Question 1

Ad valorem taxation means

Accepted Answer

A)  that only the value added by a service provider is taxed.
B)  that the tax rate is a percentage of the price paid for a product.
C)  a negative income tax.
D)  a progressive property tax imposed in some states.E) B) and D)
F) C) and D)

Question 2

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes, the income tax system would be

Accepted Answer

A)  regressive.
B)  progressive.
C)  proportional.
D)  marginal.E) None of the above
F) All of the above

Question 3

Which of the following statements about taxation is TRUE?

Accepted Answer

A)  Increasing taxes will always increase tax revenues.
B)  Static tax analysis recognizes that an increase in taxation could lead to a decrease in tax revenues.
C)  Dynamic tax analysis assumes that an increase in taxation will leave the tax base unchanged.
D)  There is a tax rate at which tax revenues are maximized.E) A) and B)
F) A) and C)

Question 4

Social Security taxes are paid by

Accepted Answer

A)  employers only.
B)  employees only.
C)  both employers and employees.
D)  neither employers nor employees.E) None of the above
F) All of the above

Question 5

Which one of the following statements is true?

Accepted Answer

A)  In a proportional tax system, the marginal tax rate always exceeds the average tax rate.
B)  In a proportional tax system, the average tax rate always exceeds the marginal tax rate.
C)  The U.S. Social Security tax is proportional.
D)  The U.S. Social Security tax is regressive.E) None of the above
F) B) and C)

Question 6

What happens when the government imposes a unit excise tax on a good?

Accepted Answer

A)  The amount of the tax is added to the current equilibrium price.
B)  The demand for the newly taxed good decreases.
C)  That good's supply curve shifts down by the amount of the tax.
D)  The newly taxed good's supply curve shifts vertically upward by the amount of the per-unit tax being levied.E) All of the above
F) A) and D)

Question 7

The tax base is

Accepted Answer

A)  the minimum amount of tax revenue that government must collect each year.
B)  the maximum amount of tax revenue that government must collect each year.
C)  the sum of all incomes earned in the United States.
D)  the value of all goods, services, incomes, or wealth subject to taxation.E) A) and C)
F) B) and C)

Question 8

Current concern about Social Security is that

Accepted Answer

A)  the fund is growing too rapidly and would trigger inflation.
B)  the fund might be depleted before long and might not be there for workers who retire later.
C)  the government is planning to phase out the program.
D)  none of the aboveE) A) and B)
F) None of the above

Question 9

How would the market for smartphones be affected if the government charged an excise tax of $5.00 on each smartphone sold?

Accepted Answer

A)  The supply of smartphones would decrease.
B)  The demand for smartphones would increase.
C)  The demand for smartphones would decrease.
D)  The price of smartphones would rise by $5.00.E) A) and D)
F) A) and C)

Question 10

Dynamic tax analysis generally predicts

Accepted Answer

A)  that the higher the tax rate is, the higher the tax revenue will continue to be into the future.
B)  that the higher tax rates lead to higher revenues only to a point at which revenues will begin to decrease due to a diminishing tax base.
C)  that lower tax rates will always and continuously lead to increased tax revenues.
D)  that lower tax rates are always going to lead to decreased tax revenues.E) None of the above
F) A) and B)

Question 11

According to the government budget constraint, any excess of public expenditures and transfers over taxes and user fees must be funded by

Accepted Answer

A)  private borrowing.
B)  government borrowing.
C)  U.S. Treasury money creation.
D)  Federal Reserve money creation.E) None of the above
F) All of the above

Question 12

Mr. Johnson earns $100,000 per year. Each year he spends $70,000 and saves $30,000. He pays a 5 percent sales tax on all of his spending. Assuming this is the only tax he pays, his average tax rate out of his income is

Accepted Answer

A)  1.5 percent.
B)  2.5 percent.
C)  3.5 percent.
D)  5.0 percent.E) A) and C)
F) B) and D)

Question 13

The federal income tax code of the United States is

Accepted Answer

A)  progressive.
B)  proportional.
C)  regressive.
D)  progressive for individuals but proportional for married couples.E) B) and D)
F) B) and C)

Question 14

Using supply and demand analysis, graphically show what an excise tax does to equilibrium price and quantity. On your graph show the part of the tax paid by the consumer and the part paid by the producer.

Accepted Answer

Total tax =

-

Cons...

Question 15

Corporate profits are taxed twice because

Accepted Answer

A)  taxes are collected on profits before profits are distributed to shareholders.
B)  the government wants to minimize the amount of tax paid on capital gains.
C)  it is economically efficient to reduce the amount of retained earnings.
D)  capital gains are not indexed to the rate of inflation.E) B) and C)
F) A) and D)

Question 16

Advocates of a progressive income tax use arguments EXCEPT for which of the following?

Accepted Answer

A)  A progressive tax system taxes according to ability to pay.
B)  A progressive tax system taxes according to benefits received.
C)  A progressive tax system helps redistribute income away from the rich and towards the poor.
D)  A progressive tax system maximizes government revenues.E) A) and C)
F) All of the above

Question 17

A tax rate system characterized by higher marginal tax rates as income increases is known as

Accepted Answer

A)  a progressive tax system.
B)  a regressive tax system.
C)  a proportional tax system.
D)  a flat-rate tax system.E) A) and C)
F) None of the above

Question 18

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if static tax analysis is used?

Accepted Answer

A)  Panel 1
B)  Panel 2
C)  Panel 3
D)  Panel 4E) A) and B)
F) B) and D)

Question 19

Retained earnings are

Accepted Answer

A)  the funds held back to pay out dividends.
B)  the funds used to pay corporate taxes.
C)  profits not given out to stockholders.
D)  the reason there is double taxation.E) None of the above
F) All of the above

Question 20

Over the long run, the fundamental funding sources for the government are

Accepted Answer

A)  user charges, taxes, and borrowing.
B)  taxes, transfer payments, and borrowing.
C)  user charges and taxes.
D)  taxes and borrowing.E) None of the above
F) A) and B)

Exam 6: Funding the Public Sector

According to the government budget constraint, any excess of public expenditures and transfers over taxes and user fees must be funded by

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What happens when the government imposes a unit excise tax on a good?

Correct AnswerverifiedShow Answer

Corporate profits are taxed twice because

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Current concern about Social Security is that

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Over the long run, the fundamental funding sources for the government are

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Social Security taxes are paid by

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Ad valorem taxation means

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Using supply and demand analysis, graphically show what an excise tax does to equilibrium price and quantity. On your graph show the part of the tax paid by the consumer and the part paid by the producer.

Correct AnswerverifiedTotal tax = - Cons...View AnswerShow Answer

Advocates of a progressive income tax use arguments EXCEPT for which of the following?

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The federal income tax code of the United States is

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Which of the following statements about taxation is TRUE?

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A tax rate system characterized by higher marginal tax rates as income increases is known as

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-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if static tax analysis is used?

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How would the market for smartphones be affected if the government charged an excise tax of $5.00 on each smartphone sold?

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Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes, the income tax system would be

Correct AnswerverifiedShow Answer

Dynamic tax analysis generally predicts

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Retained earnings are

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The tax base is

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Which one of the following statements is true?

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Mr. Johnson earns $100,000 per year. Each year he spends $70,000 and saves $30,000. He pays a 5 percent sales tax on all of his spending. Assuming this is the only tax he pays, his average tax rate out of his income is

Correct AnswerverifiedShow Answer

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Total tax = - Cons...
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