Question 1

A person whose income has increased from $10,000 to $20,000 finds that her federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a

Accepted Answer

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

Question 2

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 C)
F) A) and D)

Question 3

Taxable income is

Accepted Answer

A)   total income less deductions and exemptions.
B)   the same as gross income.
C)   the only income to which marginal tax rates apply.
D)   the sum of all wage and property income.E) B) and C)
F) B) and D)

Question 4

In 2013, U.S. governments (local, state, and federal)  employed roughly what percentage of the U.S. labor force?

Accepted Answer

A)   5 percent
B)   14 percent
C)   42 percent
D)   64 percentE) B) and D)
F) All of the above

Question 5

An income tax is progressive if the

Accepted Answer

A)   absolute amount paid as taxes varies directly with income.
B)   percentage of income paid as taxes is the same regardless of the size of income.
C)   percentage of income paid as taxes increases as income increases.
D)   tax rate varies inversely with income.E) A) and B)
F) B) and C)

Question 6

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should

Accepted Answer

A)   accept the raise because his after-tax income will rise by $1,500.
B)   reject the raise because his after-tax income will fall by $3,000.
C)   reject the raise because his after-tax income will fall by $4,500.
D)   reject the raise because his after-tax income will fall by $6,000.E) A) and B)
F) B) and C)

Question 7

The largest expenditure of the U.S. federal government is for

Accepted Answer

A)   education.
B)   national defense.
C)   pensions and income security.
D)   interest on public debt.E) A) and D)
F) B) and C)

Question 8

(Consider This)  A value-added tax (VAT)

Accepted Answer

A)   is another name for a retail sales tax but is otherwise the same.
B)   is like a sales tax but is only imposed on the difference between a firm's sales and its purchases from other firms.
C)   is like an income tax but is only imposed on the difference between a person's income and his or her consumption.
D)   only applies to imported goods.E) A) and B)
F) A) and C)

Question 9

Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by producers.

Accepted Answer

A) True 
 B)False

Question 10

The circular flow model with government included would show that government

Accepted Answer

A)   controls economic resources and sells them in the resource market.
B)   produces goods and services and sells them in the product market to generate net taxes.
C)   provides goods and services to businesses and households and pays for them with net taxes.
D)   obtains revenues in the product market and uses them to cover costs in the resource market.E) A) and D)
F) A) and B)

Question 11

(Advanced analysis)  The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q. The equilibrium quantity after the excise tax is imposed is

Accepted Answer

A)   750 units.
B)   850 units.
C)   875 units.
D)   950 units.E) C) and D)
F) B) and C)

Question 12

Most economists believe that property taxes

Accepted Answer

A)   should be eliminated.
B)   are progressive.
C)   are regressive.
D)   should become an important source of revenue for the federal government.E) All of the above
F) A) and B)

Question 13

A tax that takes a larger proportion of income from low-income groups than from high-income groups is a

Accepted Answer

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

Question 14

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

Accepted Answer

A)   supply of X is highly inelastic.
B)   supply of X is highly elastic.
C)   demand for X is highly inelastic.
D)   demand for X is highly elastic.E) A) and D)
F) All of the above

Question 16

(Advanced analysis)  The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q. The efficiency loss of this tax is

Accepted Answer

A)   $125.00.
B)   $62.50.
C)   $87.50.
D)   $1.00.E) B) and D)
F) B) and C)

Question 17

Tax shifting refers to the fact that

Accepted Answer

A)   sellers will try to pass the burden of an excise tax on to the buyers.
B)   high-income groups tend to pay a higher average tax rate than low-income groups.
C)   as one earns a higher income, one shifts to a high tax bracket.
D)   a nation can sometimes shift from a progressive tax structure to one that is regressive.E) A) and D)
F) None of the above

Question 18

If everyone pays a fixed dollar amount of tax, then the tax is a

Accepted Answer

A)   proportional tax.
B)   regressive tax.
C)   personal tax.
D)   marginal tax.E) A) and D)
F) B) and C)

Question 19

Total governmental purchases-federal, state, and local combined-accounted for about what percentage of domestic output in 2015?

Accepted Answer

A)   35 percent
B)   18 percent
C)   10 percent
D)   5 percentE) A) and B)
F) All of the above

Question 20

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Accepted Answer

A)   high-income receivers are generally in a better position to shift taxes than are low-income receivers.
B)   the transfer system is regressive and it is therefore essential to have an offsetting progressive tax structure.
C)   rational consumers spend their first dollars of income on the most urgently desired goods and successive dollars on less essential goods.
D)   taxes should be paid for financing public goods in direct proportion to the satisfaction an individual derives from those goods.E) A) and C)
F) A) and D)

Exam 20: Public Finance: Expenditures and Taxes

Correct Answer
verified

A tax that takes a larger proportion of income from low-income groups than from high-income groups is a

Correct Answer
verified

Correct Answer
verified

(Consider This) A value-added tax (VAT)

Correct Answer
verified

Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by producers.

Correct Answer
verified

The largest expenditure of the U.S. federal government is for

Correct Answer
verified

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Correct Answer
verified

Taxable income is

Correct Answer
verified

In 2013, U.S. governments (local, state, and federal) employed roughly what percentage of the U.S. labor force?

Correct Answer
verified

An income tax is progressive if the

Correct Answer
verified

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Correct Answer
verified

Tax shifting refers to the fact that

Correct Answer
verified

Total governmental purchases-federal, state, and local combined-accounted for about what percentage of domestic output in 2015?

Correct Answer
verified

Most economists believe that property taxes

Correct Answer
verified

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should

Correct Answer
verified

Which of the following is an exhaustive governmental outlay?

Correct Answer
verified

A person whose income has increased from $10,000 to $20,000 finds that her federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a

Correct Answer
verified

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

Correct Answer
verified

The circular flow model with government included would show that government

Correct Answer
verified

If everyone pays a fixed dollar amount of tax, then the tax is a

Correct Answer
verified

Exam 20: Public Finance: Expenditures and Taxes

Correct AnswerverifiedShow Answer

A tax that takes a larger proportion of income from low-income groups than from high-income groups is a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Consider This) A value-added tax (VAT)

Correct AnswerverifiedShow Answer

Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by producers.

Correct AnswerverifiedShow Answer

The largest expenditure of the U.S. federal government is for

Correct AnswerverifiedShow Answer

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Correct AnswerverifiedShow Answer

Taxable income is

Correct AnswerverifiedShow Answer

In 2013, U.S. governments (local, state, and federal) employed roughly what percentage of the U.S. labor force?

Correct AnswerverifiedShow Answer

An income tax is progressive if the

Correct AnswerverifiedShow Answer

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Correct AnswerverifiedShow Answer

Tax shifting refers to the fact that

Correct AnswerverifiedShow Answer

Total governmental purchases-federal, state, and local combined-accounted for about what percentage of domestic output in 2015?

Correct AnswerverifiedShow Answer

Most economists believe that property taxes

Correct AnswerverifiedShow Answer

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should

Correct AnswerverifiedShow Answer

Which of the following is an exhaustive governmental outlay?

Correct AnswerverifiedShow Answer

A person whose income has increased from $10,000 to $20,000 finds that her federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a

Correct AnswerverifiedShow Answer

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

Correct AnswerverifiedShow Answer

The circular flow model with government included would show that government

Correct AnswerverifiedShow Answer

If everyone pays a fixed dollar amount of tax, then the tax is a

Correct AnswerverifiedShow Answer

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