Question 1

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (7) might represent

Accepted Answer

A)  a transfer payment to disabled persons.
B)  wage payments to public schoolteachers.
C)  subsidies to corporations to stimulate exports.
D)  the U.S. Bureau of Engraving and Printing's expenditures for paper.E) All of the above
F) B) and C)

Question 2

The greater the elasticity of supply of and demand for a good, the

Accepted Answer

A)  smaller will be the efficiency loss of an excise tax on the good.
B)  more likely the good will be a public good rather than a private good.
C)  larger will be the efficiency loss of an excise tax on the good.
D)  larger will be the proportion of an excise tax on the good that will be shifted forward to consumers.E) C) and D)
F) All of the above

Question 3

Tax incidence may be defined as the

Accepted Answer

A)  average tax rate of a given group of taxpayers.
B)  degree to which a tax falls on a particular person or group.
C)  tax burden, or taxes as a percent of GDP.
D)  number and range of goods and services that are taxed.E) B) and D)
F) All of the above

Question 4

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.E) C) and D)
F) None of the above

Question 5

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

Accepted Answer

A)  16.67 percent.
B)  20 percent.
C)  23.45 percent.
D)  25 percent.E) All of the above
F) B) and C)

Question 6

Government purchases of goods and services are

Accepted Answer

A)  nonexhaustive because they do not directly absorb resources and account for production.
B)  exhaustive because they directly absorb or employ resources and account for production.
C)  both exhaustive and nonexhaustive because in some cases they do directly absorb resources or account for production and in other cases they do not.
D)  neither exhaustive nor nonexhaustive because of the tax revenues that finance these purchases.E) None of the above
F) A) and C)

Question 7

The largest category of federal spending is for

Accepted Answer

A)  health care.
B)  science, space, and technology.
C)  pensions and income security.
D)  national defense.E) B) and D)
F) All of the above

Question 8

Which of the following is an exhaustive governmental outlay?

Accepted Answer

A)  a federal $5,000 subsidy check to an Illinois farmer
B)  a Temporary Assistance to Needy Families payment made by the state of New York
C)  a NASA payment to Boeing Corporation for space hardware
D)  a federal old age insurance payment to a retired coal minerE) B) and D)
F) None of the above

Question 9

Assume you pay a tax of $15,000 on a taxable income of $80,000. If your taxable income were $160,000, your tax payment would be $30,000. This suggests that the tax is

Accepted Answer

A)  progressive.
B)  proportional.
C)  regressive.
D)  discriminatory.E) B) and C)
F) A) and C)

Question 10

Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000. If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

Accepted Answer

A)  7 percent.
B)  30 percent.
C)  about 23 percent.
D)  about 16 percent.E) B) and D)
F) None of the above

Question 11

Refer to the graph for the labor market. The government decides to impose a wage tax as shown on the graph. If the number of workers hired after the imposition of the tax is 1,000, then the total amount of the tax is

Accepted Answer

A)  $200.
B)  $300.
C)  $400.
D)  $500.E) A) and B)
F) A) and C)

Question 12

As of 2019, the marginal tax rates of the federal personal income tax

Accepted Answer

A)  are less than corresponding average tax rates.
B)  rise from 5 to 35 percent.
C)  fall from 20 to 10 percent.
D)  rise from 10 to 37 percent.E) A) and D)
F) B) and C)

Question 13

Refer to the graph for the labor market. The government decides to impose a wage tax as shown on the graph. The result is that

Accepted Answer

A)  more workers enter the labor market due to the higher wage rate being paid.
B)  the employers and laborers will split the tax evenly, each paying $0.25 to the government.
C)  the wage received by laborers will rise to $5.40 and the labor cost to employers will fall to $4.90.
D)  the wage received by laborers will fall to $4.90 and the labor cost to employers will rise to $5.40.E) All of the above
F) C) and D)

Question 14

According to data compiled by the Bureau of Economic Analysis, from 1960 to 2018, government transfer payments as a percentage of U.S. output have

Accepted Answer

A)  decreased as a result of improvements in private pension and health insurance plans.
B)  increased slightly at about the same rate as population.
C)  tripled as a percentage of output.
D)  remained approximately constant.E) A) and B)
F) B) and D)

Question 15

The marginal tax rate is

Accepted Answer

A)  less than the average tax rate when a tax is progressive.
B)  calculated by dividing total taxes paid by one's total taxable income.
C)  the percentage of one's total income that is paid in taxes.
D)  the percentage of an increment of income that is paid in taxes.E) A) and D)
F) A) and C)

Question 16

If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will

Accepted Answer

A)  raise the price by less than $1.
B)  raise the price by more than $1.
C)  raise the price by $1.
D)  lower the price by $1.E) A) and C)
F) B) and C)

Question 17

Define proprietary income. List some examples.

Accepted Answer

Proprietary income is the income that go...

Question 18

A federal excise tax on tires for cars and trucks would be an example of the

Accepted Answer

A)  benefits-received principle of taxation.
B)  ability-to-pay principle of taxation.
C)  proportional tax.
D)  progressive tax.E) B) and D)
F) A) and C)

Question 19

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

Accepted Answer

A)  education
B)  highways
C)  welfare payments
D)  health and hospitalsE) All of the above
F) A) and B)

Question 20

The table represents a personal income tax schedule. As income increases, the average tax rate

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  has no definite patternE) A) and D)
F) A) and C)

Exam 20: Public Finance: Expenditures and Taxes

The largest category of federal spending is for

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If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will

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Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000. If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

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The greater the elasticity of supply of and demand for a good, the

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Tax incidence may be defined as the

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Which of the following is an exhaustive governmental outlay?

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A federal excise tax on tires for cars and trucks would be an example of the

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The table represents a personal income tax schedule. As income increases, the average tax rate

Correct AnswerverifiedShow Answer

Define proprietary income. List some examples.

Correct AnswerverifiedProprietary income is the income that go...View AnswerShow Answer

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

Correct AnswerverifiedShow Answer

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (7) might represent

Correct AnswerverifiedShow Answer

Refer to the graph for the labor market. The government decides to impose a wage tax as shown on the graph. The result is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The marginal tax rate is

Correct AnswerverifiedShow Answer

As of 2019, the marginal tax rates of the federal personal income tax

Correct AnswerverifiedShow Answer

Assume you pay a tax of $15,000 on a taxable income of $80,000. If your taxable income were $160,000, your tax payment would be $30,000. This suggests that the tax is

Correct AnswerverifiedShow Answer

Refer to the graph for the labor market. The government decides to impose a wage tax as shown on the graph. If the number of workers hired after the imposition of the tax is 1,000, then the total amount of the tax is

Correct AnswerverifiedShow Answer

Government purchases of goods and services are

Correct AnswerverifiedShow Answer

According to data compiled by the Bureau of Economic Analysis, from 1960 to 2018, government transfer payments as a percentage of U.S. output have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Proprietary income is the income that go...
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