Question 1

-Using the above figure, which of the lines in the above diagram represents a regressive tax?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  none of them 
A)  A 
B)  B 
C)  C 
D)  none of them

Question 2

If the marginal tax rate is less than the average tax rate, the tax system is

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  flat. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  flat.

Question 3

Tax incidence refers to

Accepted Answer

A)  determining who sends the taxes into the government. 
B)  the tendency of some people to avoid paying taxes at all. 
C)  the distribution of tax burdens among groups, or who really pays a tax. 
D)  determining the marginal tax rate applied to any increase in income. 
A)  determining who sends the taxes into the government. 
B)  the tendency of some people to avoid paying taxes at all. 
C)  the distribution of tax burdens among groups, or who really pays a tax. 
D)  determining the marginal tax rate applied to any increase in income.

Question 4

The earnings that a corporation saves for investment in other productive activities are

Accepted Answer

A)  capital gains. 
B)  tax incidence. 
C)  transfers in kind. 
D)  retained earnings. 
A)  capital gains. 
B)  tax incidence. 
C)  transfers in kind. 
D)  retained earnings.

Question 5

The government budget constraint implies that

Accepted Answer

A)  government borrowings = government spending+ transfers - taxes and user charges. 
B)  government borrowings = taxes and user charges + government spending - transfers 
C)  government spending = transfers - taxes and user charges - government borrowing. 
D)  government spending = government borrowing - transfers - taxes and user charges 
A)  government borrowings = government spending+ transfers - taxes and user charges. 
B)  government borrowings = taxes and user charges + government spending - transfers 
C)  government spending = transfers - taxes and user charges - government borrowing. 
D)  government spending = government borrowing - transfers - taxes and user charges

Question 6

Ultimately, the real burden of paying for Social Security benefits will be paid for by

Accepted Answer

A)  taxes levied on workers. 
B)  Social Security trust fund bonds. 
C)  new federally issued Treasury bills. 
D)  a new tax levied on businesses. 
A)  taxes levied on workers. 
B)  Social Security trust fund bonds. 
C)  new federally issued Treasury bills. 
D)  a new tax levied on businesses.

Question 7

Static tax analysis assumes

Accepted Answer

A)  all of the present tax rates will be in place for a minimum of twenty years. 
B)  changes in the tax rates have no effect on the tax base. 
C)  changes in the tax rates have no effect on tax revenue. 
D)  changes in the tax rates will change the tax base. 
A)  all of the present tax rates will be in place for a minimum of twenty years. 
B)  changes in the tax rates have no effect on the tax base. 
C)  changes in the tax rates have no effect on tax revenue. 
D)  changes in the tax rates will change the tax base.

Question 8

-Using the above table, a unit tax of $2 is imposed on the product. The equilibrium price of this product after the tax is imposed is

Accepted Answer

A)  $5. 
B)  $4. 
C)  $3. 
D)  $2. 
A)  $5. 
B)  $4. 
C)  $3. 
D)  $2.

Question 9

Why is the government budget constraint different between the short run and the long run?

Accepted Answer

In the short run, the government budget

Question 10

Imposing a tax on sales of a product

Accepted Answer

A)  shifts the market demand curve for the product. 
B)  shifts the market supply curve for the product. 
C)  shifts both the market supply and demand curve for the product. 
D)  has no effect on either the market demand or the market supply curve for the product. 
A)  shifts the market demand curve for the product. 
B)  shifts the market supply curve for the product. 
C)  shifts both the market supply and demand curve for the product. 
D)  has no effect on either the market demand or the market supply curve for the product.

Question 11

For all employee earnings subject to Social Security taxes, what is the current Social Security tax rate for employers?

Accepted Answer

A)  0.8% 
B)  2.9% 
C)  4.2% 
D)  6.2% 
A)  0.8% 
B)  2.9% 
C)  4.2% 
D)  6.2%

Question 12

How would the market for coffee be affected if the government charged an excise tax of $1.00 on each unit of coffee sold?

Accepted Answer

A)  There would be a shortage of coffee. 
B)  The demand for coffee would increase. 
C)  The demand for coffee would decrease. 
D)  The supply curve would shift up vertically by $1.00. 
A)  There would be a shortage of coffee. 
B)  The demand for coffee would increase. 
C)  The demand for coffee would decrease. 
D)  The supply curve would shift up vertically by $1.00.

Question 13

According to dynamic tax analysis, continually increasing the tax rate will eventually

Accepted Answer

A)  cause an increase in the tax base. 
B)  have no impact on the tax base. 
C)  cause a decrease in the tax base. 
D)  result in an initial decrease in the tax base followed ultimately by a rise in the tax base. 
A)  cause an increase in the tax base. 
B)  have no impact on the tax base. 
C)  cause a decrease in the tax base. 
D)  result in an initial decrease in the tax base followed ultimately by a rise in the tax base.

Question 14

Assume a family that earns $20,000 pays $1,000 in income taxes, while a family that earns $40,000 pays $3,750 in income taxes. In this situation, the income tax system is

Accepted Answer

A)  progressive. 
B)  regressive. 
C)  proportional. 
D)  one of the above but we cannot tell which one without more information. 
A)  progressive. 
B)  regressive. 
C)  proportional. 
D)  one of the above but we cannot tell which one without more information.

Question 15

Suppose you purchased 500 shares of stock in 2013 for $15 a share, and the price now is $20 a share. If you sell the stock, then your capital gain is

Accepted Answer

A)  $2500. 
B)  $1000. 
C)  $10000. 
D)  indeterminate without knowing the inflation rate. 
A)  $2500. 
B)  $1000. 
C)  $10000. 
D)  indeterminate without knowing the inflation rate.

Question 16

The three possible sources of government funding include

Accepted Answer

A)  explicit fees, taxes, and borrowing. 
B)  international income, personal income taxes, and export taxes. 
C)  foreign aid, revenues, and implicit fees. 
D)  None of the above are correct. 
A)  explicit fees, taxes, and borrowing. 
B)  international income, personal income taxes, and export taxes. 
C)  foreign aid, revenues, and implicit fees. 
D)  None of the above are correct.

Question 17

Suppose that in the economy of Boise, Amy earns an income of $50,000 a year and pays $10,000 in income taxes; Bailey earns an income of $25,000 a year and pays $8,000 in income taxes. Based on this information, we could say that Boise's tax system is

Accepted Answer

A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  flat. 
A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  flat.

Question 18

Which of the following statements is FALSE about the issues faced by the government when contemplating a tax?

Accepted Answer

A)  Consideration must be given to how tax rates relate to the amount actually received. 
B)  Consideration must be given to how taxes influence market prices. 
C)  Consideration must be given to how taxes influence equilibrium quantity. 
D)  Consideration must be given to the amount of funds the government will be receiving from the transfer payments paid by the public to the government. 
A)  Consideration must be given to how tax rates relate to the amount actually received. 
B)  Consideration must be given to how taxes influence market prices. 
C)  Consideration must be given to how taxes influence equilibrium quantity. 
D)  Consideration must be given to the amount of funds the government will be receiving from the transfer payments paid by the public to the government.

Question 19

If a state government wants to collect the maximum tax revenue from a unit excise tax, which of the following would they tax?

Accepted Answer

A)  cigarettes 
B)  beef hamburgers 
C)  luxury cars 
D)  hotdogs 
A)  cigarettes 
B)  beef hamburgers 
C)  luxury cars 
D)  hotdogs

Question 20

How is the market for gasoline affected if the excise tax on gasoline is reduced?

Accepted Answer

A)  The supply of gasoline decreases. 
B)  The supply of gasoline increases. 
C)  The equilibrium quantity of gasoline decreases. 
D)  The equilibrium price of gasoline increases. 
A)  The supply of gasoline decreases. 
B)  The supply of gasoline increases. 
C)  The equilibrium quantity of gasoline decreases. 
D)  The equilibrium price of gasoline increases.

Exam 6: Funding the Public Sector

-Using the above figure, which of the lines in the above diagram represents a regressive tax?

If the marginal tax rate is less than the average tax rate, the tax system is

Tax incidence refers to

The earnings that a corporation saves for investment in other productive activities are

The government budget constraint implies that

Ultimately, the real burden of paying for Social Security benefits will be paid for by

Static tax analysis assumes

-Using the above table, a unit tax of $2 is imposed on the product. The equilibrium price of this product after the tax is imposed is

Why is the government budget constraint different between the short run and the long run?

Imposing a tax on sales of a product

For all employee earnings subject to Social Security taxes, what is the current Social Security tax rate for employers?

How would the market for coffee be affected if the government charged an excise tax of $1.00 on each unit of coffee sold?

According to dynamic tax analysis, continually increasing the tax rate will eventually

Assume a family that earns $20,000 pays $1,000 in income taxes, while a family that earns $40,000 pays $3,750 in income taxes. In this situation, the income tax system is

Suppose you purchased 500 shares of stock in 2013 for $15 a share, and the price now is $20 a share. If you sell the stock, then your capital gain is

The three possible sources of government funding include

Suppose that in the economy of Boise, Amy earns an income of $50,000 a year and pays $10,000 in income taxes; Bailey earns an income of $25,000 a year and pays $8,000 in income taxes. Based on this information, we could say that Boise's tax system is

Which of the following statements is FALSE about the issues faced by the government when contemplating a tax?

If a state government wants to collect the maximum tax revenue from a unit excise tax, which of the following would they tax?

How is the market for gasoline affected if the excise tax on gasoline is reduced?

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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