American's income that went to pay taxes was about

Accepted Answer

A)  5%. Today it is about 50%. 
B)  5%. Today it is about 25%. 
C)  50%. Today it is about 33%. 
D)  25%. Today it is about 33%. 
A)  5%. Today it is about 50%. 
B)  5%. Today it is about 25%. 
C)  50%. Today it is about 33%. 
D)  25%. Today it is about 33%.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Both tax avoidance and tax evasion are legal. 
B)  Both tax avoidance and tax evasion are illegal. 
C)  Tax avoidance is legal, whereas tax evasion is illegal. 
D)  Tax avoidance is illegal, whereas tax evasion is legal. 
A)  Both tax avoidance and tax evasion are legal. 
B)  Both tax avoidance and tax evasion are illegal. 
C)  Tax avoidance is legal, whereas tax evasion is illegal. 
D)  Tax avoidance is illegal, whereas tax evasion is legal.

Question 9

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Accepted Answer

A)  an application of the benefits principle of taxation. 
B)  a violation of horizontal equity. 
C)  a violation of vertical equity. 
D)  an application of egalitarian tax rules. 
A)  an application of the benefits principle of taxation. 
B)  a violation of horizontal equity. 
C)  a violation of vertical equity. 
D)  an application of egalitarian tax rules.

Question 10

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Accepted Answer

A)  the increase in life expectancy resulting from advances in healthcare 
B)  an increase in the average number of children per family. 
C)  the increase in the number of jobs lost each year to foreign countries as a result of outsourcing 
D)  the reduction in the number of high-cost medical procedures 
A)  the increase in life expectancy resulting from advances in healthcare 
B)  an increase in the average number of children per family. 
C)  the increase in the number of jobs lost each year to foreign countries as a result of outsourcing 
D)  the reduction in the number of high-cost medical procedures

Question 11

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Accepted Answer

A)  a proportional tax 
B)  a regressive tax 
C)  a progressive tax 
D)  a lump-sum tax 
A)  a proportional tax 
B)  a regressive tax 
C)  a progressive tax 
D)  a lump-sum tax

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

If a tax takes a constant fraction of income as income rises, it is

The three largest categories of spending by the Federal government in order from first to third would be

Over the past 100 years, as the U.S. economy's income has grown,

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

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

In 1789 the percentage of the average American's income that went to pay taxes was about

Which of the following statements is correct?

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

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

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Exam 12: The Design of the Tax System

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

If a tax takes a constant fraction of income as income rises, it is

The three largest categories of spending by the Federal government in order from first to third would be

Over the past 100 years, as the U.S. economy's income has grown,

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

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

In 1789 the percentage of the average American's income that went to pay taxes was about

Which of the following statements is correct?

Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage- interest deduction. This situation exemplifies

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

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

Filters