Question 1

Most of the burden of Social Security taxes falls on workers.

Accepted Answer

A) True 
 B)False  True

Question 2

Measured in terms of dollars paid out,Social Security is the largest single government program in the world.

Accepted Answer

A) True 
 B)False  True

Question 3

Except for the 1990s,the federal deficit has shown a rising trend over time.Does it mean that the U.S.government will go bankrupt soon? If so,explain why? If not,then what are many economists worried about?

Accepted Answer

Bankruptcy means that an entity is no longer able to meet its financial obligations.With the power to tax and borrow and print money,bankruptcy seems unlikely for the United States.It is also important to take the growing size of the economy into consideration.Despite the rising trend in its absolute size,the U.S.government deficit as a percentage of GDP has been rather stable.Similarly,the debt-to-GDP ratio has been quite stable historically.However,many economists are worried about the future trends of these ratios.Programs such as Social Security,Medicare,and Medicaid are already the largest in terms of government spending and will continue to grow even larger as the population ages in the United States.This will allow total spending to continue to rise at a rate faster than the rate of total revenue without significant changes in these programs and/or taxes.This means that the debt-to-GDP ratio will continue to rise over time unless the tax and spending trends change significantly in the future.Without change we may not be able to tax and borrow enough and printing enough money would be disastrous in terms of the potential inflation it would cause.

Question 4

The main forces driving the projections of exponential debt growth in the future are recessions and the rising costs of the welfare programs.

Accepted Answer

A) True 
 B)False

Question 5

The tax rate paid on an additional dollar of income is called the:

Accepted Answer

A)  last tax rate. 
B)  marginal tax rate. 
C)  total tax rate. 
D)  average tax rate. 
A)  last tax rate. 
B)  marginal tax rate. 
C)  total tax rate. 
D)  average tax rate.

Question 6

Which of the following statements about Medicare taxes is TRUE?

Accepted Answer

A)  People who are self-employed do not share the burden of this tax with employers. 
B)  People who own their own businesses do not have to pay this tax on themselves. 
C)  Medicare taxes are larger in percentage terms than Social Security taxes. 
D)  Medicare taxes are used to provide free medical care for children. 
A)  People who are self-employed do not share the burden of this tax with employers. 
B)  People who own their own businesses do not have to pay this tax on themselves. 
C)  Medicare taxes are larger in percentage terms than Social Security taxes. 
D)  Medicare taxes are used to provide free medical care for children.

Question 7

Which statement about individual income taxes in the United States is TRUE?

Accepted Answer

A)  All individuals pay the same average tax rate. 
B)  There is a huge difference in the tax rate paid within each bracket. 
C)  Taxes rates include and vary between 10% and 91%. 
D)  Marginal tax rates are flatter and lower today than in the past. 
A)  All individuals pay the same average tax rate. 
B)  There is a huge difference in the tax rate paid within each bracket. 
C)  Taxes rates include and vary between 10% and 91%. 
D)  Marginal tax rates are flatter and lower today than in the past.

Question 8

The national debt held by the public increases when the federal government runs a deficit.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is TRUE when measuring the role of the government in an economy by the amount of its government spending?

Accepted Answer

A)  The amount of government spending overstates the role of the government in the economy because it ignores the costs associated with corruption in the government. 
B)  The amount of government spending understates the role of the government in an economy because of the effects of government policies on economic activity. 
C)  The amount of government spending overstates the role of the government in the economy because most government actions have negative effects on free markets. 
D)  Government spending is not related to the role of government in the economy because most government actions are motivated by politics. 
A)  The amount of government spending overstates the role of the government in the economy because it ignores the costs associated with corruption in the government. 
B)  The amount of government spending understates the role of the government in an economy because of the effects of government policies on economic activity. 
C)  The amount of government spending overstates the role of the government in the economy because most government actions have negative effects on free markets. 
D)  Government spending is not related to the role of government in the economy because most government actions are motivated by politics.

Question 10

A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000.It also has a personal exemption of $5,000.Who benefits more from the personal exemption,a person making $35,000 or a person making $75,000?

Accepted Answer

A)  the person making $35,000 
B)  the person making $75,000 
C)  they benefit equally 
D)  It is impossible to tell. 
A)  the person making $35,000 
B)  the person making $75,000 
C)  they benefit equally 
D)  It is impossible to tell.

Question 11

Corporate income taxes bring in as much revenue to the federal government as do individual income taxes.

Accepted Answer

A) True 
 B)False

Question 12

The Federal Insurance Contributions Act tax is used to fund:

Accepted Answer

A)  The Federal Deposit Insurance Corporation. 
B)  federal defense spending. 
C)  Social Security payments. 
D)  unemployment insurance. 
A)  The Federal Deposit Insurance Corporation. 
B)  federal defense spending. 
C)  Social Security payments. 
D)  unemployment insurance.

Question 13

In recent decades,health-care costs per capita rose more than twice as fast as GDP per capita.

Accepted Answer

A) True 
 B)False

Question 14

Suppose a high-income individual,subject to a 15% capital gains tax rate,sells 100 shares of Company X for a price of $9 per share (purchased at $10 each)and 500 shares of Company Y for a price of $51 per share (purchased at $50 each).How much in capital gains tax will he pay?

Accepted Answer

A)  $60 
B)  $75 
C)  $210 
D)  $3,690 
A)  $60 
B)  $75 
C)  $210 
D)  $3,690

Question 15

Use the following to answer questions 
Figure: U.S.Marginal and Average Tax Rates  
-(Figure: U.S.Marginal and Average Tax Rates)Using the tax rates shown in the figure,assume your annual income is $15,000,that you have a deduction of $1,800 for moving expenses,and that you claim four exemptions of $3,300: one for yourself and one for each of your three children.How much taxes are you expected to pay?

Accepted Answer

A)  $0 
B)  $120 
C)  $132 
D)  $138 
A)  $0 
B)  $120 
C)  $132 
D)  $138

Question 16

What kind of rising costs will mostly cause U.S.government spending to skyrocket in the future?

Accepted Answer

A)  defense 
B)  environmental protection 
C)  education 
D)  health care 
A)  defense 
B)  environmental protection 
C)  education 
D)  health care

Question 17

If the U.S.government decides to decrease the budget deficit in the future,it could:

Accepted Answer

A)  raise taxes. 
B)  decrease Social Security payments. 
C)  reduce spending on health-care programs. 
D)  raise taxes,decrease Social Security payments,or reduce health-care spending. 
A)  raise taxes. 
B)  decrease Social Security payments. 
C)  reduce spending on health-care programs. 
D)  raise taxes,decrease Social Security payments,or reduce health-care spending.

Question 18

The marginal tax rate is the:

Accepted Answer

A)  average tax rate paid on all earned income. 
B)  tax rate paid on capital gains. 
C)  minimum tax rate paid on income in the United States. 
D)  tax rate paid on each additional dollar earned. 
A)  average tax rate paid on all earned income. 
B)  tax rate paid on capital gains. 
C)  minimum tax rate paid on income in the United States. 
D)  tax rate paid on each additional dollar earned.

Question 19

The corporate income tax is the single largest source of revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 20

Since the mid-1950s,federal government spending has been about _____ of GDP.

Accepted Answer

A)  5% 
B)  10% 
C)  20% 
D)  40% 
A)  5% 
B)  10% 
C)  20% 
D)  40%

Most of the burden of Social Security taxes falls on workers.

Measured in terms of dollars paid out,Social Security is the largest single government program in the world.

Except for the 1990s,the federal deficit has shown a rising trend over time.Does it mean that the U.S.government will go bankrupt soon? If so,explain why? If not,then what are many economists worried about?

The main forces driving the projections of exponential debt growth in the future are recessions and the rising costs of the welfare programs.

The tax rate paid on an additional dollar of income is called the:

Which of the following statements about Medicare taxes is TRUE?

Which statement about individual income taxes in the United States is TRUE?

The national debt held by the public increases when the federal government runs a deficit.

Which of the following is TRUE when measuring the role of the government in an economy by the amount of its government spending?

A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000.It also has a personal exemption of $5,000.Who benefits more from the personal exemption,a person making $35,000 or a person making $75,000?

Corporate income taxes bring in as much revenue to the federal government as do individual income taxes.

The Federal Insurance Contributions Act tax is used to fund:

In recent decades,health-care costs per capita rose more than twice as fast as GDP per capita.

Suppose a high-income individual,subject to a 15% capital gains tax rate,sells 100 shares of Company X for a price of $9 per share (purchased at $10 each)and 500 shares of Company Y for a price of $51 per share (purchased at $50 each).How much in capital gains tax will he pay?

What kind of rising costs will mostly cause U.S.government spending to skyrocket in the future?

If the U.S.government decides to decrease the budget deficit in the future,it could:

The marginal tax rate is the:

The corporate income tax is the single largest source of revenue for the federal government.

Since the mid-1950s,federal government spending has been about _____ of GDP.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 17: The Federal Budget- Taxes and Spending

Most of the burden of Social Security taxes falls on workers.

Measured in terms of dollars paid out,Social Security is the largest single government program in the world.

Except for the 1990s,the federal deficit has shown a rising trend over time.Does it mean that the U.S.government will go bankrupt soon? If so,explain why? If not,then what are many economists worried about?

The main forces driving the projections of exponential debt growth in the future are recessions and the rising costs of the welfare programs.

The tax rate paid on an additional dollar of income is called the:

Which of the following statements about Medicare taxes is TRUE?

Which statement about individual income taxes in the United States is TRUE?

The national debt held by the public increases when the federal government runs a deficit.

Which of the following is TRUE when measuring the role of the government in an economy by the amount of its government spending?

A country has two income tax brackets: people pay 10% on their first $50,000 and 20% on everything they earn over $50,000.It also has a personal exemption of $5,000.Who benefits more from the personal exemption,a person making $35,000 or a person making $75,000?

Corporate income taxes bring in as much revenue to the federal government as do individual income taxes.

The Federal Insurance Contributions Act tax is used to fund:

In recent decades,health-care costs per capita rose more than twice as fast as GDP per capita.

Suppose a high-income individual,subject to a 15% capital gains tax rate,sells 100 shares of Company X for a price of $9 per share (purchased at $10 each)and 500 shares of Company Y for a price of $51 per share (purchased at $50 each).How much in capital gains tax will he pay?

What kind of rising costs will mostly cause U.S.government spending to skyrocket in the future?

If the U.S.government decides to decrease the budget deficit in the future,it could:

The marginal tax rate is the:

The corporate income tax is the single largest source of revenue for the federal government.

Since the mid-1950s,federal government spending has been about _____ of GDP.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters