Question 1

If the taxes by state and local governments were combined with the federal tax system, the overall tax structure in the U.S.would best be characterized as

Accepted Answer

A)  progressive.
B)  highly regressive.
C)  slightly regressive.
D)  proportional.

Question 2

According to data compiled by the Bureau of Economic Analysis, from 1960 to 2015, government transfer payments as a percentage of U.S.output have

Accepted Answer

A)  decreased as a result of improvements in private pension and health insurance plans.
B)  increased slightly at about the same rate as population.
C)  tripled as a percentage of output.
D)  remained approximately constant.

Question 3

In 2011, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)  of about , whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .

Accepted Answer

A)  5.5 percent; 50 percent
B)  10.3 percent; 30.9 percent
C)  8.4 percent; 27.5 percent
D)  1.9 percent; 23.4 percent

Question 4

A tax structure is called progressive when

Accepted Answer

A)  the average tax rate decreases if income decreases.
B)  high-income groups pay more taxes absolutely than do low-income groups.
C)  the average tax rate on low-income groups exceeds the tax rate of high-income groups.
D)  the average tax rate is constant, but the absolute amount of taxes paid increases with income increases.

Question 5

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000.In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000.Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

Accepted Answer

A)  5 percent.
B)  12 percent.
C)  35 percent.
D)  42 percent.

Question 6

In 2014, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills)  was

Accepted Answer

A)  April 15.
B)  April 17.
C)  April 21.
D)  July 4.

Question 7

(Last Word)  For each dollar paid in taxes, approximately how much do households in the top quintile receive back in the form of government expenditures?

Accepted Answer

A)  12 cents
B)  41 cents
C)  29 cents
D)  71 cents

Question 8

The total amount of U.S.tax revenue needed to finance the public sector

Accepted Answer

A)  has been a declining percentage of the domestic output in this century.
B)  equals about 40 percent of domestic output.
C)  equals about 15 percent of domestic output.
D)  is larger today, as a percentage of total output, than in 1960.

Question 9

Which of the following is the largest expenditure item of state governments?

Accepted Answer

A)  education
B)  highways
C)  welfare payments
D)  health and hospitals

Question 10

Using income as the tax base, which of the following best illustrates a regressive tax?

Accepted Answer

A)  the federal inheritance tax
B)  a 7 percent general sales tax
C)  the corporate income tax
D)  the personal income tax

Question 11

The circular flow model with government included would show that government

Accepted Answer

A)  controls economic resources and sells them in the resource market.
B)  produces goods and services and sells them in the product market to generate net taxes.
C)  provides goods and services to businesses and households and pays for them with net taxes.
D)  obtains revenues in the product market and uses them to cover costs in the resource market.

Question 12

The largest category of federal government expenditures is national defense.

Accepted Answer

A) True 
 B)False

Question 13

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Accepted Answer

A)  high-income receivers are generally in a better position to shift taxes than are low-income receivers.
B)  the transfer system is regressive and it is therefore essential to have an offsetting progressive tax structure.
C)  rational consumers spend their first dollars of income on the most urgently desired goods and successive dollars on less essential goods.
D)  taxes should be paid for financing public goods in direct proportion to the satisfaction an individual derives from those goods.

Question 14

Which of the following taxes is most likely to be regressive?

Accepted Answer

A)  personal income taxes
B)  corporate income taxes
C)  estate taxes
D)  general sales taxes

Question 15

"Tax Freedom Day" in the United States typically occurs in mid-July.

Accepted Answer

A) True 
 B)False

Question 16

The incidence of a tax pertains to

Accepted Answer

A)  the degree to which it alters the distribution of income.
B)  how easy it is to evade the tax.
C)  who actually bears the burden of a tax.
D)  the progressiveness or regressiveness of tax rates.

Question 17

Which of the following is not an argument presented by defenders of state-run lotteries?

Accepted Answer

A)  Lotteries are preferable to taxes because they are voluntary rather than compulsory.
B)  Higher-income families tend to spend a larger portion of their incomes on lotteries than do low-income families.
C)  Lotteries compete with illegal gambling and are thus socially beneficial in curtailing organized crime.
D)  They are a relatively painless way to finance government services such as education, medical care, and welfare programs.

Question 18

Taxes on commodities or on purchases are known as

Accepted Answer

A)  corporate income taxes.
B)  sales and excise taxes.
C)  personal income taxes.
D)  payroll taxes.

Question 19

Which of the following is not a significant source of revenue for the U.S.federal government?

Accepted Answer

A)  personal income taxes
B)  corporate income taxes
C)  property taxes
D)  payroll taxes

Question 20

(Advanced analysis)  The equations for the demand and supply curves for a particular product are P = 10 − 0.4Q and P = 2 + 0.4Q, where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4Q.The equilibrium quantity after the excise tax is imposed is

Accepted Answer

A)  750 units.
B)  850 units.
C)  875 units.
D)  950 units.

Exam 20: Public Finance: Expenditures and Taxes

In 2011, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about , whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .

Correct Answer
verified

(Last Word) For each dollar paid in taxes, approximately how much do households in the top quintile receive back in the form of government expenditures?

Correct Answer
verified

According to data compiled by the Bureau of Economic Analysis, from 1960 to 2015, government transfer payments as a percentage of U.S.output have

Correct Answer
verified

Taxes on commodities or on purchases are known as

Correct Answer
verified

If the taxes by state and local governments were combined with the federal tax system, the overall tax structure in the U.S.would best be characterized as

Correct Answer
verified

The total amount of U.S.tax revenue needed to finance the public sector

Correct Answer
verified

The circular flow model with government included would show that government

Correct Answer
verified

Which of the following is not a significant source of revenue for the U.S.federal government?

Correct Answer
verified

In 2014, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was

Correct Answer
verified

Correct Answer
verified

The largest category of federal government expenditures is national defense.

Correct Answer
verified

The incidence of a tax pertains to

Correct Answer
verified

"Tax Freedom Day" in the United States typically occurs in mid-July.

Correct Answer
verified

Which of the following is the largest expenditure item of state governments?

Correct Answer
verified

Which of the following is not an argument presented by defenders of state-run lotteries?

Correct Answer
verified

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000.In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000.Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

Correct Answer
verified

A tax structure is called progressive when

Correct Answer
verified

Which of the following taxes is most likely to be regressive?

Correct Answer
verified

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Correct Answer
verified

Using income as the tax base, which of the following best illustrates a regressive tax?

Correct Answer
verified

Exam 20: Public Finance: Expenditures and Taxes

In 2011, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about , whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .

Correct AnswerverifiedShow Answer

(Last Word) For each dollar paid in taxes, approximately how much do households in the top quintile receive back in the form of government expenditures?

Correct AnswerverifiedShow Answer

According to data compiled by the Bureau of Economic Analysis, from 1960 to 2015, government transfer payments as a percentage of U.S.output have

Correct AnswerverifiedShow Answer

Taxes on commodities or on purchases are known as

Correct AnswerverifiedShow Answer

If the taxes by state and local governments were combined with the federal tax system, the overall tax structure in the U.S.would best be characterized as

Correct AnswerverifiedShow Answer

The total amount of U.S.tax revenue needed to finance the public sector

Correct AnswerverifiedShow Answer

The circular flow model with government included would show that government

Correct AnswerverifiedShow Answer

Which of the following is not a significant source of revenue for the U.S.federal government?

Correct AnswerverifiedShow Answer

In 2014, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The largest category of federal government expenditures is national defense.

Correct AnswerverifiedShow Answer

The incidence of a tax pertains to

Correct AnswerverifiedShow Answer

"Tax Freedom Day" in the United States typically occurs in mid-July.

Correct AnswerverifiedShow Answer

Which of the following is the largest expenditure item of state governments?

Correct AnswerverifiedShow Answer

Which of the following is not an argument presented by defenders of state-run lotteries?

Correct AnswerverifiedShow Answer

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000.In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000.Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

Correct AnswerverifiedShow Answer

A tax structure is called progressive when

Correct AnswerverifiedShow Answer

Which of the following taxes is most likely to be regressive?

Correct AnswerverifiedShow Answer

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that

Correct AnswerverifiedShow Answer

Using income as the tax base, which of the following best illustrates a regressive tax?

Correct AnswerverifiedShow Answer

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