Question 1

The payroll tax represents

Accepted Answer

A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets. 
A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets.

Question 2

The people most likely to pay little personal income tax to the U.S.government are

Accepted Answer

A) the middle class. 
B) renters. 
C) the very poor. 
D) earners of wages (as opposed to salaries). 
A) the middle class. 
B) renters. 
C) the very poor. 
D) earners of wages (as opposed to salaries).

Question 3

Above a certain income the marginal social security tax drops to zero.

Accepted Answer

A) True 
 B)False

Question 4

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 5

The federal government of the United States relies heavily on value-added taxes.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A tax that does not change consumers' behavior creates no

Accepted Answer

A) economic burden. 
B) excess burden. 
C) tax revenue. 
D) tax incidence. 
A) economic burden. 
B) excess burden. 
C) tax revenue. 
D) tax incidence.

Question 8

A $10 fee to obtain a driver's license is a

Accepted Answer

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

Question 9

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

Accepted Answer

A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation. 
A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation.

Question 10

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 11

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 12

The share of Gross Domestic Product paid by Americans in federal taxes is now roughly

Accepted Answer

A) 5 percent. 
B) 160 percent. 
C) 60 percent. 
D) 65 percent. 
A) 5 percent. 
B) 160 percent. 
C) 60 percent. 
D) 65 percent.

Question 13

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 14

Philip purchased one million dollars' worth of New York City bonds.His interest earnings were $100,000.His total federal tax on this income will be

Accepted Answer

A) $40,000, since his marginal tax rate was 40 percent. 
B) $40,000, since only 40 percent of capital gains is taxed. 
C) zero. 
D) very small, since he had a clever accountant who knew how to use loopholes. 
A) $40,000, since his marginal tax rate was 40 percent. 
B) $40,000, since only 40 percent of capital gains is taxed. 
C) zero. 
D) very small, since he had a clever accountant who knew how to use loopholes.

Question 15

Fiscal federalism refers to

Accepted Answer

A) passing money from one level of government to another. 
B) leaving indirect taxes to the states. 
C) keeping property taxes low. 
D) making all levels of government operate on a "pay as you go" basis. 
A) passing money from one level of government to another. 
B) leaving indirect taxes to the states. 
C) keeping property taxes low. 
D) making all levels of government operate on a "pay as you go" basis.

Question 16

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

Accepted Answer

A) True 
 B)False

Question 17

Define the following terms and explain their importance to the study of economics:
a.regressive tax
b.proportional tax
c.progressive tax
d.direct tax
e.indirect tax

Accepted Answer

a.A regressive tax is one in which the a

Question 18

Why do many economists rate the income tax high in efficiency and equity terms?

Accepted Answer

The income tax could potentially reduce

Question 19

Under a progressive tax,the fraction of income paid in taxes

Accepted Answer

A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income. 
A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income.

Question 20

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

Exam 18: Taxation and Resource Allocation

The payroll tax represents

The people most likely to pay little personal income tax to the U.S.government are

Above a certain income the marginal social security tax drops to zero.

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

The federal government of the United States relies heavily on value-added taxes.

Horizontal equity is a difficult concept to implement because

A tax that does not change consumers' behavior creates no

A $10 fee to obtain a driver's license is a

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

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

The term "fiscal federalism" refers to

The share of Gross Domestic Product paid by Americans in federal taxes is now roughly

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

Philip purchased one million dollars' worth of New York City bonds.His interest earnings were $100,000.His total federal tax on this income will be

Fiscal federalism refers to

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

Define the following terms and explain their importance to the study of economics: a.regressive tax b.proportional tax c.progressive tax d.direct tax e.indirect tax

Why do many economists rate the income tax high in efficiency and equity terms?

Under a progressive tax,the fraction of income paid in taxes

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

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 Markets 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

International Trade and Comparative Advantage

Filters

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