Deck 11: Fiscal Policy

Question 1

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Tax rates,tax evasion

Answer 1

Answer will vary

Question 2

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
State-owned enterprises (SOEs),subsidies

Answer 2

Answer will vary

Question 3

As usually applied,the value-added tax (VAT)is a:

A) form of excise tax.
B) tax on income.
C) tax on consumption.
D) tax on domestic production.

Answer 3

C

Question 4

Although taxes on foreign trade have fallen dramatically in recent decades,tax revenue structures in developing countries historically have been dependent on:

A) import duties.
B) excise taxes.
C) overvaluing their currency.
D) the exploitation of one resource.

Question 5

When governments raise expenditures or cut taxes on individuals and corporations so that they can raise their expenditures,such actions are referred to as:

A) fiscal policy.
B) monetary policy.
C) indexing.
D) regressive taxation.

Question 6

The value-added tax (VAT)form of the sales tax is preferred in many developing countries because:

A) a large share of VAT revenue is collected prior to the retail level.
B) the VAT can be levied at a higher rate.
C) firms have no way to suppress information on their purchases and sales.
D) there is no need to conduct periodic audits to ensure compliance.

Question 7

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Fiscal policy,monetary policy

Question 8

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Excise tax,sales tax

Question 9

Which of the following statements best captures the textbook's conclusions about using fiscal policy to promote equity in developing countries?

A) Equity is not a proper goal for fiscal policy.
B) Economic and administrative realities limit the scope for achieving income redistribution through the tax system.
C) Highly progressive taxes can and should be used to promote equity and efficiency simultaneously.
D) Tax policy is far more effective than expenditure policy as an instrument for income redistribution.

Question 10

Consumer subsidies are not unique to developing countries; although they are in many ways costly,governments are reluctant to eliminate them because such action typically leads to:

A) deflation.
B) neutral taxes.
C) demonstrations or even riots against the government.
D) the emergence of corporatism.

Question 11

Investments that,in general,generate a stream of income or services into the future are known as:

A) future markets.
B) public (development) expenditures.
C) recurrent expenditures.
D) private (luxury) expenditures.

Question 12

One of most significant changes that most developing nations could take to increase their tax revenue would be to:

A) raise taxes.
B) reform tax administration.
C) institute a strong corporate tax.
D) undertake radical land redistribution.

Question 13

The term public good refers to a good or service that:

A) results in income and profit.
B) is free and portable.
C) has a value of zero.
D) exhibits nonrival consumption and nonexcludability.

Question 14

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Development expenditures,recurrent expenditures

Question 15

A neutral tax system is one that:

A) generates no excess burden.
B) affects government savings and private sector investment decisions equally.
C) balances the government budget.
D) relies, as far as possible, on uniform tax rates.

Question 16

The primary difference between excise and sales taxes is that only excise taxes are:

A) imposed on specifically enumerated items.
B) paid by the consumer rather than the seller.
C) progressive.
D) revenue elastic.

Question 17

High tax rates often encourage taxpayers to engage in illegal maneuvers to avoid paying taxes.The term used for this behavior is:

A) revenue elasticity.
B) tax avoidance.
C) tax evasion.
D) excess burden.

Question 18

Heavy taxes on alcohol and tobacco are favored because:

A) they are progressive.
B) they display a high price elasticity of demand.
C) most governments want to discourage consumption of these items.
D) all of the above.

Question 19

Developing country governments are more likely to focus on measures to increase investment for:

A) profiteering and graft.
B) health and education.
C) overall growth.
D) enhancing their ability to get more loans from the World Bank.

Question 20

In developing countries,borrowing domestically often means borrowing directly from the:

A) World Bank.
B) central bank.
C) the IMF.
D) other nations in the geographic region.

Question 21

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Direct taxes,indirect taxes

Question 22

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Progressive tax,regressive tax

Question 23

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Personal tax,corporate tax

Question 24

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Effective taxes,luxury tax

Question 25

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Tax incentives,tax shelters

Question 26

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Value-added tax (VAT),sales taxes

Question 27

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
Neutral tax,efficient tax system