Question 1

The Canada Health Transfer (CHT) is scheduled to grow at a(n) ________% annual rate until 2017, and after 2017 at an annual rate ________.

Accepted Answer

A) 6; equal to GDP growth 
B) 4; of 2% 
C) 4; equal to the rate of increase of provincial health-care expenditures 
D) 8; of 6% 
E) 8; of 4% 
A) 6; equal to GDP growth 
B) 4; of 2% 
C) 4; equal to the rate of increase of provincial health-care expenditures 
D) 8; of 6% 
E) 8; of 4% A

Question 2

Consider an income-tax system that requires all individuals to pay exactly 3% of their income.This income -tax system is

Accepted Answer

A) proportional. 
B) progressive,because the higher the individualʹs income,the greater the amount of tax paid. 
C) regressive,since 3% is harder to pay for a low-income taxpayer. 
D) fair,since everyone pays the same amount. 
E) a lump-sum system,sometimes called a poll tax. 
A) proportional. 
B) progressive,because the higher the individualʹs income,the greater the amount of tax paid. 
C) regressive,since 3% is harder to pay for a low-income taxpayer. 
D) fair,since everyone pays the same amount. 
E) a lump-sum system,sometimes called a poll tax. A

Question 3

An important objective in designing a tax system is to

Accepted Answer

A) design a system that minimizes inefficiency for a given amount of revenue raised. 
B) design a system that raises the revenue required for the governmentʹs debt-service obligations. 
C) raise the maximum possible revenue. 
D) not intervene in the market economy because this only causes inefficiencies. 
E) eliminate all deadweight loss. 
A) design a system that minimizes inefficiency for a given amount of revenue raised. 
B) design a system that raises the revenue required for the governmentʹs debt-service obligations. 
C) raise the maximum possible revenue. 
D) not intervene in the market economy because this only causes inefficiencies. 
E) eliminate all deadweight loss. A

Question 4

Welfare recipients are sometimes faced with a withdrawal of welfare benefits and an increase in income tax as their earned income rises.This creates a problem because

Accepted Answer

A) firms become unwilling to hire people that are currently unemployed. 
B) of the powerful disincentives to work for low-income individuals. 
C) of the incentives for workers to shirk and/or retire early. 
D) of the incentives for firms to lay off workers more frequently for short periods. 
E) it is administratively difficult to track these individuals. 
A) firms become unwilling to hire people that are currently unemployed. 
B) of the powerful disincentives to work for low-income individuals. 
C) of the incentives for workers to shirk and/or retire early. 
D) of the incentives for firms to lay off workers more frequently for short periods. 
E) it is administratively difficult to track these individuals.

Question 5

In Canada,publicly provided health care is

Accepted Answer

A) purely a public good. 
B) a form of transfer payment across regions. 
C) an externality. 
D) funded through equalization payments across geographic boundaries. 
E) a provincial responsibility,funded partially by the federal government. 
A) purely a public good. 
B) a form of transfer payment across regions. 
C) an externality. 
D) funded through equalization payments across geographic boundaries. 
E) a provincial responsibility,funded partially by the federal government.

Question 6

In 2015, the federal income-tax rate was graduated in ________ steps, with the top rate applying to incomes above approximately ________.

Accepted Answer

A) eight; $40 000 
B) eight; $120 000 
C) three; $81 000 
D) three; $100 000 
E) four; $138 000 
A) eight; $40 000 
B) eight; $120 000 
C) three; $81 000 
D) three; $100 000 
E) four; $138 000

Question 7

The direct burden of a tax is

Accepted Answer

A) directly proportional to average income. 
B) always progressive. 
C) always regressive. 
D) a tax-deductible expense for the person who pays the tax. 
E) the total revenue collected by the tax. 
A) directly proportional to average income. 
B) always progressive. 
C) always regressive. 
D) a tax-deductible expense for the person who pays the tax. 
E) the total revenue collected by the tax.

Question 8

The five pillars of Canadian social policy are

Accepted Answer

A) education,health care,foreign aid,agricultural support,and retirement benefits. 
B) education,health care,agricultural support,research and development,and retirement benefits. 
C) education,health care,foreign aid,employment insurance and welfare payments. 
D) education,health care,welfare payments,foreign aid,and employment insurance. 
E) education,health care,income support,employment insurance and retirement benefits. 
A) education,health care,foreign aid,agricultural support,and retirement benefits. 
B) education,health care,agricultural support,research and development,and retirement benefits. 
C) education,health care,foreign aid,employment insurance and welfare payments. 
D) education,health care,welfare payments,foreign aid,and employment insurance. 
E) education,health care,income support,employment insurance and retirement benefits.

Question 9

The Canadian federal governmentʹs system of ʺequalization paymentsʺ

Accepted Answer

A) are made out of the federal governmentʹs general revenues to provinces with below-average tax capacity. 
B) are made by provinces with above-average tax capacity to the federal government. 
C) are made to provinces with inadequate ʺtax room.ʺ 
D) are made by richer provinces to poorer provinces in the form of no-interest loans. 
E) were established in 1867 between the original provinces of Canada as a means of equalizing living standards across the country. 
A) are made out of the federal governmentʹs general revenues to provinces with below-average tax capacity. 
B) are made by provinces with above-average tax capacity to the federal government. 
C) are made to provinces with inadequate ʺtax room.ʺ 
D) are made by richer provinces to poorer provinces in the form of no-interest loans. 
E) were established in 1867 between the original provinces of Canada as a means of equalizing living standards across the country.

Question 10

In Canada,post-secondary education is

Accepted Answer

A) a provincial responsibility,funded by property taxes. 
B) a form of transfer payment. 
C) a provincial responsibility not funded by the federal government. 
D) a form of equalization payment across geographic boundaries. 
E) a provincial responsibility,funded almost completely from provincial budgets. 
A) a provincial responsibility,funded by property taxes. 
B) a form of transfer payment. 
C) a provincial responsibility not funded by the federal government. 
D) a form of equalization payment across geographic boundaries. 
E) a provincial responsibility,funded almost completely from provincial budgets.

Question 11

The figure below show a simplified version of the current (2015)Canadian federal income-tax system.The marginal income-tax rates for the four ranges of income are 15%,22%,26%,and 29%,respectively.
   FIGURE 18-2
-Refer to Figure 18-2.An individual with a taxable income of $98 125 will pay  $________ in income taxes.

Accepted Answer

A) 15 209 
B) 18 807 
C) 22 513 
D) 25 513 
E) 28 456 
A) 15 209 
B) 18 807 
C) 22 513 
D) 25 513 
E) 28 456

Question 12

When assessing a tax system,ʺvertical equityʺ refers to

Accepted Answer

A) equity within a given income group. 
B) equity across income groups. 
C) equity between corporate entities. 
D) unequal treatment of persons with unequal incomes. 
E) equity across different periods of time. 
A) equity within a given income group. 
B) equity across income groups. 
C) equity between corporate entities. 
D) unequal treatment of persons with unequal incomes. 
E) equity across different periods of time.

Question 13

The excess burden of a tax reflects a reduction of

Accepted Answer

A) allocative inefficiency. 
B) total tax revenues. 
C) total economic surplus. 
D) both equilibrium price and quantity. 
E) economic profits generated in the economy. 
A) allocative inefficiency. 
B) total tax revenues. 
C) total economic surplus. 
D) both equilibrium price and quantity. 
E) economic profits generated in the economy.

Question 14

The table below shows 2015 federal income-tax rates in Canada.   TABLE 18-1
-Refer to Table 18-1.If an individual had a taxable income of $120 000,how much total federal tax would be due?

Accepted Answer

A) $6109 
B) $8959 
C) $31 200 
D) $24 494 
E) $28 020 
A) $6109 
B) $8959 
C) $31 200 
D) $24 494 
E) $28 020

Question 15

Consider the allocation of a nationʹs resources between additional public-sector spending versus additional private spending.James Buchanan argued that

Accepted Answer

A) given the current size of government,the value of the marginal dollar spent by government is less than the value of that dollar left in the hands of households or firms. 
B) public sector spending is always subject to corruption and is therefore not as valuable as private spending. 
C) the marginal utility of an additional dollarʹs worth of spending on public goods is higher than an additional dollarʹs worth of spending on private goods. 
D) compared to public spending,private spending leads to more sustained long -run economic growth. 
E) compared to private spending,public spending leads to more sustained long -run economic growth. 
A) given the current size of government,the value of the marginal dollar spent by government is less than the value of that dollar left in the hands of households or firms. 
B) public sector spending is always subject to corruption and is therefore not as valuable as private spending. 
C) the marginal utility of an additional dollarʹs worth of spending on public goods is higher than an additional dollarʹs worth of spending on private goods. 
D) compared to public spending,private spending leads to more sustained long -run economic growth. 
E) compared to private spending,public spending leads to more sustained long -run economic growth.

Question 16

In Canada,public primary and secondary education

Accepted Answer

A) are exclusive federal responsibilities. 
B) are funded by provincial governments,but managed by local school boards. 
C) have eliminated illiteracy in Canada. 
D) are funded by government as an income redistribution plan. 
E) are purely public goods. 
A) are exclusive federal responsibilities. 
B) are funded by provincial governments,but managed by local school boards. 
C) have eliminated illiteracy in Canada. 
D) are funded by government as an income redistribution plan. 
E) are purely public goods.

Question 17

Which of the following is required to achieve progressivity for a particular tax?

Accepted Answer

A) a marginal tax rate equal to the average tax rate (implying that the average tax rate is rising with income) 
B) a marginal tax rate equal to the average tax rate (implying that the average tax rate is falling with income) 
C) an average tax rate above the marginal tax rate (implying that the average tax rate is falling with income) 
D) a marginal tax rate above the average tax rate (implying that the average tax rate is rising with income) 
E) a constant tax rate for all incomes 
A) a marginal tax rate equal to the average tax rate (implying that the average tax rate is rising with income) 
B) a marginal tax rate equal to the average tax rate (implying that the average tax rate is falling with income) 
C) an average tax rate above the marginal tax rate (implying that the average tax rate is falling with income) 
D) a marginal tax rate above the average tax rate (implying that the average tax rate is rising with income) 
E) a constant tax rate for all incomes

Question 18

An efficiency argument for public provision of basic education is that

Accepted Answer

A) many poor families could not afford to educate their children if they had to pay for it themselves. 
B) society as a whole benefits when all of its citizens have the basic skills and knowledge acquired from kindergarten to grade 12. 
C) the government is best able to assess the level of provision for which marginal cost equals marginal benefit. 
D) the government can best provide education up to that point where marginal benefit is zero. 
E) education cannot be efficiently provided by private firms. 
A) many poor families could not afford to educate their children if they had to pay for it themselves. 
B) society as a whole benefits when all of its citizens have the basic skills and knowledge acquired from kindergarten to grade 12. 
C) the government is best able to assess the level of provision for which marginal cost equals marginal benefit. 
D) the government can best provide education up to that point where marginal benefit is zero. 
E) education cannot be efficiently provided by private firms.

Question 19

As a proportion of Gross Domestic Product (GDP),Canadian governmentsʹ tax revenues,as compared to other industrialized countries,are

Accepted Answer

A) the very lowest. 
B) among the lowest. 
C) roughly in the middle of the group. 
D) among the highest. 
E) the very highest. 
A) the very lowest. 
B) among the lowest. 
C) roughly in the middle of the group. 
D) among the highest. 
E) the very highest.

Question 20

In Canada,taxes are levied and collected by

Accepted Answer

A) the federal government only. 
B) the provincial governments only. 
C) local governments only. 
D) federal and provincial governments only. 
E) all levels of government. 
A) the federal government only. 
B) the provincial governments only. 
C) local governments only. 
D) federal and provincial governments only. 
E) all levels of government.

Exam 18: Taxation and Public Expenditure

The Canada Health Transfer (CHT) is scheduled to grow at a(n) ________% annual rate until 2017, and after 2017 at an annual rate ________.

Consider an income-tax system that requires all individuals to pay exactly 3% of their income.This income -tax system is

An important objective in designing a tax system is to

Welfare recipients are sometimes faced with a withdrawal of welfare benefits and an increase in income tax as their earned income rises.This creates a problem because

In Canada,publicly provided health care is

In 2015, the federal income-tax rate was graduated in ________ steps, with the top rate applying to incomes above approximately ________.

The direct burden of a tax is

The five pillars of Canadian social policy are

The Canadian federal governmentʹs system of ʺequalization paymentsʺ

In Canada,post-secondary education is

When assessing a tax system,ʺvertical equityʺ refers to

The excess burden of a tax reflects a reduction of

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $120 000,how much total federal tax would be due?

Consider the allocation of a nationʹs resources between additional public-sector spending versus additional private spending.James Buchanan argued that

In Canada,public primary and secondary education

Which of the following is required to achieve progressivity for a particular tax?

An efficiency argument for public provision of basic education is that

As a proportion of Gross Domestic Product (GDP),Canadian governmentsʹ tax revenues,as compared to other industrialized countries,are

In Canada,taxes are levied and collected by

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

Filters

The Canada Health Transfer (CHT) is scheduled to grow at a(n) % annual rate until 2017, and after 2017 at an annual rate .

In 2015, the federal income-tax rate was graduated in steps, with the top rate applying to incomes above approximately .