Question 1

The total burden of a tax equals tax receipts plus excess burden.

Accepted Answer

A) True 
 B)False

Question 2

Figure 18-2
  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.The revenue collected by the tax is ____.

Accepted Answer

A)  $8,000 
B)  $50,000 
C)  $100,000 
D)  $150,000 
A)  $8,000 
B)  $50,000 
C)  $100,000 
D)  $150,000

Question 3

The system of grants from one level of government to another is an example of fiscal federalism.

Accepted Answer

A) True 
 B)False

Question 4

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Accepted Answer

A)  income taxes; property taxes 
B)  property taxes; sales taxes 
C)  sales taxes; property taxes 
D)  income taxes; sales taxes 
A)  income taxes; property taxes 
B)  property taxes; sales taxes 
C)  sales taxes; property taxes 
D)  income taxes; sales taxes

Question 5

One major problem with Social Security is that it is a "pay as you go" system.

Accepted Answer

A) True 
 B)False

Question 6

The term "fiscal federalism" refers to

Accepted Answer

A)  deficit financing of government programs. 
B)  the power of Congress to tax and to determine how tax revenues are spent. 
C)  transferring money between levels of government (for example, from a state government to a local government). 
D)  the system under which governments ask citizens to vote on major revenue-raising measures (for example, on issues of municipal bonds). 
A)  deficit financing of government programs. 
B)  the power of Congress to tax and to determine how tax revenues are spent. 
C)  transferring money between levels of government (for example, from a state government to a local government). 
D)  the system under which governments ask citizens to vote on major revenue-raising measures (for example, on issues of municipal bonds).

Question 7

The benefits principle is often used to justify

Accepted Answer

A)  the progressive income tax. 
B)  a flat income tax. 
C)  a regressive excise tax. 
D)  earmarking the proceeds from taxes for specific public services. 
A)  the progressive income tax. 
B)  a flat income tax. 
C)  a regressive excise tax. 
D)  earmarking the proceeds from taxes for specific public services.

Question 8

The ability to shift a tax burden depends on the relative elasticities of demand and supply for the taxed commodity.

Accepted Answer

A) True 
 B)False

Question 9

Which is the correct order of importance in terms of revenue collected among the following federal taxes?

Accepted Answer

A)  (1) corporate income taxes (2) value-added taxes (3) excise taxes 
B)  (1) personal income taxes (2) corporate income taxes (3) sales taxes 
C)  (1) payroll taxes (2) personal income taxes (3) federal excise taxes 
D)  (1) personal income taxes (2) payroll taxes (3) corporate income taxes 
A)  (1) corporate income taxes (2) value-added taxes (3) excise taxes 
B)  (1) personal income taxes (2) corporate income taxes (3) sales taxes 
C)  (1) payroll taxes (2) personal income taxes (3) federal excise taxes 
D)  (1) personal income taxes (2) payroll taxes (3) corporate income taxes

Question 10

The total burden of a tax is the

Accepted Answer

A)  absolute number of dollars an individual pays. 
B)  percentage of income a person pays. 
C)  number of dollars a person must be given after taxation to make him as well off as he was before taxation. 
D)  revenue lost to loopholes. 
A)  absolute number of dollars an individual pays. 
B)  percentage of income a person pays. 
C)  number of dollars a person must be given after taxation to make him as well off as he was before taxation. 
D)  revenue lost to loopholes.

Question 11

The federal income tax is an example of a

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  value-added tax. 
A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  value-added tax.

Question 12

Explain the purpose of payroll taxes.Is it a proportional form of tax?

Accepted Answer

The payroll tax is a tax levied on the e

Question 13

The average tax rate is

Accepted Answer

A)  the ratio of additional taxes to an additional dollar of income. 
B)  the ratio of taxes to income. 
C)  the ratio of taxes to GDP. 
D)  the ratio of income to direct taxes. 
A)  the ratio of additional taxes to an additional dollar of income. 
B)  the ratio of taxes to income. 
C)  the ratio of taxes to GDP. 
D)  the ratio of income to direct taxes.

Question 14

The federal income tax began in the United States with the

Accepted Answer

A)  Morrill Act of 1862. 
B)  addition of the Bill of Rights to the Constitution in 1791. 
C)  passage of the 16th Amendment to the Constitution in 1913. 
D)  New Deal legislation of the 1930s. 
A)  Morrill Act of 1862. 
B)  addition of the Bill of Rights to the Constitution in 1791. 
C)  passage of the 16th Amendment to the Constitution in 1913. 
D)  New Deal legislation of the 1930s.

Question 15

What are the arguments for and against federal government grants to states?

Accepted Answer

Supporters of large grants see state gov

Question 16

Figure 18-2
  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

Accepted Answer

A)  $5 
B)  $20 
C)  $25 
D)  $30 
A)  $5 
B)  $20 
C)  $25 
D)  $30

Question 17

Horizontal equity is a difficult concept to implement because

Accepted Answer

A)  it is difficult to determine how unequally unequals should be treated. 
B)  it is difficult to measure ability to pay. 
C)  it is difficult to determine which people are equally situated. 
D)  people object to the use of absolute tax liability instead of percentage of income. 
A)  it is difficult to determine how unequally unequals should be treated. 
B)  it is difficult to measure ability to pay. 
C)  it is difficult to determine which people are equally situated. 
D)  people object to the use of absolute tax liability instead of percentage of income.

Question 18

Michigan recently did away with property taxes.Alternative funding for schools could come from

Accepted Answer

A)  a lottery system. 
B)  an increase in sales tax and income tax. 
C)  an increase in corporate taxes. 
D)  All of the above are correct. 
A)  a lottery system. 
B)  an increase in sales tax and income tax. 
C)  an increase in corporate taxes. 
D)  All of the above are correct.

Question 19

An excise tax on gasoline is regressive if

Accepted Answer

A)  rich people buy more gasoline than poor people. 
B)  the demand for gasoline is elastic. 
C)  the tax causes people to buy less gasoline. 
D)  poor people spend a larger portion of their incomes on gasoline than rich people. 
A)  rich people buy more gasoline than poor people. 
B)  the demand for gasoline is elastic. 
C)  the tax causes people to buy less gasoline. 
D)  poor people spend a larger portion of their incomes on gasoline than rich people.

Question 20

State governments' main source of revenue is

Accepted Answer

A)  property taxes. 
B)  income taxes. 
C)  excise taxes. 
D)  sales taxes. 
A)  property taxes. 
B)  income taxes. 
C)  excise taxes. 
D)  sales taxes.

Exam 18: Taxation and Resource Allocation

The total burden of a tax equals tax receipts plus excess burden.

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.The revenue collected by the tax is ____.

The system of grants from one level of government to another is an example of fiscal federalism.

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

One major problem with Social Security is that it is a "pay as you go" system.

The term "fiscal federalism" refers to

The benefits principle is often used to justify

The ability to shift a tax burden depends on the relative elasticities of demand and supply for the taxed commodity.

Which is the correct order of importance in terms of revenue collected among the following federal taxes?

The total burden of a tax is the

The federal income tax is an example of a

Explain the purpose of payroll taxes.Is it a proportional form of tax?

The average tax rate is

The federal income tax began in the United States with the

What are the arguments for and against federal government grants to states?

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

Horizontal equity is a difficult concept to implement because

Michigan recently did away with property taxes.Alternative funding for schools could come from

An excise tax on gasoline is regressive if

State governments' main source of revenue is

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

Most state governments finance their budgets through , and most local governments finance their budgets through .