Question 1

Which of the following U.S. taxes is the most consistent with the ability-to-pay principle?

Accepted Answer

A) The excise tax on gasoline. 
B) The federal income tax. 
C) State sales taxes. 
D) The Social Security payroll tax. 
A) The excise tax on gasoline. 
B) The federal income tax. 
C) State sales taxes. 
D) The Social Security payroll tax. B

Question 2

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then:

Accepted Answer

A) Gary and Sandy both pay taxes of the same percentage of total income. 
B) Gary and Sandy pay the same amount of taxes. 
C) Gary pays twice the tax amount Sandy pays. 
D) Gary pays three times the tax amount Sandy pays. 
E) Sandy does not pay taxes. 
A) Gary and Sandy both pay taxes of the same percentage of total income. 
B) Gary and Sandy pay the same amount of taxes. 
C) Gary pays twice the tax amount Sandy pays. 
D) Gary pays three times the tax amount Sandy pays. 
E) Sandy does not pay taxes. D

Question 3

Exhibit 12-3 Income for two persons   In Exhibit 12-3, if the income tax system is currently proportional, we know that:

Accepted Answer

A) Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B) Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
C) Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
D) Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E) Meredith and Hillary's tax bills are equal. 
A) Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B) Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
C) Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
D) Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E) Meredith and Hillary's tax bills are equal. A

Question 4

If a person is taxed $1,000 on an income of $10,000, taxed $2,000 on an income of $20,000, and taxed $3,000 on an income of $30,000, this person is paying a(n):

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) poll tax. 
E) excise tax. 
A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) poll tax. 
E) excise tax.

Question 5

The amount of government expenditures on a project or program should continue to increase for as long as the marginal benefits exceed the marginal costs.

Accepted Answer

A) True 
 B)False

Question 6

Government expenditures as a share of the U.S. economy are:

Accepted Answer

A) the largest in the world. 
B) the smallest in the world. 
C) smaller than most Western European countries. 
D) larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy. 
A) the largest in the world. 
B) the smallest in the world. 
C) smaller than most Western European countries. 
D) larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy.

Question 7

Rational voter ignorance occurs because the marginal cost of obtaining information is higher than the marginal benefit from obtaining the information.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?

Accepted Answer

A) Income security. 
B) National defense. 
C) Education and health. 
D) Interest on the national debt. 
A) Income security. 
B) National defense. 
C) Education and health. 
D) Interest on the national debt.

Question 9

At the federal level, the single most important tax, accounting for slightly less than half of revenue, is the:

Accepted Answer

A) corporate income tax. 
B) personal income tax. 
C) estate tax. 
D) property tax. 
E) sales tax. 
A) corporate income tax. 
B) personal income tax. 
C) estate tax. 
D) property tax. 
E) sales tax.

Question 10

Taxes in the United States as a percentage of GDP are among the highest in the world.

Accepted Answer

A) True 
 B)False

Question 11

People who often impose cost on the majority in order to benefit certain groups are called:

Accepted Answer

A) laissez-faire groups. 
B) encounter groups. 
C) fair-interest groups. 
D) special-interest groups. 
E) none of these. 
A) laissez-faire groups. 
B) encounter groups. 
C) fair-interest groups. 
D) special-interest groups. 
E) none of these.

Question 12

The federal personal income tax was designed to be a:

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) poll tax. 
E) payroll tax. 
A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) poll tax. 
E) payroll tax.

Question 13

Which of the following is the largest source of revenue for the federal government?

Accepted Answer

A) corporate income tax 
B) payroll tax 
C) personal income tax 
D) user charges 
A) corporate income tax 
B) payroll tax 
C) personal income tax 
D) user charges

Question 14

Describe the major sources of tax revenue and expenditures for the federal government.

Accepted Answer

The major source of tax revenu

Question 15

Measured as a share of the economy, government expenditures:

Accepted Answer

A) have been between 10 and 15 percent of the U.S. economy since 1930. 
B) have been between 20 and 25 percent of the U.S. economy since 1930. 
C) rose from less than 10 percent in 1929 to nearly 40 percent in 2009. 
D) declined from more than 50 percent in 1929 to approximately 25 percent in 2009. 
A) have been between 10 and 15 percent of the U.S. economy since 1930. 
B) have been between 20 and 25 percent of the U.S. economy since 1930. 
C) rose from less than 10 percent in 1929 to nearly 40 percent in 2009. 
D) declined from more than 50 percent in 1929 to approximately 25 percent in 2009.

Question 16

The term "public sector" refers only to federal government purchases of goods and services.

Accepted Answer

A) True 
 B)False

Question 17

Total government spending (federal, state, and local)sums to approximately:

Accepted Answer

A) 10 percent of the U.S. economy. 
B) 20 percent of the U.S. economy. 
C) 40 percent of the U.S. economy. 
D) one-half of the U.S. economy. 
A) 10 percent of the U.S. economy. 
B) 20 percent of the U.S. economy. 
C) 40 percent of the U.S. economy. 
D) one-half of the U.S. economy.

Question 18

Jan has an income of $30,000 and pays $4,500 in taxes. When Jan's income rises to $40,000, her tax bill rises to $6,500. What is Jan's marginal tax rate?

Accepted Answer

A) 5 percent. 
B) 15 percent. 
C) 16.25 percent. 
D) 20 percent. 
A) 5 percent. 
B) 15 percent. 
C) 16.25 percent. 
D) 20 percent.

Question 19

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

Accepted Answer

A) True 
 B)False

Question 20

A progressive income tax means the percentage of income paid in taxes decreases as income increases.

Accepted Answer

A) True 
 B)False

Exam 12: The Public Sector

Which of the following U.S. taxes is the most consistent with the ability-to-pay principle?

Consider two people, Sandy Smith, who earns $25,000, and Gary Carver, who earns $50,000. If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then:

Exhibit 12-3 Income for two persons In Exhibit 12-3, if the income tax system is currently proportional, we know that:

If a person is taxed $1,000 on an income of $10,000, taxed $2,000 on an income of $20,000, and taxed $3,000 on an income of $30,000, this person is paying a(n):

The amount of government expenditures on a project or program should continue to increase for as long as the marginal benefits exceed the marginal costs.

Government expenditures as a share of the U.S. economy are:

Rational voter ignorance occurs because the marginal cost of obtaining information is higher than the marginal benefit from obtaining the information.

Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?

At the federal level, the single most important tax, accounting for slightly less than half of revenue, is the:

Taxes in the United States as a percentage of GDP are among the highest in the world.

People who often impose cost on the majority in order to benefit certain groups are called:

The federal personal income tax was designed to be a:

Which of the following is the largest source of revenue for the federal government?

Describe the major sources of tax revenue and expenditures for the federal government.

Measured as a share of the economy, government expenditures:

The term "public sector" refers only to federal government purchases of goods and services.

Total government spending (federal, state, and local)sums to approximately:

Jan has an income of $30,000 and pays $4,500 in taxes. When Jan's income rises to $40,000, her tax bill rises to $6,500. What is Jan's marginal tax rate?

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

A progressive income tax means the percentage of income paid in taxes decreases as income increases.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

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