Deck 18: Taxation and Public Expenditure

Question 1

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Which of the following best describes the policy implications of a Laffer curve?

A)Policymakers should carefully consider whether a given increase in tax rates would increase or decrease tax revenues.
B)Policymakers should avoid imposing taxes on income as they decrease the work incentive.
C)Policymakers should eliminate tax deductions and maximize revenue at any given tax rate.
D)Policymakers should eliminate tax loopholes and maximize revenue at any given tax rate.
E)Policymakers should set the tax rate as low as possible to maximize tax revenue.

Answer 1

Policymakers should carefully consider whether a given increase in tax rates would increase or decrease tax revenues.

Question 2

FIGURE 18- 1
The Canada Health Transfer (CHT)and the Canada Social Transfer (CST)are allocated to provinces

A)on an equal per capita basis.
B)according to the different health and social needs of each province.
C)according to the tax base and age structure of the province and its population.
D)on an equal per capita basis after subtracting any equalization payments payable to the province.
E)according to the tax base of the province.

Answer 2

A

Question 3

Taking all federal and provincial expenditures into account,Canada's single most expensive social program is

A)employment- insurance payments.
B)post- secondary education programs.
C)the public health- care system.
D)the basic education system.
E)social- assistance payments.

Answer 3

C

Question 4

As a proportion of Gross Domestic Product (GDP),Canadian governments' tax revenues,as compared to other industrialized countries,are

A)the very lowest.
B)among the highest.
C)the very highest.
D)roughly in the middle of the group.
E)among the lowest.

Question 5

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
Refer to Figure 18- 4.What is the value of the tax imposed on this product,in dollars per unit?

A)$1
B)$2
C)$3
D)$4
E)$5

Question 6

FIGURE 18- 1
Refer to Figure 18- 1.A progressive tax is illustrated by curve(s)

A)A and B.
B)B and C.
C)C and D.
D)A only.
E)C only.

Question 7

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Refer to Table 18- 1.If an individual had a taxable income of $120 000,how much federal tax would be due?

A)$24 794
B)$28 020
C)$6109
D)$31 200
E)$8959

Question 8

Statistics Canada defines the poverty line as the level of income at which a household

A)is in the bottom 10% of income groups.
B)spends more than 63% of its income on the three basic necessities of food,shelter,and clothing.
C)spends more than 87% of its income on the three basic necessities of food,shelter,and clothing.
D)adjusted for family size earns less than the average family income in Canada.
E)earns less than $8850 during a calendar year.

Question 9

The debate about the appropriate balance between the public and private sectors

A)is about the marginal benefits of public spending versus the marginal benefits of private spending,received for the last dollar spent.
B)has been solved in Canada.
C)should be decided by economists because they know the right balance.
D)was solved by John Kenneth Galbraith in his book The Affluent Society.
E)was solved by James Buchanan,a Nobel laureate.

Question 10

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
One efficiency- based argument in favour of government subsidies for post- secondary education is that

A)there are positive externalities involved in the consumption of education.
B)very few benefits from an individual's education accrue to society as a whole.
C)the subsidy is essentially a transfer from lower- income,non- university- trained taxpayers to potentially higher- income- earning university students.
D)they would encourage people not to seek employment.
E)relative to the federal contribution,the provincial contribution to higher education is too low.

Question 11

The sometimes proposed "flat tax," such as one that takes 15% of income at all levels of income,is an example of a(n)

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

Question 12

If all university students had to pay the full cost of their education,

A)the economic efficiency of the higher education system would be greatly enhanced.
B)vertical equity would be enhanced,since university students would internalize the externalities of their educations.
C)horizontal equity would be worsened because university students in general come from the lowest- income families.
D)the federal debt could be eliminated.
E)they would probably choose less education than what is socially optimal.

Question 13

In 2009,public expenditure by all levels of government (federal,provincial,and municipal)combined accounted for approximately what percentage of Canadian GDP?

A)40
B)26
C)36
D)56
E)16

Question 14

A mandatory health- insurance premium of a given amount payable by all residents is an example of a(n)

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

Question 15

Interest earnings from accumulated savings are subject to personal income tax in Canada.As a result,

A)taxes applied to this income are regressive.
B)the interest paid on savings accounts increases.
C)individuals have a reduced incentive to save.
D)total national saving is higher than it otherwise would be.
E)there will be more capital accumulated for the economy.

Question 16

The efficiency argument for government provision of health care is that

A)a healthy population is important to the smooth functioning of a country and its economy.
B)the government can provide health care up to that point where marginal benefit is zero.
C)the government is best able to assess the level of provision for which marginal cost equals marginal benefit.
D)health care cannot be efficiently provided by private firms.
E)many poor people could not afford health care if they had to pay for it.

Question 17

Welfare recipients are sometimes faced with a withdrawal of welfare benefits and an increase in income tax as their earned income rises.This creates a problem because

A)it is administratively difficult to track these individuals.
B)of the incentives for firms to lay off workers more frequently for short periods.
C)firms become unwilling to hire people that are currently unemployed.
D)of the powerful disincentives to work for low- income individuals.
E)of the incentives for workers to shirk and/or retire early.

Question 18

A "poverty trap" refers to the situation where

A)low- income persons whose only income for a period of 5 or more years has been welfare benefits.
B)tax- generated disincentives exist for middle- income persons to increase their earned income.
C)low- income persons whose only income for a period of 2 or more years has been welfare benefits.
D)the government has imposed a negative income tax.
E)tax- generated disincentives exist for very- low- income persons to increase their earned income.

Question 19

The excess burden of a tax

A)is the deadweight loss created by the tax.
B)is always regressive.
C)is always progressive.
D)is the incidence of a tax.
E)increases economic efficiency by eliminating distortions in the economy.

Question 20

Suppose taxes are levied in the following way.No individual pays any taxes on the first $10 000 of their income.And for every dollar earned above this amount,all individuals pay 20% in taxes.This income- tax system is

A)indexed.
B)an accurate description of the Canadian system.
C)proportional.
D)regressive.
E)progressive.

Question 21

The most important source of revenue for the Canadian federal government is taxes; the most important source of revenue for Canadian municipal governments is taxes.

A)income; property
B)property; payroll
C)corporate; sales
D)income; excise
E)sales; property

Question 22

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
Refer to Figure 18- 4.What is the dollar value of the direct burden of this tax?

A)- $30
B)$180
C)$30
D)$90
E)$450

Question 23

In Canada,public primary and secondary education

A)have eliminated illiteracy in Canada.
B)are funded by provincial governments,but managed by local school boards.
C)are exclusive federal responsibilities.
D)are purely public goods.
E)are funded by government as an income redistribution plan.

Question 24

In Canada,post- secondary education is

A)a provincial responsibility,funded almost completely from provincial budgets.
B)a form of equalization payment across geographic boundaries.
C)a provincial responsibility not funded by the federal government.
D)a form of transfer payment.
E)a provincial responsibility,funded by property taxes.

Question 25

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
Refer to Figure 18- 4.What is the dollar value of the excess burden of this tax?

A)$2
B)$10
C)$5
D)$40
E)$1

Question 26

The federal corporate income tax in Canada is

A)a progressive tax on profits.
B)a flat tax on revenues.
C)a proportional tax on revenues.
D)a progressive tax on revenues.
E)a proportional tax on profits.

Question 27

In Canada,students' tuition fees for post- secondary education account for about

A)20% of total costs.
B)12% of total costs.
C)16% of total costs.
D)50% of total costs.
E)54% of total costs.

Question 28

Consider two families,each of whom earn total income of $80 000,but that are different in many other respects.If each family is assessed income tax payable of $14 749,then it is very likely that the principle of is being violated.

A)horizontal equity
B)proportionality
C)vertical equity
D)ability to pay
E)progressivity

Question 29

The figure below show a simplified version of the current (2012)Canadian federal income- tax system.The marginal income- tax rates for the four ranges of income are 15.5%,22%,26%,and 29%,respectively.
FIGURE 18- 2
Refer to Figure 18- 2.An individual with a taxable income of $39 500 will pay in income taxes.

A)$5925
B)$8690
C)$6122
D)$0
E)$6109

Question 30

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Refer to Table 18- 1.If an individual had a taxable income of $132 406,how much total federal tax would be due?

A)$24 794
B)$34 426
C)$5639
D)$28 020
E)$497

Question 31

Tax and other revenues collected by all levels of government amounted to approximately what proportion of Canada's Gross Domestic Product (GDP)in 2009?

A)8%
B)40%
C)18%
D)28%
E)48%

Question 32

The excess burden of an excise tax

A)is the administrative cost of collecting the tax.
B)is the price the consumer must pay above the free- market price.
C)reflects the allocative efficiency of the tax.
D)is the deadweight loss created by the tax.
E)is the total cost imposed on the producer by the tax.

Question 33

An efficiency argument for public provision of basic education is that

A)society as a whole benefits when all of its citizens have the basic skills and knowledge acquired from kindergarten to grade 12.
B)the government can best provide education up to that point where marginal benefit is zero.
C)the government is best able to assess the level of provision for which marginal cost equals marginal benefit.
D)many poor families could not afford to educate their children if they had to pay for it themselves.
E)education cannot be efficiently provided by private firms.

Question 34

In Canada,publicly provided health care is

A)a provincial responsibility,funded partially by the federal government.
B)a form of transfer payment across regions.
C)funded through equalization payments across geographic boundaries.
D)purely a public good.
E)an externality.

Question 35

If one was concerned only with satisfying the "benefit principle," the ideal tax would be a(n)

A)proportional income tax.
B)user charge.
C)sales tax.
D)income tax.
E)surcharge tax.

Question 36

According to Statistics Canada's definition,the percentage of families living below the poverty line in Canada in 2009 was about

A)20%.
B)10%.
C)25%.
D)4%.
E)13%.

Question 37

A tax that takes a higher percentage of income as income rises is called a(n)

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

Question 38

Which of the following is an example of a tax that is designed according to the "benefit principle"?

A)a provincial sales tax
B)value- added tax
C)federal income tax
D)school tax (based on property value)
E)a metered water tax

Question 39

One of the guiding principles in Canada's system of "fiscal federalism" is that

A)the tax base should be approximately equal in each of the provinces and territories.
B)only provinces that are "federalist" should receive fiscal assistance from the federal government.
C)individuals should have approximately the same access to public services,at broadly comparable tax rates,no matter where they live.
D)each province is an independent fiscal entity.
E)the true cost of provision of public goods to the various provinces of Canada should be recovered in tax revenue from the province receiving the benefit.

Question 40

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
Refer to Figure 18- 4.What is the producers' revenue before the imposition of the tax?

A)$540
B)$500
C)$600
D)$630
E)$450

Question 41

Consider a monopolist that is earning profits in the long run.If the government imposes a lump- sum tax on this monopolist (that is less than its profits),then

A)output would decrease and price to consumers would increase.
B)new firms would enter the industry.
C)neither output nor price would change.
D)the monopolist would cease production.
E)the output would remain the same while price increased.

Question 42

Consider an income- tax system that requires all individuals to pay exactly 3% of their income.This income- tax system is

A)regressive,since 3% is harder to pay for a low- income taxpayer.
B)fair,since everyone pays the same amount.
C)a lump- sum system,sometimes called a poll tax.
D)progressive,because the higher the individual's income,the greater the amount of tax paid.
E)proportional.

Question 43

Suppose an additional "special" tax of $0.10 per litre is imposed on the sale of gasoline in one province.Prior to the tax the price was $1.30 per litre and 10 million litres of gasoline are sold per day.After imposition of the tax,the new equilibrium price and quantity are $1.38 per litre and 9.6 million litres per day.What is the direct burden of this "special" tax?

A)$768 000 per day
B)$ 960 000 per day
C)$192 000 per day
D)$40 000 per day
E)There is not enough information to know.

Question 44

The figure below show a simplified version of the current (2012)Canadian federal income- tax system.The marginal income- tax rates for the four ranges of income are 15.5%,22%,26%,and 29%,respectively.
FIGURE 18- 2
Suppose taxes are levied in the following way.All individuals pay a tax equal to $2000 no matter what income they earn.In addition,all individuals pay 20% of all their earned income in taxes.This income- tax system is

A)indexed.
B)progressive.
C)regressive.
D)an accurate description of the Canadian system.
E)proportional.

Question 45

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Refer to Table 18- 1.If an individual had a taxable income of $120 000,how much federal tax would be due from the portion of earnings taxed at the maximum rate of 29%?

A)$1817
B)$23 621
C)$34 800
D)$0
E)$8003

Question 46

The excess burden of a tax reflects a reduction of

A)total economic surplus.
B)allocative inefficiency.
C)both equilibrium price and quantity.
D)economic profits generated in the economy.
E)total tax revenues.

Question 47

The Canada Health Transfer (CHT)and the Canada Social Transfer (CST)refer to transfer payments made by the federal government to

A)the Medicare program.
B)municipal governments.
C)specific social programs.
D)individuals.
E)provincial governments.

Question 48

The Canada (and Quebec)Pension Plans (CPP and QPP)operate whereby

A)the federal government transfers funds to provincial governments.
B)any unemployed worker is paid while searching for employment.
C)Canadians contribute during their working years and then receive payments when they are retired.
D)the federal and provincial governments allow income- tax deductions for contributions made to special retirement funds.
E)eligible unemployed workers are paid while searching for new employment.

Question 49

Consider the concept of equity in taxation.What is the "benefit principle"?

A)the principle that users of public goods are taxed in proportion to their ability to pay
B)the main principle on which all tax systems are based
C)the main principle on which the Canadian tax system is based
D)the main principle on which horizontal equity is based
E)the principle that users of public goods are taxed in proportion to their use of them

Question 50

Suppose a firm buys $1000 worth of inputs from other firms,hires $1000 worth of labour services,and has sales revenue of $2500.The firm's resulting profit is $500.According to a value- added tax such as the GST,this firm would pay taxes on

A)$500.
B)$2500.
C)$1000.
D)$1500.
E)$4500.

Question 51

The figure below show a simplified version of the current (2012)Canadian federal income- tax system.The marginal income- tax rates for the four ranges of income are 15.5%,22%,26%,and 29%,respectively.
FIGURE 18- 2
Refer to Figure 18- 2.What must be true of the four marginal income- tax rates in order for the tax to be considered a "flat" tax?

A)they need to be the same
B)they need to be smaller
C)they need to gradually level out
D)they need to be zero
E)they need to be constant

Question 52

In Canada,the corporate income tax is integrated with the ,so that are not taxed twice on the firm's earnings.

A)income; shareholders
B)sales tax; shareholders
C)personal income tax; corporations
D)property tax; corporations
E)sales tax; consumers

Question 53

In Canada,taxes are levied and collected by

A)federal and provincial governments only.
B)all levels of government.
C)the federal government only.
D)local governments only.
E)the provincial governments only.

Question 54

The tax that generates the greatest proportion of government revenue in Canada is

A)the income tax.
B)the provincial sales tax.
C)the payroll tax.
D)the property tax.
E)the goods and services tax.

Question 55

The direct burden of a tax is .The excess burden reflects the .

A)the amount paid by taxpayers; the amount paid by taxpayers in excess of the free- market price.
B)the costs of administering the tax; the amount paid by taxpayers
C)the amount paid by taxpayers; allocative inefficiency of the tax
D)the deadweight loss of the tax; the inefficiency of the tax
E)the costs of administering the tax; amount paid by taxpayers in excess of the free- market price.

Question 56

From the perspective of individuals,the goods and services tax (GST)applies to

A)saving rather than expenditure.
B)profits for self- employed individuals.
C)additional income earned.
D)expenditure rather than income.
E)total taxable income.

Question 57

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Refer to Table 18- 1.If an individual had a taxable income of $70 000,how much federal tax would be due?

A)$15 400
B)$6004
C)$10 500
D)$12 411
E)$6406

Question 58

Suppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is $7 and 940 visits per week.Now suppose the government imposes a tax of $3 per movie admission,and the new equilibrium price and quantity are $8.75 and 750 visits per week.What is the direct burden of this tax?

A)$1645
B)$937.50
C)$1312.50
D)$2250
E)There is not enough information to know.

Question 59

The direct burden of a tax is

A)the total revenue collected by the tax.
B)always regressive.
C)directly proportional to average income.
D)a tax- deductible expense for the person who pays the tax.
E)always progressive.

Question 60

Which of the following best explains the essence of Canada's system of fiscal federalism?

A)the law that determines the formula for Canada's system of equalization payments
B)the constitutional delegation of fiscal responsibilities between federal,provincial,territorial and municipal governments
C)the coordination necessary for joint collection of federal and provincial income taxes
D)the division of powers between the federal government and the provincial governments
E)the coordination on taxing and spending that is necessary between the federal,provincial,territorial and municipal governments to meet the needs of all Canadian residents

Question 61

A tax that takes a smaller percentage of income as the income increases is called

A)an excise tax.
B)a regressive tax.
C)a progressive tax.
D)an efficient tax.
E)a proportional tax.

Question 62

The diagram below shows supply and demand diagrams (S and D)for some product.The government then imposes an excise tax.The new supply curve is ST.
FIGURE 18- 4
Refer to Figure 18- 4.What is the producers' net revenue after the imposition of the tax?

A)$630
B)$450
C)$600
D)$500
E)$540

Question 63

Suppose a Canadian Member of Parliament suggests that people with the ability to pay higher taxes should do so.This refers to the concept of

A)proportionality.
B)the benefit principle.
C)vertical equity.
D)horizontal equity.
E)equality of outcomes.

Question 64

The goods and services tax (GST)in Canada is an example of a(n)

A)proportional tax.
B)value- added tax.
C)progressive tax.
D)invisible tax.
E)excise tax.

Question 65

The table below shows 2012 federal income- tax rates in Canada. $$\begin{array} { | c | c | } \hline \text { Taxable Income } & \text { Mar ginal Tax Rate } \\\hline \$ 0 - \$ 42707 & 15 \% \\\hline \$ 42708 - \$ 85414 & 22 \% \\\hline \$ 85415 - \$ 132406 & 26 \% \\\hline \$ 132407 \text { and over } & 29 \% \\\hline\end{array}$$ TABLE 18- 1

-Refer to Table 18- 1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the minimum rate of 15%?

A)$8003
B)$34 800
C)$0
D)$6406
E)$18 000

Question 66

An important objective in designing a tax system is to

A)not intervene in the market economy because this only causes inefficiencies.
B)raise the maximum possible revenue.
C)design a system that raises the revenue required for the government's debt- service obligations.
D)eliminate all deadweight loss.
E)design a system that minimizes inefficiency for a given amount of revenue raised.

Question 67

An example of a regressive tax in Canada is

A)the corporate income tax.
B)the typical property taxes in Canadian cities and towns.
C)the provincial income taxes.
D)any one of the provincial sales taxes.
E)the federal income tax.

Question 68

An example of a government expenditure that is a transfer payment is

A)payments made to the Canadian International Development Agency (CIDA).
B)construction costs of a new government- owned airport.
C)education payments.
D)salaries of welfare case workers.
E)employment- insurance (EI)payments.

Question 69

If there were "horizontal equity" between all households in Canada,then

A)individuals in the same age group would share the same tax burden.
B)there would be equity between different income classes.
C)all households would pay the same percentage of income as tax.
D)households of the same size would share the same tax burden.
E)households with identical abilities to pay would bear the same tax burden.

Question 70

Which of the following is required to achieve progressivity for a particular tax?

A)A marginal tax rate equal to the average tax rate (implying that the average tax rate is falling with income)
B)A marginal tax rate above the average tax rate (implying that the average tax rate is rising with income)
C)An average tax rate above the marginal tax rate (implying that the average tax rate is falling with income)
D)A constant tax rate for all incomes
E)A marginal tax rate equal to the average tax rate (implying that the average tax rate is rising with income)

Question 71

If a tax system contains some important taxes that are regressive,substantial progressivity in other taxes would be required in order to achieve

A)a negative income tax.
B)proportionality in the overall tax system.
C)equity in the overall tax system.
D)efficiency in the overall tax system.
E)a flat- rate tax.

Question 72

Because government benefits paid by most universal programs are taxable,their net after- tax yield depends on the income of the recipient.Hence

A)only higher- income households can benefit fully from such programs.
B)gross payments may not be universal,but net benefits are.
C)gross payments and net benefits are universal.
D)gross payments may not be universal,and net benefits are not.
E)gross payments may be universal,but net benefits are not.

Question 73

Social and economic policies often involve a tradeoff between efficiency and equity because

A)the economy can achieve efficient allocation of resources by starting with unequal allocation of resources.
B)economic units who are efficient completely dislike equity.
C)it is not possible to improve efficiency with economic policies.
D)income redistribution often reduces incentives for efficient behaviour of economic units.
E)income redistribution increases incentives for efficient behaviour of economic units.

Question 74

What is a demogrant?

A)A social benefit that is paid to individuals depending on their income.
B)A social benefit that is paid to individuals,regardless of their income.
C)A social benefit that is paid to individuals according to their demographic group (race,age or income group,for example).
D)A federal transfer to provincial governments that is adjusted annually based on demographic shifts in the province.
E)A federal transfer to individuals that is administered through the tax system.

Question 75

Which of the following statements suggests that property taxes might be progressive?

A)Higher- income people live in more expensive houses than do low- income people.
B)The proportion of income spent on housing tends to decline as income rises.
C)A large part of the property tax is shifted to renters,who typically have lower incomes than owners.
D)Inner city neighbourhoods often have higher property taxes than do the more affluent suburbs.
E)Elderly pensioners often live in their family homes after children have left.

Question 76

The figure below show a simplified version of the current (2012)Canadian federal income- tax system.The marginal income- tax rates for the four ranges of income are 15.5%,22%,26%,and 29%,respectively.
FIGURE 18- 2
Refer to Figure 18- 2.This income- tax system can be characterized as

A)cumbersome.
B)regressive.
C)progressive.
D)proportional.
E)fair.

Question 77

An income tax is progressive if,as income increases,

A)its average tax rate and marginal tax rate are constant while income is increasing.
B)its average tax rate is increasing.
C)its average tax rate is falling,but the marginal tax rate is increasing.
D)its marginal tax rate is falling.
E)its average tax rate is falling,but total taxes are increasing.

Question 78

The Employment Insurance (EI)system operates whereby

A)eligible unemployed workers are paid while searching for new employment.
B)the federal and provincial governments allow income- tax deductions for contributions made to special retirement funds.
C)Canadians contribute during their working years and then receive payments when they are retired.
D)the federal government transfers funds to provincial governments.
E)any unemployed worker is paid while searching for employment.

Question 79

Consider a 10% excise tax that is similarly applied to good X,which has a price elasticity of 2.7,and to good Y,that has a price elasticity of 0.6.We can predict that the excess burden of this tax in the market for good X will be the excess burden in the market for good Y.

A)larger than
B)equal to
C)no larger than
D)2.1 times the size of
E)smaller than

Question 80

Consider the allocation of a nation's resources between additional public- sector spending versus additional private spending.John Kenneth Galbraith argued that

A)compared to public spending,private spending leads to more sustained long- run economic growth.
B)compared to private spending,public spending leads to more sustained long- run economic growth.
C)public sector spending is always subject to corruption and is therefore not as valuable as private spending.
D)the marginal utility of an additional dollar's worth of spending on public goods is higher than an additional dollar's worth of spending on private goods.
E)the value of the marginal dollar spent by government is less than the value of that dollar left in the hands of households or firms.