Question 1

From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a percentage of GDP has

Accepted Answer

A)  decreased from about ten percent to less than one percent. 
B)  increased from less than one percent to about ten percent. 
C)  remained constant at less than one percent. 
D)  remained constant at about ten percent. 
A)  decreased from about ten percent to less than one percent. 
B)  increased from less than one percent to about ten percent. 
C)  remained constant at less than one percent. 
D)  remained constant at about ten percent.

Question 2

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Accepted Answer

A) True 
 B)False

Question 3

Table 12-10  
-Refer to Table 12-10. If Willie has $170,000 in taxable income, his tax liability will be

Accepted Answer

A)  $16,781. 
B)  $41,309. 
C)  $41,827. 
D)  $47,600. 
A)  $16,781. 
B)  $41,309. 
C)  $41,827. 
D)  $47,600.

Question 4

State and local governments generate revenue from all of the following sources except

Accepted Answer

A)  sales taxes. 
B)  the federal government. 
C)  corporate income taxes. 
D)  customs duties. 
A)  sales taxes. 
B)  the federal government. 
C)  corporate income taxes. 
D)  customs duties.

Question 5

Medicaid is

Accepted Answer

A)  the government's health plan for the elderly. 
B)  the government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct. 
A)  the government's health plan for the elderly. 
B)  the government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct.

Question 6

A lump-sum tax minimizes deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

A tax that is higher for men than for women violates the criterion of

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 8

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Accepted Answer

A)  income tax. 
B)  consumption tax. 
C)  lump-sum tax. 
D)  marginal tax. 
A)  income tax. 
B)  consumption tax. 
C)  lump-sum tax. 
D)  marginal tax.

Question 9

Vertical equity states that taxpayers with a greater ability to pay taxes should

Accepted Answer

A)  contribute a decreasing proportion of each increment in income to taxes. 
B)  contribute a larger amount than those with a lesser ability to pay. 
C)  be less subject to administrative burdens of a tax. 
D)  be less subject to tax distortions that lead to deadweight losses. 
A)  contribute a decreasing proportion of each increment in income to taxes. 
B)  contribute a larger amount than those with a lesser ability to pay. 
C)  be less subject to administrative burdens of a tax. 
D)  be less subject to tax distortions that lead to deadweight losses.

Question 10

Economists play an important role in the complex debates over tax policy by

Accepted Answer

A)  identifying efficiency as the most important goal of tax policy. 
B)  identifying equity as the most important goal of tax policy. 
C)  shedding light on the tradeoff between efficiency and equity in tax policy. 
D)  None of the above is correct. 
A)  identifying efficiency as the most important goal of tax policy. 
B)  identifying equity as the most important goal of tax policy. 
C)  shedding light on the tradeoff between efficiency and equity in tax policy. 
D)  None of the above is correct.

Question 11

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 12

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income. What is his average tax rate?

Accepted Answer

A)  17.19 percent 
B)  46.69 percent 
C)  48.87 percent 
D)  56.01 percent 
A)  17.19 percent 
B)  46.69 percent 
C)  48.87 percent 
D)  56.01 percent

Question 13

A person's tax liability refers to

Accepted Answer

A)  the percentage of income that a person must pay in taxes. 
B)  the amount of tax a person owes to the government. 
C)  the amount of tax the government is required to refund to each person. 
D)  deductions that can be legally subtracted from a person's income each year. 
A)  the percentage of income that a person must pay in taxes. 
B)  the amount of tax a person owes to the government. 
C)  the amount of tax the government is required to refund to each person. 
D)  deductions that can be legally subtracted from a person's income each year.

Question 14

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

Accepted Answer

A)  auditing burden. 
B)  lower incidence of compliance. 
C)  administrative burden. 
D)  certification requirement. 
A)  auditing burden. 
B)  lower incidence of compliance. 
C)  administrative burden. 
D)  certification requirement.

Question 15

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Question 16

What are the two main sources of tax revenues for state and local governments?

Accepted Answer

sales taxe

Question 17

Under a progressive tax system, the marginal tax rate could be equal to the average tax rate only when a taxpayer

Accepted Answer

A)  has a very high income. 
B)  has a very low income. 
C)  is self-employed. 
D)  invests in a retirement plan. 
A)  has a very high income. 
B)  has a very low income. 
C)  is self-employed. 
D)  invests in a retirement plan.

Question 18

A tax imposed at every stage of production is a

Accepted Answer

A)  value-added tax. 
B)  lump sum tax. 
C)  corrective tax. 
D)  regressive tax. 
A)  value-added tax. 
B)  lump sum tax. 
C)  corrective tax. 
D)  regressive tax.

Question 19

Over the past century in the U.S., what has been federal government revenue as a percentage of GDP? What has been state and local government revenue as a percentage of GDP?

Accepted Answer

According to Figure 1, in 1913, the fede

Question 20

A value-added tax or VAT is a tax on

Accepted Answer

A)  retail purchases only. 
B)  wholesale purchases only. 
C)  pollution. 
D)  all stages of production of a good. 
A)  retail purchases only. 
B)  wholesale purchases only. 
C)  pollution. 
D)  all stages of production of a good.

Exam 12: The Design of the Tax System

From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a percentage of GDP has

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Table 12-10 -Refer to Table 12-10. If Willie has $170,000 in taxable income, his tax liability will be

State and local governments generate revenue from all of the following sources except

Medicaid is

A lump-sum tax minimizes deadweight loss.

A tax that is higher for men than for women violates the criterion of

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Vertical equity states that taxpayers with a greater ability to pay taxes should

Economists play an important role in the complex debates over tax policy by

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

A person's tax liability refers to

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

What are the two main sources of tax revenues for state and local governments?

Under a progressive tax system, the marginal tax rate could be equal to the average tax rate only when a taxpayer

A tax imposed at every stage of production is a

Over the past century in the U.S., what has been federal government revenue as a percentage of GDP? What has been state and local government revenue as a percentage of GDP?

A value-added tax or VAT is a tax on

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

Six Debates Over Macroeconomic Policy

Filters