Question 1

The U.S.federal government spends its revenues in a number of ways.Rank the following spending categories from largest to smallest.

Accepted Answer

A)  Social Security, national defense, income security, net interest
B)  health care, national defense, net interest, income security
C)  Social Security, health care, national defense, federal judicial system (including prisons) 
D)  national defense, social security, net interest, income securityE) A) and B)
F) All of the above

Question 2

A tax on the wages that a firm pays its workers is called

Accepted Answer

A)  an income tax.
B)  an excise tax.
C)  a consumption tax.
D)  a payroll tax.E) A) and B)
F) A) and C)

Question 3

If James earns $80,000 in taxable income and pays $20,000 in taxes,his average tax rate is 25 percent.

Accepted Answer

A) True 
 B)False

Question 4

A family's income tax liability is

Accepted Answer

A)  a standard percentage of all income earned.
B)  determined by wage income rather than dividend and interest income.
C)  based on total income.
D)  constant from year to year.E) C) and D)
F) B) and D)

Question 5

List the three most important expenditure programs of the federal government.How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Accepted Answer

The three most important expenditure pro...

Question 6

In 1789,the average American paid approximately what percent of his income in taxes?

Accepted Answer

A)  5
B)  15
C)  33
D)  50E) B) and C)
F) A) and C)

Question 7

Deadweight losses occur in markets in which

Accepted Answer

A)  firms decide to downsize.
B)  the government imposes a tax.
C)  profits fall because of low consumer demand.
D)  equilibrium prices fall.E) A) and D)
F) B) and C)

Question 8

Which of the following statements is correct?

Accepted Answer

A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount.
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden.
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers.
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.E) B) and D)
F) A) and B)

Question 9

The largest category of federal government spending is growing because

Accepted Answer

A)  the U.S.must spend more on national defense due to the war against terror.
B)  the elderly population is increasing due to rising life expectancies.
C)  expenditures on space exploration have increased dramatically.
D)  health care costs are rising faster than any other service in the U.S.E) A) and D)
F) B) and D)

Question 10

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) B) and C)
F) A) and B)

Question 11

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future.What category of spending is this?

Accepted Answer

A)  national defense
B)  Social Security
C)  income security
D)  farm support programsE) A) and B)
F) C) and D)

Question 12

When interest income from savings is taxed,

Accepted Answer

A)  people will save more to make up for what is lost in taxes.
B)  people will save the same amount as they would have without the tax.
C)  people will save less than they would without the tax.
D)  None of the above is correct since the government would not tax interest on savings.E) A) and D)
F) All of the above

Question 13

A tax system based on the ability-to-pay principle claims that all citizens should

Accepted Answer

A)  pay taxes based on the benefits they receive from government services.
B)  pay the same amount in taxes.
C)  pay taxes based on consumption rather than income.
D)  make an equal sacrifice.E) A) and B)
F) A) and C)

Question 14

Table 12-6
 
-Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Accepted Answer

A)  30%
B)  40%
C)  50%
D)  60%E) A) and B)
F) C) and D)

Question 15

Use Table A to complete Table B.

Accepted Answer

The answer of Use Table A to complete Table B.
...

Question 16

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 17

In 1987,the marginal tax rate in Iceland was

Accepted Answer

A)  0 percent.
B)  3 percent.
C)  50 percent.
D)  100 percent.E) B) and C)
F) A) and D)

Question 18

Table 12-1
 
-Refer to Table 12-1.If Danielle has $38,000 in taxable income,her tax liability will be

Accepted Answer

A)  $2,237.50.
B)  $3,800.
C)  $6,237.50.
D)  $9,500.E) None of the above
F) All of the above

Question 19

Public schools,which educate most students through high school,are paid for primarily by

Accepted Answer

A)  state governments.
B)  local governments.
C)  the federal government.
D)  taxpayers directly.E) None of the above
F) A) and C)

Question 20

Which of the following is not true about government spending on national defense?

Accepted Answer

A)  It is the second-largest spending category for the U.S.federal government.
B)  It includes salaries of military personnel.
C)  It fluctuates over time as the political climate changes.
D)  It is not financed with tax revenue.E) A) and D)
F) None of the above

Exam 12: The Design of the Tax System

Which of the following is not true about government spending on national defense?

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A family's income tax liability is

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In 1789,the average American paid approximately what percent of his income in taxes?

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If James earns $80,000 in taxable income and pays $20,000 in taxes,his average tax rate is 25 percent.

Correct AnswerverifiedShow Answer

List the three most important expenditure programs of the federal government.How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Correct AnswerverifiedThe three most important expenditure pro...View AnswerShow Answer

In 1987,the marginal tax rate in Iceland was

Correct AnswerverifiedShow Answer

Deadweight losses occur in markets in which

Correct AnswerverifiedShow Answer

When interest income from savings is taxed,

Correct AnswerverifiedShow Answer

The U.S.federal government spends its revenues in a number of ways.Rank the following spending categories from largest to smallest.

Correct AnswerverifiedShow Answer

A tax on the wages that a firm pays its workers is called

Correct AnswerverifiedShow Answer

A tax system based on the ability-to-pay principle claims that all citizens should

Correct AnswerverifiedShow Answer

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Correct AnswerverifiedShow Answer

A person's average tax rate equals her

Correct AnswerverifiedShow Answer

The largest category of federal government spending is growing because

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

Correct AnswerverifiedShow Answer

Public schools,which educate most students through high school,are paid for primarily by

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Which of the following statements is correct?

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Use Table A to complete Table B.

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Table 12-1 -Refer to Table 12-1.If Danielle has $38,000 in taxable income,her tax liability will be

Correct AnswerverifiedShow Answer

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future.What category of spending is this?

Correct AnswerverifiedShow Answer

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The three most important expenditure pro...
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