Question 1

If your income increases from $10,000 per year to $14,000 per year and your tax payment increases from $2,000 to $2,840, the marginal tax rate

Accepted Answer

A)   is 20 percent.
B)   is 21 percent.
C)   is 25 percent.
D)   cannot be determined from the given data.E) All of the above
F) A) and C)

Question 2

In the U.S., the taxes mostly come from the rich and government spending mostly goes to programs that benefit the rich.

Accepted Answer

A) True 
 B)False

Question 3

Government assumes some responsibility for providing a minimum standard of living for all citizens to compensate for the increase in income inequality caused by government tax revenues and expenditures.

Accepted Answer

A) True 
 B)False

Question 4

Many states in the U.S. acquire significant amounts of funds from the following, except

Accepted Answer

A)   state-run lotteries.
B)   grants from the federal government.
C)   personal income taxes.
D)   property taxes.E) A) and B)
F) A) and C)

Question 5

The property tax may be regressive even though wealthy people own much more taxable property than do poor people. This possibility arises because

Accepted Answer

A)   marginal and average tax rates on property tend to converge.
B)   wealthy people can evade property taxes, while poor people cannot.
C)   property taxes on rental property and business property are shifted.
D)   statutory property tax rates decline as the value of property rises.E) All of the above
F) A) and B)

Question 6

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

Accepted Answer

A)   5 percent.
B)   12 percent.
C)   35 percent.
D)   42 percent.E) A) and D)
F) B) and C)

Question 7

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

Accepted Answer

A)   highways
B)   welfare
C)   education
D)   public safetyE) All of the above
F) A) and C)

Question 8

In 2014, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills)  was

Accepted Answer

A)   April 15.
B)   April 17.
C)   April 21.
D)   July 4.E) None of the above
F) B) and C)

Question 9

The marginal tax rate is the tax rate that applies to additional income.

Accepted Answer

A) True 
 B)False

Question 10

Just like businesses, the public sector uses resources in order to produce goods and services.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that a $0.75 tax is placed on gasoline. Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Accepted Answer

A)   if supply is perfectly inelastic and demand is downward-sloping
B)   if demand is perfectly inelastic and supply is upward-sloping
C)   if supply is upward-sloping and demand is perfectly elastic
D)   The consumer and the seller always share the burden of the tax.E) A) and B)
F) None of the above

Question 12

(Consider This)  Which of the following claims is not made by opponents of a value-added tax (VAT) ?

Accepted Answer

A)   Savings and investment is discouraged because future consumption is penalized.
B)   The VAT is regressive, potentially leading to additional progressive taxes to offset the regressive VAT.
C)   Sellers bear a disproportionately large burden of the tax.
D)   The VAT is a hidden tax, and thus easier to raise to support the expansion of government.E) None of the above
F) C) and D)

Question 13

The probable incidence of the tax on business property is on consumers.

Accepted Answer

A) True 
 B)False

Question 14

The federal personal income tax

Accepted Answer

A)   has a regressive structure.
B)   is actually less progressive than official tax schedules would indicate because of various tax exemptions and deductions.
C)   has become extremely progressive as a result of taxpayers' being pushed into higher tax brackets by higher income levels.
D)   has experienced substantial increases in rates during the past two years.E) B) and C)
F) A) and D)

Question 15

More than 50 percent of local and state employees are employed in the education sector.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is most consistent with the benefits-received principle of taxation?

Accepted Answer

A)   A childless couple should not be required to pay taxes for the support of public schools.
B)   Prosperous corporations should pay substantial taxes even if they use few government goods and services.
C)   The best tax is the income tax.
D)   People with high incomes should pay more taxes than people with low incomes.E) A) and B)
F) B) and D)

Question 17

A tax structure is called progressive when

Accepted Answer

A)   the average tax rate decreases if income decreases.
B)   high-income groups pay more taxes absolutely than do low-income groups.
C)   the average tax rate on low-income groups exceeds the tax rate of high-income groups.
D)   the average tax rate is constant, but the absolute amount of taxes paid increases with income increases.E) A) and B)
F) All of the above

Question 18

Overall, the U.S. tax system (combined federal, state, and local)  is

Accepted Answer

A)   highly progressive.
B)   slightly progressive.
C)   slightly regressive.
D)   highly regressive.E) None of the above
F) A) and B)

Question 19

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Accepted Answer

A) True 
 B)False

Question 20

The state and local tax structure is largely progressive.

Accepted Answer

A) True 
 B)False

Exam 20: Public Finance: Expenditures and Taxes

Many states in the U.S. acquire significant amounts of funds from the following, except

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The federal personal income tax

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Between the government and households, money or funds tend to flow only in one direction: from households to government.

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Overall, the U.S. tax system (combined federal, state, and local) is

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Government assumes some responsibility for providing a minimum standard of living for all citizens to compensate for the increase in income inequality caused by government tax revenues and expenditures.

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If your income increases from $10,000 per year to $14,000 per year and your tax payment increases from $2,000 to $2,840, the marginal tax rate

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Just like businesses, the public sector uses resources in order to produce goods and services.

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

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Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

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Which of the following statements is most consistent with the benefits-received principle of taxation?

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Suppose that a $0.75 tax is placed on gasoline. Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

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More than 50 percent of local and state employees are employed in the education sector.

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(Consider This) Which of the following claims is not made by opponents of a value-added tax (VAT) ?

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The probable incidence of the tax on business property is on consumers.

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A tax structure is called progressive when

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The property tax may be regressive even though wealthy people own much more taxable property than do poor people. This possibility arises because

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The marginal tax rate is the tax rate that applies to additional income.

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In the U.S., the taxes mostly come from the rich and government spending mostly goes to programs that benefit the rich.

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In 2014, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was

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The state and local tax structure is largely progressive.

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