Deck 18: Personal Taxation and Behavior

Question 1

Social savings is

A) just another way of defining security.
B) the sum of government and private savings.
C) government savings only.
D) defined by higher rates of interest for the government.

Answer 1

the sum of government and private savings.

Question 2

The personal income tax excludes the imputed rent from owner-occupied housing from taxation.

A) True
B) False
C) Uncertain

Answer 2

True

Question 3

In the leisure-income model,taxing income causes

A) the budget constraint to kink.
B) males to work to change their work habits dramatically.
C) utility to increase.
D) all of these answer options are correct.

Answer 3

the budget constraint to kink.

Question 4

Real rates of return are

A) not taxed.
B) not adjusted for inflation.
C) adjusted for inflation.
D) used in individual financing and not corporate financing.

Question 5

A compensation package offered by employers often includes

A) wages.
B) health benefits.
C) vacations.
D) pensions.
E) all of these answer options are correct.

Question 6

The consumption bundle that is available,if there are no exchanges with the market,is known as the

A) federal system.
B) endowment point.
C) Ramsey rule.
D) gross replacement rate.

Question 7

The Laffer curve is

A) never referred to in modern day discussions of public finance.
B) a curve that describes the relationship between tax rates and tax revenues.
C) used to describe the relationship between consumption and hours worked.
D) a curve that refers to the endowment of time.

Question 8

Increasing wage rates will result in more hours worked.

A) True
B) False
C) Uncertain

Question 9

On the Laffer curve,an increase in tax rates causes tax revenue to increase if the starting point is

A) to the right of the top.
B) exactly at the top.
C) to the left of the top.
D) to the farthest point to the right.

Question 10

An individual's consumption and saving behavior during a given year,as a result of a planning process that considers his or her lifetime economic situations,is known as the

A) lifetime model.
B) consumption model.
C) life-cycle model.
D) income model.

Question 11

An income effect

A) is measured as the change in prices over time.
B) is not possible when people are unemployed.
C) requires interest rates to remain constant.
D) is the change in the quantity demand due to the fact that real income changes when prices change.

Question 12

Human capital is

A) how firms use more humans than machines in the production process.
B) the accumulation of investments that make people more productive.
C) more costly than other forms of capital.
D) none of these answer options are correct.

Question 13

An intertemporal budget constraint

A) requires an endowment point.
B) requires time to remain constant.
C) has no endowment point.
D) requires time to move in a loop.

Question 14

The theoretical effects of taxation on portfolio composition are ambiguous.

A) True
B) False
C) Uncertain

Question 15

A decrease in the interest rate will cause the intertemporal budget constraint to _______________ through the endowment point.

A) pivot clockwise
B) pivot counter-clockwise
C) shift clockwise
D) shift counter-clockwise

Question 16

An example of a tax-preferred savings account would be

A) an IRA.
B) an interest bearing savings account.
C) a noninterest bearing checking account.
D) cash.

Question 17

Residential housing consumption is not affected by U.S.personal income taxes.

A) True
B) False
C) Uncertain

Question 18

To accurately draw a labor supply curve,there should be a relationship between _______ and __________.

A) the wage rate; utility
B) total expenditures; the wage rate
C) the wage rate; hours worked
D) taxes; utility

Question 19

Full loss offset allows individuals to

A) claim children as dependents.
B) deduct mortgage interest from taxes.
C) deduct savings interest from taxes.
D) deduct capital losses from taxable income.

Question 20

In 2009,President Obama proposed limiting the value of deductions for high-earners.

A) True
B) False
C) Uncertain

Question 21

Sometimes increases in the wage rate will cause individuals to work more hours.It is also the case that this same increase could cause people to work fewer hours.What is happening to cause this variance?

Question 22

Taxing savings will cause people to save more.

A) True
B) False
C) Uncertain

Question 23

Returns to investments in human capital can be calculated with great accuracy.

A) True
B) False
C) Uncertain

Question 24

A capital shortage results from insufficient capital to meet our national "needs."

A) True
B) False
C) Uncertain

Question 25

The analysis of a progressive tax is very similar to that of a proportional tax.

A) True
B) False
C) Uncertain

Question 26

In the textbook,there was a discussion of the average numbers of hours worked in the U.S.being around 34 hours per week.As you enter the work force,do you expect this number to increase or decrease?

Question 27

Jennifer lives in two periods.In the first period,her income is fixed at $72,000; in the second,she is gets a 4% raise in her income.She can borrow and save at the market interest rate of 5 percent.
(A)Sketch her intertemporal budget constraint.
(B)Suppose that Jennifer is unable to lend at any rate of interest,although she can still borrow at 5 percent.Sketch her new intertemporal budget constraint.

Question 28

Suppose the labor supply equation is L = (W/3)- (4/3).The wage rate is initially 5.What is the amount of producer surplus here?