Question 1

The largest source of local government's revenue is the sales tax.

Accepted Answer

A) True 
 B)False

Question 2

Property taxes are

Accepted Answer

A)  collected primarily at the federal level. 
B)  the largest source of tax revenue for local governments. 
C)  the primary source of federal revenue-sharing funds. 
D)  used primarily by states to finance state welfare programs. 
A)  collected primarily at the federal level. 
B)  the largest source of tax revenue for local governments. 
C)  the primary source of federal revenue-sharing funds. 
D)  used primarily by states to finance state welfare programs.

Question 3

The federal tax system is

Accepted Answer

A)  proportional, while state and local tax structures are largely progressive. 
B)  progressive, while state and local tax structures are largely regressive. 
C)  regressive, while state and local tax structures are largely proportional. 
D)  regressive, while state and local tax structures are largely progressive. 
A)  proportional, while state and local tax structures are largely progressive. 
B)  progressive, while state and local tax structures are largely regressive. 
C)  regressive, while state and local tax structures are largely proportional. 
D)  regressive, while state and local tax structures are largely progressive.

Question 4

The maximum federal marginal tax rate on taxable personal income is, as of 2016,

Accepted Answer

A)  50 percent. 
B)  39.6 percent. 
C)  35 percent. 
D)  28 percent. 
A)  50 percent. 
B)  39.6 percent. 
C)  35 percent. 
D)  28 percent.

Question 5

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

Accepted Answer

A)  20 percent. 
B)  25 percent. 
C)  30 percent. 
D)  40 percent. 
A)  20 percent. 
B)  25 percent. 
C)  30 percent. 
D)  40 percent.

Question 6

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

Accepted Answer

A) True 
 B)False

Question 7

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

Accepted Answer

A)  23.4 percent 
B)  37.8 percent 
C)  39.6 percent 
D)  58.5 percent 
A)  23.4 percent 
B)  37.8 percent 
C)  39.6 percent 
D)  58.5 percent

Question 8

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers) in the U.S. was about

Accepted Answer

A)  10 percent of the economy's total output. 
B)  33 percent of the economy's total output. 
C)  60 percent of the economy's total output. 
D)  75 percent of the economy's total output. 
A)  10 percent of the economy's total output. 
B)  33 percent of the economy's total output. 
C)  60 percent of the economy's total output. 
D)  75 percent of the economy's total output.

Question 9

If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

Accepted Answer

A)  40 percent, and the average tax rate is about 23 percent at the $30,000 income level. 
B)  50 percent, and the average tax rate is 40 percent at the $30,000 income level. 
C)  40 percent, and the average tax rate is 25 percent at the $25,000 income level. 
D)  30 percent, but average tax rates cannot be determined from the information given. 
A)  40 percent, and the average tax rate is about 23 percent at the $30,000 income level. 
B)  50 percent, and the average tax rate is 40 percent at the $30,000 income level. 
C)  40 percent, and the average tax rate is 25 percent at the $25,000 income level. 
D)  30 percent, but average tax rates cannot be determined from the information given.

Question 10

The federal income tax is consistent with the principle of taxation, whereas an excise tax on sporting event tickets is consistent with the principle of taxation.

Accepted Answer

A)  benefits-received; ability-to-pay 
B)  benefits-received; pay-as-you-go 
C)  ability-to-pay; benefits-received 
D)  ability-to-pay; pay-as-you-go 
A)  benefits-received; ability-to-pay 
B)  benefits-received; pay-as-you-go 
C)  ability-to-pay; benefits-received 
D)  ability-to-pay; pay-as-you-go

Question 11

Taxes on commodities or on purchases are known as

Accepted Answer

A)  corporate income taxes. 
B)  sales and excise taxes. 
C)  personal income taxes. 
D)  payroll taxes. 
A)  corporate income taxes. 
B)  sales and excise taxes. 
C)  personal income taxes. 
D)  payroll taxes.

Question 12

127. (Last Word) In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Accepted Answer

A)  zero 
B)  10 
C)  15 
D)  22 
A)  zero 
B)  10 
C)  15 
D)  22

Question 13

The benefits-received principle of taxation is

Accepted Answer

A)  the basis for the gasoline tax. 
B)  easy to apply because benefits received are conveniently measurable. 
C)  applied in income-redistribution programs. 
D)  the principle behind the income tax system. 
A)  the basis for the gasoline tax. 
B)  easy to apply because benefits received are conveniently measurable. 
C)  applied in income-redistribution programs. 
D)  the principle behind the income tax system.

Question 14

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

Accepted Answer

A)  transfer payments such as social security benefits. 
B)  subsidies to farmers, airlines, and others. 
C)  proprietary income generated by public utilities and state lotteries. 
D)  salaries to military personnel, public school teachers, and government inspectors. 
A)  transfer payments such as social security benefits. 
B)  subsidies to farmers, airlines, and others. 
C)  proprietary income generated by public utilities and state lotteries. 
D)  salaries to military personnel, public school teachers, and government inspectors.

Question 15

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the

Accepted Answer

A)  ability-to-pay principle of taxation. 
B)  benefits-received principle of taxation. 
C)  single-tax theory of taxation. 
D)  pay-as-you-go theory of taxation. 
A)  ability-to-pay principle of taxation. 
B)  benefits-received principle of taxation. 
C)  single-tax theory of taxation. 
D)  pay-as-you-go theory of taxation.

Question 16

The incidence of taxation refers to

Accepted Answer

A)  who in society actually pays a tax. 
B)  the structure of basic income tax rates. 
C)  whether taxes are progressive or regressive. 
D)  whether or not the benefits-received principle applies. 
A)  who in society actually pays a tax. 
B)  the structure of basic income tax rates. 
C)  whether taxes are progressive or regressive. 
D)  whether or not the benefits-received principle applies.

Question 17

Which of the following is the largest expenditure item of state governments?

Accepted Answer

A)  education 
B)  highways 
C)  welfare payments 
D)  health and hospitals 
A)  education 
B)  highways 
C)  welfare payments 
D)  health and hospitals

Question 18

Using income as the tax base, which of the following best illustrates a regressive tax?

Accepted Answer

A)  the federal inheritance tax 
B)  a 7 percent general sales tax 
C)  the corporate income tax 
D)  the personal income tax 
A)  the federal inheritance tax 
B)  a 7 percent general sales tax 
C)  the corporate income tax 
D)  the personal income tax

Question 19

If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of

Accepted Answer

A)  a progressive tax. 
B)  a regressive tax. 
C)  the ability-to-pay principle of taxation. 
D)  the benefits-received principle of taxation. 
A)  a progressive tax. 
B)  a regressive tax. 
C)  the ability-to-pay principle of taxation. 
D)  the benefits-received principle of taxation.

Question 20

129. (Last Word) Which of the following statements about taxes and government spending is correct?

Accepted Answer

A)  Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive. 
B)  The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional. 
C)  The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional. 
D)  The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households. 
A)  Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive. 
B)  The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional. 
C)  The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional. 
D)  The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households.

Exam 20: Public Finance: Expenditures and Taxes

The largest source of local government's revenue is the sales tax.

Property taxes are

The federal tax system is

The maximum federal marginal tax rate on taxable personal income is, as of 2016,

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

According to data compiled by the Bureau of Economic Analysis, in 2015, total government spending (comprising purchases and transfers) in the U.S. was about

If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

The federal income tax is consistent with the principle of taxation, whereas an excise tax on sporting event tickets is consistent with the principle of taxation.

Taxes on commodities or on purchases are known as

127. (Last Word) In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

The benefits-received principle of taxation is

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the

The incidence of taxation refers to

Which of the following is the largest expenditure item of state governments?

Using income as the tax base, which of the following best illustrates a regressive tax?

If government levies a tax or fee on hunting licenses and uses the resulting revenue for wildlife stocking programs, this would be an example of

129. (Last Word) Which of the following statements about taxes and government spending is correct?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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