Question 1

Since 1929, total government taxes as a percentage of GDP:

Accepted Answer

A)  climbed from 10 percent to about 30 percent. 
B)  remained close to 30 percent. 
C)  climbed from 30 percent to about 50 percent. 
D)  climbed from 15 percent to about 50 percent. 
A)  climbed from 10 percent to about 30 percent. 
B)  remained close to 30 percent. 
C)  climbed from 30 percent to about 50 percent. 
D)  climbed from 15 percent to about 50 percent.

Question 2

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:

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 3

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 4

A person who is in a 31 percent marginal tax bracket and has a total taxable income of $100,000 will owe $31,000 in taxes.

Accepted Answer

A) True 
 B)False

Question 5

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

Accepted Answer

A)  A true flax tax. 
B)  A flat sales tax on consumption purchases. 
C)  A progressive tax on income. 
D)  A fixed federal tax of $5,000 that everyone pays regardless of income status. 
A)  A true flax tax. 
B)  A flat sales tax on consumption purchases. 
C)  A progressive tax on income. 
D)  A fixed federal tax of $5,000 that everyone pays regardless of income status.

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

A tax is proportional if, as a person's income rises, the:

Accepted Answer

A)  tax rate is constant. 
B)  tax rate falls. 
C)  tax rate rises. 
D)  amount of the tax is constant. 
E)  amount of the tax falls. 
A)  tax rate is constant. 
B)  tax rate falls. 
C)  tax rate rises. 
D)  amount of the tax is constant. 
E)  amount of the tax falls.

Question 8

According to public choice theory, why might government policy benefit only a narrow interest group?

Accepted Answer

A)  If the benefits to the narrow interest group are relatively large, they have an incentive to invest a lot of money and effort in lobbying government. 
B)  If the costs of this policy are spread out among the general population, and are a very small burden for anyone person, then those paying the costs have little incentive to organize opposition. 
C)  Both a. and b. are correct. 
D)  None of the above is correct. 
A)  If the benefits to the narrow interest group are relatively large, they have an incentive to invest a lot of money and effort in lobbying government. 
B)  If the costs of this policy are spread out among the general population, and are a very small burden for anyone person, then those paying the costs have little incentive to organize opposition. 
C)  Both a. and b. are correct. 
D)  None of the above is correct.

Question 9

Cost-benefit analysis can be applied to individual decision-making and public choice theory.

Accepted Answer

A) True 
 B)False

Question 10

If a person is taxed $100 on an income of $1,000, taxed $180 on an income of $2,000, and taxed $220 on an income of $3,000, this person is paying a:

Accepted Answer

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

Question 11

Exhibit 16-1  Income for two persons   In Exhibit 16-1, if the income tax system is progressive, then:

Accepted Answer

A)  Elaine and Daniel will face the same tax rate and will have tax bills the same size. 
B)  Elaine and Daniel will face the same tax rate but have tax bills that are different sizes. 
C)  Elaine will face a higher tax rate and will have a larger tax bill than Daniel. 
D)  Elaine will face a lower tax rate and will have a smaller tax bill than Daniel. 
E)  Elaine will face a lower tax rate but will have a larger tax bill than Daniel. 
A)  Elaine and Daniel will face the same tax rate and will have tax bills the same size. 
B)  Elaine and Daniel will face the same tax rate but have tax bills that are different sizes. 
C)  Elaine will face a higher tax rate and will have a larger tax bill than Daniel. 
D)  Elaine will face a lower tax rate and will have a smaller tax bill than Daniel. 
E)  Elaine will face a lower tax rate but will have a larger tax bill than Daniel.

Question 12

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.

Question 13

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 14

According to the public choice theory, voters who choose to remain uninformed about the issues are behaving irrationally.

Accepted Answer

A) True 
 B)False

Question 15

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport. The departure tax follows the:

Accepted Answer

A)  benefits-received principle. 
B)  ability-to-pay principle. 
C)  flat-rate taxation principle. 
D)  public-choice principle. 
A)  benefits-received principle. 
B)  ability-to-pay principle. 
C)  flat-rate taxation principle. 
D)  public-choice principle.

Question 16

Which of the following statements is true ?

Accepted Answer

A)  The most important source of revenue to the federal government is personal income taxes. 
B)  The most important source of revenue to state governments are sales and property taxes. 
C)  The most important source of revenue to local governments are local property taxes. 
D)  The taxation burden, measured by taxes as a percentage of GDP, is lighter in the United States than in most other advanced industrial countries. 
E)  All of the above. 
A)  The most important source of revenue to the federal government is personal income taxes. 
B)  The most important source of revenue to state governments are sales and property taxes. 
C)  The most important source of revenue to local governments are local property taxes. 
D)  The taxation burden, measured by taxes as a percentage of GDP, is lighter in the United States than in most other advanced industrial countries. 
E)  All of the above.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):

Accepted Answer

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

Question 19

Suppose fairness is defined as those who receive the greatest benefits from government should pay the most in taxes, then which of the following taxation systems would be consistent with this notion of fairness?

Accepted Answer

A)  User fees for national parks. 
B)  Gasoline taxes to fund highway maintenance. 
C)  A tax on the poor to finance food stamps and other low-income assistance programs. 
D)  All of the above are consistent. 
A)  User fees for national parks. 
B)  Gasoline taxes to fund highway maintenance. 
C)  A tax on the poor to finance food stamps and other low-income assistance programs. 
D)  All of the above are consistent.

Question 20

Exhibit 16-4  Marginal tax rate lines   In Exhibit 16-4, line B represents a:

Accepted Answer

A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  flat tax. 
A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  flat tax.

Exam 16: The Public Sector

Since 1929, total government taxes as a percentage of GDP:

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:

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?

A person who is in a 31 percent marginal tax bracket and has a total taxable income of $100,000 will owe $31,000 in taxes.

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

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

A tax is proportional if, as a person's income rises, the:

According to public choice theory, why might government policy benefit only a narrow interest group?

Cost-benefit analysis can be applied to individual decision-making and public choice theory.

If a person is taxed $100 on an income of $1,000, taxed $180 on an income of $2,000, and taxed $220 on an income of $3,000, this person is paying a:

Exhibit 16-1 Income for two persons In Exhibit 16-1, if the income tax system is progressive, then:

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

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

According to the public choice theory, voters who choose to remain uninformed about the issues are behaving irrationally.

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport. The departure tax follows the:

Which of the following statements is true ?

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

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):

Suppose fairness is defined as those who receive the greatest benefits from government should pay the most in taxes, then which of the following taxation systems would be consistent with this notion of fairness?

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, line B represents a:

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

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