Question 1

A progressive tax means the percentage of income paid as taxes:

Accepted Answer

A)  increases as income increases. 
B)  decreases as income increases. 
C)  remains the same as income increases. 
D)  none of the above. 
A)  increases as income increases. 
B)  decreases as income increases. 
C)  remains the same as income increases. 
D)  none of the above.

Question 2

Which of the following can be classified as a regressive tax?

Accepted Answer

A)  Federal corporate income tax. 
B)  Federal personal income tax. 
C)  Federal gasoline tax. 
D)  All of the above. 
A)  Federal corporate income tax. 
B)  Federal personal income tax. 
C)  Federal gasoline tax. 
D)  All of the above.

Question 3

State and local sales taxes are typically progressive.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following represents the basic principle of public choice theory?

Accepted Answer

A)  Politicians act consistently in the public's interest. 
B)  Politicians follow their own self-interest and seek to maximize their reelection chances, rather than promote the best interests of society. 
C)  Politicians act in the public interest once they are elected, but follow their own self-interest and seek to maximize their reelection chances during a political campaign. 
D)  None of the above. 
A)  Politicians act consistently in the public's interest. 
B)  Politicians follow their own self-interest and seek to maximize their reelection chances, rather than promote the best interests of society. 
C)  Politicians act in the public interest once they are elected, but follow their own self-interest and seek to maximize their reelection chances during a political campaign. 
D)  None of the above.

Question 5

The primary source of revenue at the federal level is:

Accepted Answer

A)  the corporate income tax. 
B)  the personal income tax. 
C)  property taxes. 
D)  sales taxes. 
E)  customs duties. 
A)  the corporate income tax. 
B)  the personal income tax. 
C)  property taxes. 
D)  sales taxes. 
E)  customs duties.

Question 6

Currently, total government expenditures in the United States have totaled about:

Accepted Answer

A)  one-tenth of GDP. 
B)  one-fifth of GDP. 
C)  one-third of GDP. 
D)  one-half of GDP. 
A)  one-tenth of GDP. 
B)  one-fifth of GDP. 
C)  one-third of GDP. 
D)  one-half of GDP.

Question 7

In which of the following countries are taxes (measured as a percentage of GDP) the lowest?

Accepted Answer

A)  Germany. 
B)  France. 
C)  Sweden. 
D)  The United States. 
A)  Germany. 
B)  France. 
C)  Sweden. 
D)  The United States.

Question 8

The results of majority voting sometimes, but not always, agree with the results of benefit-cost analysis.

Accepted Answer

A) True 
 B)False

Question 9

Consider two people, Sandy Ross, who earns $25,000, and Gary Belcher, who earns $50,000. If the flat-tax rate is 20 percent, then:

Accepted Answer

A)  the government collects a total of $20,000. 
B)  Gary pays twice the tax amount Sandy pays. 
C)  Gary pays three times the tax amount Sandy pays. 
D)  Gary and Sandy pay exactly the same tax amount. 
E)  Gary pays $15,000 in taxes. 
A)  the government collects a total of $20,000. 
B)  Gary pays twice the tax amount Sandy pays. 
C)  Gary pays three times the tax amount Sandy pays. 
D)  Gary and Sandy pay exactly the same tax amount. 
E)  Gary pays $15,000 in taxes.

Question 10

A special interest group cannot impose its will on the majority because the perceived costs and benefits from government programs are the same for both groups.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following can be classified as a regressive tax?

Accepted Answer

A)  Excise tax. 
B)  Sales tax. 
C)  Gasoline tax. 
D)  All of the above. 
A)  Excise tax. 
B)  Sales tax. 
C)  Gasoline tax. 
D)  All of the above.

Question 12

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.

Question 13

The federal income tax is progressive because the tax rates increase at higher income levels.

Accepted Answer

A) True 
 B)False

Question 14

Since 1970, the composition of federal expenditures has:

Accepted Answer

A)  been virtually unchanged, but federal spending as a share of GDP has declined substantially. 
B)  been virtually unchanged, but federal spending as a share of GDP has increased sharply. 
C)  shifted away from national defense and toward spending on income security. 
D)  shifted away from income security income transfers and toward spending on national defense. 
A)  been virtually unchanged, but federal spending as a share of GDP has declined substantially. 
B)  been virtually unchanged, but federal spending as a share of GDP has increased sharply. 
C)  shifted away from national defense and toward spending on income security. 
D)  shifted away from income security income transfers and toward spending on national defense.

Question 15

Exhibit 16-3  Income for two persons   In Exhibit 16-3, 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.

Question 16

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  Benefits-received. 
B)  Inexpensive-to-collect. 
C)  Ability-to-pay. 
D)  Fairness of contribution. 
A)  Benefits-received. 
B)  Inexpensive-to-collect. 
C)  Ability-to-pay. 
D)  Fairness of contribution.

Question 17

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 Gary pays:

Accepted Answer

A)  $10,000 in taxes and Sandy pays $5,000 in taxes. 
B)  $10,000 in taxes and Sandy pays $10,000 in taxes. 
C)  $15,000 in taxes and Sandy pays $5,000 in taxes. 
D)  $15,000 in taxes and Sandy pays $10,000 in taxes. 
E)  $17,000 in taxes and Sandy pays $5,000 in taxes. 
A)  $10,000 in taxes and Sandy pays $5,000 in taxes. 
B)  $10,000 in taxes and Sandy pays $10,000 in taxes. 
C)  $15,000 in taxes and Sandy pays $5,000 in taxes. 
D)  $15,000 in taxes and Sandy pays $10,000 in taxes. 
E)  $17,000 in taxes and Sandy pays $5,000 in taxes.

Question 18

Cost-benefit principles can be applied to the decision of:

Accepted Answer

A)  profit-maximizing firms. 
B)  majority-rule voting. 
C)  which project receives the most votes. 
D)  rational ignorance. 
E)  all of the above. 
A)  profit-maximizing firms. 
B)  majority-rule voting. 
C)  which project receives the most votes. 
D)  rational ignorance. 
E)  all of the above.

Question 19

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 20

Suppose a person with an income of $20,000 pays a tax of $2,000. If the tax is progressive, then how large of a tax will a person with an income of $40,000 pay?

Accepted Answer

A)  Exactly $2,000. 
B)  Between $2,000 and $4,000. 
C)  Exactly $4,000. 
D)  More than $4,000. 
A)  Exactly $2,000. 
B)  Between $2,000 and $4,000. 
C)  Exactly $4,000. 
D)  More than $4,000.

Exam 16: The Public Sector

A progressive tax means the percentage of income paid as taxes:

Which of the following can be classified as a regressive tax?

State and local sales taxes are typically progressive.

Which of the following represents the basic principle of public choice theory?

The primary source of revenue at the federal level is:

Currently, total government expenditures in the United States have totaled about:

In which of the following countries are taxes (measured as a percentage of GDP) the lowest?

The results of majority voting sometimes, but not always, agree with the results of benefit-cost analysis.

Consider two people, Sandy Ross, who earns $25,000, and Gary Belcher, who earns $50,000. If the flat-tax rate is 20 percent, then:

A special interest group cannot impose its will on the majority because the perceived costs and benefits from government programs are the same for both groups.

Which of the following can be classified as a regressive tax?

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:

The federal income tax is progressive because the tax rates increase at higher income levels.

Since 1970, the composition of federal expenditures has:

Exhibit 16-3 Income for two persons In Exhibit 16-3, if the income tax system is currently proportional, we know that:

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

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 Gary pays:

Cost-benefit principles can be applied to the decision of:

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

Suppose a person with an income of $20,000 pays a tax of $2,000. If the tax is progressive, then how large of a tax will a person with an income of $40,000 pay?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters