Question 1

A person's average tax rate equals her

Accepted Answer

A)   tax obligation divided by her marginal tax rate.
B)   increase in taxes if her income were to rise by $1.
C)   tax obligation divided by her income.
D)   increase in taxes if her marginal tax rate were to rise 1%.E) A) and B)
F) A) and C)

Question 2

The flypaper theory of tax incidence

Accepted Answer

A)   ignores the indirect effects of taxes.
B)   assumes that most taxes should be "stuck on " the rich.
C)   says that once a tax has been imposed,there is little chance of it changing,so in essence people are stuck with it.
D)   suggests that taxes are like flies because they are everywhere and will never go away.E) B) and D)
F) All of the above

Question 3

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 4

Rank the following state and local government expenditure categories from largest to smallest.

Accepted Answer

A)   education,public welfare,highways
B)   education,highways,public welfare
C)   highways,education,public welfare
D)   public welfare,education,highwaysE) C) and D)
F) A) and D)

Question 5

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Accepted Answer

A) True 
 B)False

Question 6

Part of the administrative burden of a tax is

Accepted Answer

A)   the money people pay to the government in taxes.
B)   reducing the size of the market because of the tax.
C)   the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax.
D)   the cost of administering programs that use tax revenue.E) None of the above
F) A) and D)

Question 7

In order to determine tax incidence,one must

Accepted Answer

A)   consider issues of equity.
B)   also determine the legal liability of the tax.
C)   evaluate where the tax burden eventually falls.
D)   use the "flypaper theory" of taxation.E) All of the above
F) B) and C)

Question 8

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-17.Which of the three tax systems is progressive?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   None of the systems are progressive.E) A) and C)
F) All of the above

Question 9

All of the following are transfer payments except

Accepted Answer

A)   Medicaid.
B)   unemployment compensation.
C)   personal income taxes.
D)   Food Stamps.E) All of the above
F) None of the above

Question 10

The three largest categories of spending by the Federal government in order from first to third would be

Accepted Answer

A)   Social Security,Medicare,and national defense
B)   national defense,net interest,and Social Security
C)   Social Security,national defense,and income security
D)   income security,Social Security,and national defenseE) A) and D)
F) None of the above

Question 11

In 2009 the largest percentage of federal government spending was on

Accepted Answer

A)   national defense.The largest source of federal revenues was from corporate income taxes.
B)   national defense.The largest source of federal revenues was from individual income taxes.
C)   Social Security.The largest source of federal revenues was from corporate income taxes.
D)   Social Security.The largest source of federal revenues was from individual income taxes.E) A) and B)
F) B) and D)

Question 12

European countries tend to rely on which type of tax more so than the United States does?

Accepted Answer

A)   an income tax
B)   a lump-sum tax
C)   a value-added tax
D)   a corrective taxE) A) and B)
F) A) and C)

Question 13

Sue earns income of $80,000 per year.Her average tax rate is 40 percent.Sue paid $4,500 in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Accepted Answer

A)   15 percent
B)   32 percent
C)   40 percent
D)   55 percentE) B) and C)
F) B) and D)

Question 14

When government receipts exceed total government spending during a fiscal year,the difference is

Accepted Answer

A)   a budget surplus.
B)   a budget deficit.
C)   the national debt.
D)   automatically refunded.E) A) and B)
F) A) and C)

Question 15

If transfer payments are included when evaluating tax burdens,then the average tax rate of the poorest quintile of taxpayers would be approximately

Accepted Answer

A)   negative 30 percent.
B)   negative 10 percent.
C)   positive 1 percent.
D)   positive 8 percent.E) A) and B)
F) None of the above

Question 16

Table 12-16
The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes.
 
-Refer to Table 12-16.In this economy Tax C exhibits

Accepted Answer

A)   horizontal and vertical equity.
B)   horizontal equity but not vertical equity.
C)   vertical equity but not horizontal equity.
D)   neither horizontal nor vertical equity.E) None of the above
F) A) and D)

Question 17

The public welfare spending category for state and local governments includes

Accepted Answer

A)   many programs that are initiated by private foundations.
B)   contributions in support of public universities.
C)   some federal programs that are administered by state and local governments.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 18

Which of the following countries has the largest tax burden?

Accepted Answer

A)   Brazil
B)   Germany
C)   United States
D)   SwedenE) None of the above
F) All of the above

Question 19

Scenario 12-4.A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.The taxpayer faces

Accepted Answer

A)   an average tax rate of 22.5 percent when her income is $30,000.
B)   an average tax rate of 22.0 percent when her income is $50,000.
C)   a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001.
D)   a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001.E) C) and D)
F) B) and D)

Question 20

The U.S.tax code gives preferential treatment to investors in municipal bonds.This is an example of

Accepted Answer

A)   a tax loophole.
B)   tax evasion.
C)   an administrative burden.
D)   tax enforcement.E) C) and D)
F) None of the above

Exam 12: The Design of the Tax System

A budget deficit occurs when government receipts fall short of government spending.

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Scenario 12-4.A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.The taxpayer faces

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The three largest categories of spending by the Federal government in order from first to third would be

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A person's average tax rate equals her

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Sue earns income of $80,000 per year.Her average tax rate is 40 percent.Sue paid $4,500 in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

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In 2009 the largest percentage of federal government spending was on

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The U.S.tax code gives preferential treatment to investors in municipal bonds.This is an example of

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Table 12-16 The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes. -Refer to Table 12-16.In this economy Tax C exhibits

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In order to determine tax incidence,one must

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The flypaper theory of tax incidence

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The public welfare spending category for state and local governments includes

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Rank the following state and local government expenditure categories from largest to smallest.

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Part of the administrative burden of a tax is

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Which of the following countries has the largest tax burden?

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When government receipts exceed total government spending during a fiscal year,the difference is

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If transfer payments are included when evaluating tax burdens,then the average tax rate of the poorest quintile of taxpayers would be approximately

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Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

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All of the following are transfer payments except

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Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems is progressive?

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European countries tend to rely on which type of tax more so than the United States does?

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