Question 1

A tax is regressive if it

Accepted Answer

A)   takes a higher percentage of income as income increases.
B)   takes the same percentage of income regardless of income level.
C)   takes a smaller percentage of income as income increases.
D)   is levied on consumers.E) A) and C)
F) A) and D)

Question 2

When the government is doing "deficit spending," it will be increasing its total debt.

Accepted Answer

A) True 
 B)False

Question 3

The ability-to-pay principle of taxation

Accepted Answer

A)   has been declared unconstitutional because it deprives individuals of property without due process of law.
B)   suggests that people should pay taxes in proportion to the benefits they derive from public goods and services.
C)   suggests that taxes should vary directly with people's income and wealth.
D)   suggests that taxes should vary inversely with people's income and wealth.E) B) and C)
F) A) and B)

Question 4

With respect to state finance, for most states

Accepted Answer

A)   estate taxes are the major source of revenue and most expenditures are for health services.
B)   the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure.
C)   property taxes are the basic source of revenue and education is the major type of expenditure.
D)   sales and excise taxes are the major source of revenue and education is the major type of expenditure.E) A) and B)
F) C) and D)

Question 5

Which of the following taxes is most likely to be shifted?

Accepted Answer

A)   a general sales tax
B)   a flat-rate state income tax
C)   a progressive federal income tax
D)   a property tax on an owner-occupied residenceE) All of the above
F) None of the above

Question 6

The efficiency loss of a tax is

Accepted Answer

A)   the net value of sacrificed output caused by the tax.
B)   that portion of the tax paid by producers minus the portion paid by consumers.
C)   that portion of the tax paid by consumers minus the portion paid by producers.
D)   the total tax revenue minus the output loss caused by the tax.E) C) and D)
F) A) and D)

Question 7

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 C)
F) A) and C)

Question 8

Which of the following statements about specific excise taxes is true?

Accepted Answer

A)   These taxes are levied on a wide range of consumer goods.
B)   These taxes are usually transparent to (and easily reckoned by)  the buyers.
C)   A large portion of these taxes are often borne by the sellers, not shifted to the buyers.
D)   In the U.S., these taxes are more common than sales taxes.E) B) and D)
F) None of the above

Question 9

Which of the following taxes is least likely to be shifted?

Accepted Answer

A)   a state excise tax on the sellers of football tickets
B)   a personal income tax
C)   a general sales tax on retailers who sell foodstuffs and clothing
D)   a federal excise tax on the producers of whiskeyE) A) and C)
F) All of the above

Question 10

The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax.

Accepted Answer

A) True 
 B)False

Question 11

As a proportion of domestic output, taxes in the United States

Accepted Answer

A)   are lower than in most other industrially advanced countries.
B)   are higher than in most other industrially advanced countries.
C)   are approximately the same as in most other industrially advanced countries.
D)   doubled in the 1990s.E) None of the above
F) C) and D)

Question 12

If the taxes by state and local governments were combined with the federal tax system, the overall tax structure in the U.S. would best be characterized as

Accepted Answer

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

Question 13

Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

Accepted Answer

A) True 
 B)False

Question 14

Public finance is the subdiscipline of economics that studies the various ways in which

Accepted Answer

A)   the general public acquire financing for their purchases.
B)   governments raise and expend money.
C)   firms in the financial sector provide services to households and firms.
D)   governments may regulate and promote the stability of the financial sector.E) All of the above
F) None of the above

Question 15

A progressive tax takes relatively more from the rich than it does from the poor.

Accepted Answer

A) True 
 B)False

Question 16

The U.S. tax-transfer system (as distinct from the tax system alone)  is

Accepted Answer

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

Question 17

Excise taxes of the federal government include the following items, except a(n)

Accepted Answer

A)   alcoholic beverage tax.
B)   tobacco tax.
C)   general sales tax.
D)   gasoline tax.E) None of the above
F) C) and D)

Question 18

When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

Accepted Answer

A)   all cultural and educational services and events need to be taxed.
B)   taxes are the major source of funding for the goods and services provided by government.
C)   tax rates should be higher on higher-income well-educated households.
D)   we should collect taxes mostly from those who benefit from the government-provided goods and services.E) B) and C)
F) B) and D)

Question 19

The fact that high-income earners tend to earn a higher percentage of their incomes from rent and dividends, in contrast to low-income earners, makes the payroll taxes

Accepted Answer

A)   more progressive.
B)   proportional.
C)   more regressive.
D)   a flat tax.E) A) and B)
F) All of the above

Question 20

Which is the most important source of tax revenue for local governments?

Accepted Answer

A)   property taxes
B)   corporate income taxes
C)   sales and excise taxes
D)   personal income taxesE) B) and D)
F) C) and D)

Exam 20: Public Finance: Expenditures and Taxes

The U.S. tax-transfer system (as distinct from the tax system alone) is

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When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

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Tax incidence may be defined as the

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As a proportion of domestic output, taxes in the United States

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Which of the following taxes is most likely to be shifted?

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A tax is regressive if it

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The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax.

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Excise taxes of the federal government include the following items, except a(n)

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Public finance is the subdiscipline of economics that studies the various ways in which

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The fact that high-income earners tend to earn a higher percentage of their incomes from rent and dividends, in contrast to low-income earners, makes the payroll taxes

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Which of the following statements about specific excise taxes is true?

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If the taxes by state and local governments were combined with the federal tax system, the overall tax structure in the U.S. would best be characterized as

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Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

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The ability-to-pay principle of taxation

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Which is the most important source of tax revenue for local governments?

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With respect to state finance, for most states

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The efficiency loss of a tax is

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A progressive tax takes relatively more from the rich than it does from the poor.

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Which of the following taxes is least likely to be shifted?

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When the government is doing "deficit spending," it will be increasing its total debt.

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