Deck 34: The Federal Reserve System and Open Market Operations

Question 1

Reference: Ref 17-1 (Figure: U.S. Marginal and Average Tax Rates) According to the figure, an individual who earns $63,700 a year, has no deductions, and claims no exemptions will pay income tax of

A) $8,772.50.
B) $9,555.00.
C) $6,370.00.
D) $1,565.00.

Answer 1

A

Question 2

The Social Security payment system began issuing Social Security checks

A) at the end of World War II.
B) in 1940.
C) before the Great Depression began.
D) in 1913.

Answer 2

B

Question 3

Reference: Ref 17-1 (Figure: U.S. Marginal and Average Tax Rates) According to the figure, an individual who earns $85,000 a year will pay income tax of

A) $7,202.50.
B) $14,097.50.
C) $5,325.
D) $21,250.

Answer 3

B

Question 4

In 1940, Ida May Fuller received the first Social Security check after contributing only $24.75 in Social Security taxes before she retired and lived to be 100 years old. Her case is an example of how

A) Social Security payments were not issued to people who were close to retirement.
B) people can choose not to contribute to Social Security.
C) people begin to get Social Security payments before they retire.
D) the first Social Security recipients benefitted much more from the program than will workers entering the program today.

Question 5

As income rises, the average tax rate for married couples

A) decreases smoothly.
B) decreases in steps.
C) increases smoothly.
D) increases in steps.

Question 6

Which of the following represents a change that has been made since the individual income tax was first levied in 1913?

A) In 1969, the overall tax system was changed from a regressive to a progressive set of tax rates.
B) People can no longer receive Temporary Assistance for Needy Families for more than five years of their life.
C) The alternative minimum tax has been adjusted for inflation.
D) Social Security payments are no longer indexed to wages.

Question 7

In the United States, the marginal tax rate for married couples

A) exceeds the average tax rate for most income levels.
B) is less than the average tax rate for most income levels.
C) is equal to the average tax rate for most income levels.
D) is less than the average tax rate at low income levels, but greater than the average tax rate at high income levels.

Question 8

Which tax rate determines whether it is worth it to work an extra day?

A) marginal
B) average
C) payroll (FICA)
D) capital gains

Question 9

As income rises, the marginal tax rate for married couples

A) decreases smoothly.
B) decreases in steps.
C) increases smoothly.
D) increases in steps.

Question 10

What is the level of per capita federal taxes collected in the United States each year?

A) $400
B) $700
C) $4,000
D) $7,000

Question 11

The largest source of revenue for the federal government is the

A) corporate income tax.
B) Social Security tax.
C) Medicare tax.
D) individual income tax.

Question 12

In 2010, federal government taxation made up approximately _____ of GDP.

A) 5 percent
B) 15 percent
C) 25 percent
D) 35 percent

Question 13

In 2010, federal government spending made up approximately _____ of GDP.

A) 18 percent
B) 26 percent
C) 28 percent
D) 36 percent

Question 14

The two lowest marginal tax brackets in the United States are

A) 5 percent and 10 percent.
B) 7 percent and 15 percent.
C) 10 percent and 15 percent.
D) 15 percent and 25 percent.

Question 15

The tax rate paid on an additional dollar of income is the

A) higher tax rate.
B) secondary tax rate.
C) marginal tax rate.
D) reserve tax rate.

Question 16

Figure: U.S. Marginal and Average Tax Rates Reference: Ref 17-1 (Figure: U.S. Marginal and Average Tax Rates) Using the figure, assume your annual income is $15,000, that you have a deduction of $1,800 for moving expenses, and that you claim four exemptions of $3,300: one for yourself and one for each of your three children. How much taxes are you expected to pay?
A. $132 B. $0 C. $138 D. $120

Question 17

Figure: U.S. Marginal and Average Tax Rates Reference: Ref 17-1 (Figure: U.S. Marginal and Average Tax Rates) According to the figure, an individual who earns $150,000 a year has an approximate average tax rate of

A) 28 percent.
B) 25 percent.
C) 21 percent.
D) 15 percent.

Question 18

Since 1960, marginal tax rates in the United States have decreased for individuals

A) at all income levels.
B) with high incomes only.
C) with low incomes only.
D) at no income level.

Question 19

What are the three largest sources of tax revenue for the U.S. federal government?

A) corporate income tax, excise taxes, and Social Security/Medicare
B) individual income tax, corporate income tax, and sales tax
C) Social Security/Medicare, corporate income tax, and custom duties
D) individual income tax, Social Security/Medicare, and corporate income tax

Question 20

Income that is not subject to taxation is called

A) marginal income.
B) average income.
C) exempt income.
D) None of the answers is correct.

Question 21

Suppose the tax rate on the first $20,000 income is 0 percent;10 percent on the next $20,000 earned; and 20 percent on any additional income earned. A person earning $35,000 pays an income tax of

A) $1,000.
B) $1,500.
C) $2,000.
D) $3,500.

Question 22

In a progressive tax system, if a person moves from one income bracket to a higher income bracket

A) both the marginal tax rate and average tax rate will be higher.
B) both the marginal tax rate and average tax rate will be lower.
C) the marginal tax rate will be lower and the average tax rate will be higher.
D) the marginal tax rate will be higher and the average tax rate will be lower.

Question 23

Revenue collected through the Federal Insurance Contributions Act is used to fund

A) the Federal Deposit Insurance Corporation.
B) unemployment insurance.
C) unemployment compensation.
D) Social Security payments.

Question 24

The Federal Insurance Contributions Act taxes are paid to fund

A) Medicaid.
B) Medicare.
C) Social Security.
D) the operation of the Federal Emergency Management Agency.

Question 25

Which of the following statements about Medicare taxes is TRUE?

A) People who are self-employed do not share the burden of this tax with employers.
B) People who own their own businesses do not have to pay this tax on themselves.
C) Medicare taxes are larger in percent than Social Security taxes.
D) Medicare taxes are used to provide free medical care for children.

Question 26

Suppose a high-income individual, subject to a 15 percent capital gains tax rate, sells 100 shares of company X and makes a loss of $500. She also sells 100 shares of company Y and makes a profit of $1,200. How much in capital gains tax will she pay?

A) $105
B) $75
C) $180
D) $255

Question 27

The alternative minimum tax has become an added tax burden on many upper middle class families because

A) Congress intended it to be that way.
B) it is not indexed to inflation.
C) it is indexed to inflation.
D) None of the answers is correct.

Question 28

Workers bear at least a majority, if not all, of the burden of the employers' share of FICA and Medicare tax payments because

A) the workers would have earned lower wages without the tax payments.
B) the workers would have earned higher wages without the tax payments.
C) the workers would have earned the same wages as those without the tax payments.
D) the employers will force the workers to pay the taxes at the end of the year.

Question 29

Taxpayers in the United States for the year 2010 received individual and dependent exemptions, each worth

A) $3,650.
B) $3,950.
C) $4,300.
D) $3,300.

Question 30

The legislation Congress passed in 1969 to make sure that the rich pay at least some income taxes was called the

A) flat tax code.
B) regressive tax code.
C) Social Security Tax.
D) alternative minimum tax.

Question 31

The U.S. income tax system is

A) proportional.
B) progressive.
C) regressive.
D) marginal.

Question 32

The FICA tax burden is

A) paid entirely by the employer.
B) shared equally by employer and employee.
C) borne more by the employee even though the employer contributes an equal dollar amount.
D) the same amount as the alternative minimum tax burden.

Question 33

Suppose a high-income individual, subject to a 15 percent capital gains tax rate, sells 100 shares of company X for a price of $9 per share (purchased at $10 each) and 500 shares of company Y for a price of $51 per share (purchased at $50 each). How much in capital gains tax will he pay?

A) $210
B) $75
C) $60
D) $3,690

Question 34

The tax rate on an additional dollar of income is the

A) average tax rate.
B) total tax rate.
C) marginal tax rate.
D) alternative minimum tax rate.

Question 35

Because the alternative minimum tax (AMT) is not indexed to inflation

A) more American families have become subject to the AMT over time.
B) fewer American families have become subject to the AMT over time.
C) every American family is subject to the AMT today.
D) no American family is subject to the AMT today.

Question 36

Which statement about individual income taxes in the United States is TRUE?

A) All individuals pay the same average tax rate.
B) There is a huge difference in the tax rate paid within each bracket.
C) Taxes rates include and vary between 10 percent and 91 percent.
D) Marginal tax rates are flatter and lower than in the past.

Question 37

How much FICA tax does your employer pay on the taxable portion of your income?

A) 1.45 percent
B) 6.2 percent
C) 12.4 v
D) 15.3 percent

Question 38

Suppose the tax rate on the first $20,000 income is 0 percent; 10 percent on the next $20,000 earned; and 20 percent on any additional income earned. The marginal tax rate for a person earning $30,000 is

A) 10 percent.
B) 15 percent.
C) 20 percent.
D) more than 20 percent.

Question 39

Suppose the tax rate on the first $20,000 income is 0 percent; 10 percent on the next $20,000 earned; and 20 percent on any additional income earned. The average tax rate for a person earning $35,000 is

A) 0 percent.
B) 3.5 percent.
C) 4.3 percent.
D) 10 percent.

Question 40

The purpose of FICA taxes is to fund

A) health services for elderly people.
B) defense expenditures.
C) presidential campaigns.
D) Social Security payments.

Question 41

The U.S. corporate tax rate is __________, and U.S. corporations on average pay __________ on their corporate income.

A) 35 percent; more than 35 percent
B) 35 percent; less than 35 percent
C) 60 percent; more than 60 percent
D) 60 percent; 0 percent

Question 42

If you pay an average tax rate of 25 percent on your salary of $20,000 and your neighbor pays an average tax rate of 10 percent on his salary of $300,000, the tax system is

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

Question 43

Under a regressive tax, people with higher incomes

A) have higher average tax rates.
B) have lower average tax rates.
C) have the same average tax rates as those with lower incomes.
D) pay fewer tax dollars.

Question 44

Households in the top 20 percent of the income distribution pay approximately what percent of their income in federal taxes?

A) 4.3 percent
B) 9.9 percent
C) 17.4 percent
D) 25.5 percent

Question 45

This table shows data on taxes paid by three individuals living in each of three countries: A, B, and C. The tax paid in dollars is based on the marginal tax rates assessed in each of the three countries. Assume that each individual earns an income of exactly $37,000, and there are no deductions or exemptions that need to be applied. Reference: Ref 17-2 (Table: A Cross-Country Comparison) According to the data in the table, which countries have a progressive tax system?

A) A and B only
B) B and C only
C) B only
D) None of the countries has it.

Question 46

The U.S. individual income tax system can best be described as a

A) regressive tax system.
B) flat tax system.
C) zero tax system.
D) progressive tax system.

Question 47

Who pays the most federal taxes?

A) top 20 percent of income earners
B) middle 20 percent of income earners
C) second 20 percent of income earners
D) bottom 20 percent of income earners

Question 48

In which of the following tax systems do people with higher incomes end up paying more tax dollars? I. progressive II. regressive III. proportional

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III.

Question 49

This table shows data on taxes paid by three individuals living in each of three countries: A, B, and C. The tax paid in dollars is based on the marginal tax rates assessed in each of the three countries. Assume that each individual earns an income of exactly $37,000, and there are no deductions or exemptions that need to be applied. Reference: Ref 17-2 (Table: A Cross-Country Comparison) According to the data in the table, which country has a flat tax rate system?

A) A and B only
B) A and C only
C) C only
D) None of the countries has it.

Question 50

What kind of tax has higher average rates for people with higher incomes?

A) flat tax
B) progressive tax
C) regressive tax
D) sales tax

Question 51

In the United States, the corporate income tax rate is generally

A) 25 percent.
B) 30 percent.
C) 35 percent.
D) 45 percent.

Question 52

The entire U.S. tax system is moderately

A) flat.
B) progressive.
C) regressive.
D) value-added.

Question 53

Households in the bottom 20 percent of the income distribution pay approximately what percent of their income in federal taxes?

A) 4.3 percent
B) 9.9 percent
C) 17.4 percent
D) 25.5 percent

Question 54

The U.S. tax system is

A) progressive.
B) flat.
C) regressive.
D) None of the answers is correct.

Question 55

Under a flat tax

A) the marginal tax rate is zero but the average tax rate is one.
B) people with higher incomes pay less tax dollars.
C) the average tax rate is the same for people with different income levels.
D) the amount of tax payment is the same for people with different income levels.

Question 56

The burden of the corporate income tax ultimately falls on the corporation's

A) stockholders.
B) workers.
C) consumers.
D) Each of these answers is correct.

Question 57

What is the U.S. corporate tax rate?

A) 6.2 percent
B) 15 percent
C) 35 percent
D) 37 percent

Question 58

Who bears the burden of corporate income tax? I. shareholders II. consumers III. employees

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 59

Under a progressive tax system, tax payments will _______ if a person's income doubles.

A) double
B) more than double
C) less than double
D) remain unchanged

Question 60

This table shows data on taxes paid by three individuals living in each of three countries: A, B, and C. The tax paid in dollars is based on the marginal tax rates assessed in each of the three countries. Assume that each individual earns an income of exactly $37,000, and there are no deductions or exemptions that need to be applied. Reference: Ref 17-2 (Table: A Cross-Country Comparison) According to the data in the table, which country has a regressive tax rate system?

A) A only
B) B and C only
C) C only
D) None of the countries has it.

Question 61

The Medicaid program offers

A) health care benefits for the elderly and the disabled.
B) health care benefits for the poor and the disableB.
C) health care benefits for the unemployeC.
D) Each of these answers is correct.

Question 62

Together, Social Security, defense, Medicare, and Medicaid make up approximately what percent of federal government spending?

A) 38 percent
B) 48 percent
C) 58 percent
D) 68 percent

Question 63

State and local taxes are about

A) 1/5 the level of federal taxes.
B) 1/4 the level of federal taxes.
C) 1/3 the level of federal taxes.
D) None of these answers is correct.

Question 64

Which of the following is the smallest component of U.S. federal government spending?

A) defense
B) Social Security
C) unemployment and welfare
D) interest payments on government debt

Question 65

The money you pay into Social Security goes to

A) an individual account.
B) a trust that earns interest to help pay your benefits.
C) pay current beneficiaries.
D) the investment fund of your choice.

Question 66

If you were born after 1960, you will not be eligible to draw full Social Security retirement benefits until you reach age

A) 62.
B) 65.
C) 67.
D) 70.

Question 67

Included among the top ten nations in the category of military spending are

A) Saudi Arabia and France.
B) North Korea and Pakistan.
C) Iran and Israel.
D) Turkey and Greece.

Question 68

If you are a married man, you can expect

A) more in Social Security benefits than a single man.
B) less in Social Security benefits than a single man.
C) the same in Social Security benefits as a single man.
D) more than a single man only if your wife worked.

Question 69

The Social Security system is becoming

A) less generous.
B) more generous.
C) more profitable.
D) more reliable.

Question 70

Which of the following is the largest component of U.S. federal government spending?

A) defense
B) Social Security
C) unemployment and welfare
D) interest on government debt

Question 71

The United States spends more on its military than

A) China.
B) Russia.
C) Saudi Arabia.
D) Each of these answers is correct.

Question 72

The largest spending program for the U.S. federal government is

A) Social Security.
B) Medicaid.
C) unemployment insurance.
D) Medicare.

Question 73

Compared to the federal individual income tax, sales taxes are

A) more progressive.
B) less progressive.
C) paid by corporations.
D) fixed for all families.

Question 74

Future Social Security recipients with similar life expectancies have fewer benefits relative to older people who have already been receiving them for a while because

A) Social Security payments are now no longer paid out when the government has a budget deficit.
B) the retirement age when one becomes eligible for Social Security will likely increase.
C) Social Security payments have fallen as a percentage of the federal government's spending.
D) Social Security payments are not indexed to wages.

Question 75

Which of the following statements about the Social Security program is correct?

A) Women, who generally live longer than men, benefit more from the system.
B) The earlier you retire, the greater the benefits you receive from the Social Security system.
C) Your Social Security withholdings from your paychecks are deposited into an account for you.
D) On average, retirees in the United States receive about $8,000 per month in Social Security payments.

Question 76

If you were born after 1960, you will be eligible to draw partial Social Security retirement benefits when you reach age

A) 62.
B) 65.
C) 67.
D) 70.

Question 77

The Medicare program offers

A) health care benefits for the elderly.
B) health care benefits for the disabled only.
C) health care benefits for the poor and disabled.
D) health care benefits for the poor.

Question 78

Together, Social Security, defense, Medicare, and Medicaid made up approximately ________ of federal government spending in 2010, the year illustrated in the text.

A) 38 percent
B) 48 percent
C) 58 percent
D) 68 percent

Question 79

The Social Security system redistributes income from

A) low-wage workers to high-wage workers.
B) people with longer life expectancies to people with shorter life expectancies.
C) women to men.
D) None of these answers is correct.

Question 80

Which of the following statements about Medicare and Medicaid is not correct?

A) Medicaid covers the poor and disabled.
B) Medicare reimburses the elderly for much of their medical care.
C) An individual must be at least 65 years old to qualify for Medicare.
D) Social Security and Medicare together make up about 15 percent of the federal budget.