Question 1

Individual Retirement Accounts and 401(k)  plans make the current U.S. tax system

Accepted Answer

A)  less like European tax systems than it otherwise would be.
B)  more like a payroll tax than it otherwise would be.
C)  more like an income tax than it otherwise would be.
D)  more like a consumption tax than it otherwise would be.E) All of the above
F) B) and C)

Question 2

In which of the following tax systems do taxes increase as income increases?

Accepted Answer

A)  both proportional and progressive
B)  proportional but not progressive
C)  progressive but not proportional
D)  neither proportional nor progressiveE) B) and C)
F) B) and D)

Question 3

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

Accepted Answer

A) True 
 B)False

Question 4

The U.S. federal government finances budget deficits by

Accepted Answer

A)  selling stock, much like a corporation.
B)  printing additional currency.
C)  borrowing from the public.
D)  raising property taxes.E) B) and C)
F) All of the above

Question 5

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Accepted Answer

A)  a per person budget surplus of $891.
B)  a per person budget deficit of $891.
C)  horizontal equity.
D)  vertical equity.E) All of the above
F) None of the above

Question 6

Taxes can be justified if the government uses the revenue to
(i) provide public goods such as national defense.
(ii) clean up negative externalities such as water pollution.
(iii) regulate a common resource such as fish in a public lake.
(iv) provide goods with positive externalities such as medical research.

Accepted Answer

A)  (ii)  only
B)  (ii)  and (iii)  only
C)  (i) , (ii) , and (iii)  only
D)  (i) , (ii) , (iii) , and (iv) E) A) and D)
F) None of the above

Question 7

The U.S. income tax

Accepted Answer

A)  discourages saving.
B)  encourages saving.
C)  has no effect on saving.
D)  will reduce the administrative burden of taxation.E) A) and C)
F) B) and C)

Question 8

Citizens expect the government to provide various goods and services making taxes

Accepted Answer

A)  inefficient.
B)  equitable.
C)  inevitable.
D)  intolerable.E) C) and D)
F) A) and C)

Question 9

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Accepted Answer

A)  ​0%
B)  ​2.67%
C)  ​4%
D)  ​8%E) A) and B)
F) A) and C)

Question 10

In 1789 the percentage of the average American's income that went to pay taxes was about

Accepted Answer

A)  5%. Today it is about 50%.
B)  5%. Today it is about 25%.
C)  50%. Today it is about 33%.
D)  25%. Today it is about 33%.E) C) and D)
F) All of the above

Question 11

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Accepted Answer

A lump-sum tax is the most efficient tax...

Question 12

The largest budgetary expense for the federal government in 2011 was

Accepted Answer

A)  interest on the national debt.
B)  health.
C)  highways.
D)  income security.E) A) and D)
F) A) and C)

Question 13

Table 12-25 
-Refer to Table 12-25. Do any of the plans achieve vertical equity?

Accepted Answer

Yes. People with hig...

Question 14

The federal healthcare spending program that specifically targets the poor is called

Accepted Answer

A)  Medicaid.
B)  Medicare.
C)  National Institutes of Health.
D)  Blue Cross/Blue Shield.E) None of the above
F) A) and B)

Question 15

Which of the following statements is correct?

Accepted Answer

A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers.
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers.
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers.
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.E) All of the above
F) None of the above

Question 16

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Accepted Answer

A) True 
 B)False

Question 17

Leonard, Sheldon, Raj, and Penny each like science fiction moves. The price of a special boxed set of Star Trek DVDs is $50. Leonard values the set of movies at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes DVDs at $10 each, the price rises to $60. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)  $50 and tax revenues increase by $30, so there is a deadweight loss of $20.
B)  $35 and tax revenues increase by $30, so there is a deadweight loss of $5.
C)  $20 and tax revenues increase by $20, so there is no deadweight loss.
D)  $15 and tax revenues increase by $20, so there is no deadweight loss.E) All of the above
F) A) and B)

Question 18

By law, all states must have a state income tax.

Accepted Answer

A) True 
 B)False

Question 19

Tax incidence refers to

Accepted Answer

A)  what product or service the tax is levied on.
B)  who bears the tax burden.
C)  what sector of the economy is most affected by the tax.
D)  the dollar value of the tax revenues.E) None of the above
F) B) and C)

Question 20

Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income?

Accepted Answer

A)  Japan
B)  United States
C)  Mexico
D)  DenmarkE) A) and B)
F) None of the above

Exam 12: The Design of the Tax System

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The largest budgetary expense for the federal government in 2011 was

Correct Answer
verified

By law, all states must have a state income tax.

Correct Answer
verified

The federal healthcare spending program that specifically targets the poor is called

Correct Answer
verified

Citizens expect the government to provide various goods and services making taxes

Correct Answer
verified

Correct Answer
verified

Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Correct Answer
verified

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Correct Answer
verified

Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income?

Correct Answer
verified

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Correct Answer
verified

The U.S. federal government finances budget deficits by

Correct Answer
verified

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

Correct Answer
verified

Table 12-25 -Refer to Table 12-25. Do any of the plans achieve vertical equity?

Correct Answer
verified
Yes. People with hig...
View Answer

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct Answer
verified
A lump-sum tax is the most efficient tax...
View Answer

In which of the following tax systems do taxes increase as income increases?

Correct Answer
verified

In 1789 the percentage of the average American's income that went to pay taxes was about

Correct Answer
verified

Tax incidence refers to

Correct Answer
verified

Correct Answer
verified

The U.S. income tax

Correct Answer
verified

Exam 12: The Design of the Tax System

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The largest budgetary expense for the federal government in 2011 was

Correct AnswerverifiedShow Answer

By law, all states must have a state income tax.

Correct AnswerverifiedShow Answer

The federal healthcare spending program that specifically targets the poor is called

Correct AnswerverifiedShow Answer

Citizens expect the government to provide various goods and services making taxes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Correct AnswerverifiedShow Answer

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Correct AnswerverifiedShow Answer

Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income?

Correct AnswerverifiedShow Answer

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Correct AnswerverifiedShow Answer

The U.S. federal government finances budget deficits by

Correct AnswerverifiedShow Answer

In 2014, the largest source of receipts for state and local governments was corporate income taxes.

Correct AnswerverifiedShow Answer

Table 12-25 -Refer to Table 12-25. Do any of the plans achieve vertical equity?

Correct AnswerverifiedYes. People with hig...View AnswerShow Answer

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct AnswerverifiedA lump-sum tax is the most efficient tax...View AnswerShow Answer

In which of the following tax systems do taxes increase as income increases?

Correct AnswerverifiedShow Answer

In 1789 the percentage of the average American's income that went to pay taxes was about

Correct AnswerverifiedShow Answer

Tax incidence refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The U.S. income tax

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Yes. People with hig...
View Answer

Correct Answer
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A lump-sum tax is the most efficient tax...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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