Question 1

Most of the state and local government employees are in what area?

Accepted Answer

A)   health care
B)   education
C)   administration
D)   highways

Question 2

Approximately what percentage of state spending goes to finance education?

Accepted Answer

A)   36
B)   44
C)   47
D)   53

Question 3

Economists agree that corporations always shift the corporate income tax to consumers by raising product prices.

Accepted Answer

A) True 
 B)False

Question 4

The sales tax is a regressive tax because the

Accepted Answer

A)   percentage of income paid as taxes falls as income rises.
B)   administrative costs associated with the collection of the tax are relatively high.
C)   percentage of income paid as taxes is constant as income rises.
D)   tax tends to reduce the total volume of consumption expenditures.

Question 5

The opportunity cost of borrowing funds to finance government deficits is

Accepted Answer

A)   greatest when the economy is doing well.
B)   greatest when the economy is in a recession.
C)   zero.
D)   the same regardless of the state of the economy.

Question 6

With a tax of $2,000 on $30,000 of income and $2,000 on $70,000 of income, we can describe the structure of this tax as

Accepted Answer

A)   progressive.
B)   proportional.
C)   regressive.
D)   marginal.

Question 7

The tax revenues of local governments are typically

Accepted Answer

A)   more than their expenditures.
B)   equal to their expenditures.
C)   slightly less than their expenditures.
D)   less than one-half of their expenditures.

Question 8

The average tax rate is

Accepted Answer

A)   equal to the change in taxes/change in taxable income.
B)   equal to total taxes/total taxable income.
C)   the sum of the marginal tax rate and the rate of transfer payments.
D)   the tax on incremental income less the tax on total income.

Question 9

In general for an excise tax on a product, given supply, the more elastic is the demand for the product, the larger will be the portion of the tax shouldered by the buyers.

Accepted Answer

A) True 
 B)False

Question 10

(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 excise tax on each unit of the product

Accepted Answer

A)   is $1.
B)   is $2.
C)   is $3.
D)   cannot be determined with the information given.

Question 11

Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

Accepted Answer

A)   proprietary income.
B)   transfer payments.
C)   tax revenue.
D)   subsidies.

Question 12

The U.S. tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Accepted Answer

A)   75 cents in government spending for every dollar they paid in taxes.
B)   60 cents in government spending for every dollar they paid in taxes.
C)   30 cents in government spending for every dollar they paid in taxes.
D)   10 cents in government spending for every dollar they paid in taxes.

Question 13

The Social Security tax is regressive because

Accepted Answer

A)   the Social Security tax rate applied does not rise with the salary level.
B)   no Social Security tax is collected for incomes in excess of a "cap" income level.
C)   each individual must pay a set percentage of his or her income in Social Security taxes.
D)   as income increases, the Social Security tax rate increases at a decreasing rate.

Question 14

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

Accepted Answer

A)   disproportionate.
B)   progressive.
C)   proportional.
D)   regressive.

Question 15

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 16

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Accepted Answer

A) True 
 B)False

Question 17

Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income were $30,000, your tax payment would be $5,000. This suggests that the tax is

Accepted Answer

A)   progressive.
B)   proportional.
C)   regressive.
D)   discriminatory.

Question 18

A federal excise tax on tires for cars and trucks would be an example of the

Accepted Answer

A)   benefits-received principle of taxation.
B)   ability-to-pay principle of taxation.
C)   proportional tax.
D)   progressive tax.

Question 19

The largest category of federal spending is for

Accepted Answer

A)   health care.
B)   science, space, and technology.
C)   pensions and income security.
D)   national defense.

Question 20

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Accepted Answer

A)   unitary elastic.
B)   very inelastic.
C)   slightly elastic.
D)   perfectly elastic.

Exam 20: Public Finance: Expenditures and Taxes

Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income were $30,000, your tax payment would be $5,000. This suggests that the tax is

Correct Answer
verified

The sales tax is a regressive tax because the

Correct Answer
verified

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Correct Answer
verified

The Social Security tax is regressive because

Correct Answer
verified

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

Correct Answer
verified

The U.S. tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Correct Answer
verified

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Correct Answer
verified

Most of the state and local government employees are in what area?

Correct Answer
verified

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

Correct Answer
verified

A federal excise tax on tires for cars and trucks would be an example of the

Correct Answer
verified

The average tax rate is

Correct Answer
verified

Approximately what percentage of state spending goes to finance education?

Correct Answer
verified

The opportunity cost of borrowing funds to finance government deficits is

Correct Answer
verified

Economists agree that corporations always shift the corporate income tax to consumers by raising product prices.

Correct Answer
verified

Correct Answer
verified

The tax revenues of local governments are typically

Correct Answer
verified

Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

Correct Answer
verified

In general for an excise tax on a product, given supply, the more elastic is the demand for the product, the larger will be the portion of the tax shouldered by the buyers.

Correct Answer
verified

The largest category of federal spending is for

Correct Answer
verified

With a tax of $2,000 on $30,000 of income and $2,000 on $70,000 of income, we can describe the structure of this tax as

Correct Answer
verified

Exam 20: Public Finance: Expenditures and Taxes

Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income were $30,000, your tax payment would be $5,000. This suggests that the tax is

Correct AnswerverifiedShow Answer

The sales tax is a regressive tax because the

Correct AnswerverifiedShow Answer

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Correct AnswerverifiedShow Answer

The Social Security tax is regressive because

Correct AnswerverifiedShow Answer

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

Correct AnswerverifiedShow Answer

The U.S. tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Correct AnswerverifiedShow Answer

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Correct AnswerverifiedShow Answer

Most of the state and local government employees are in what area?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A federal excise tax on tires for cars and trucks would be an example of the

Correct AnswerverifiedShow Answer

The average tax rate is

Correct AnswerverifiedShow Answer

Approximately what percentage of state spending goes to finance education?

Correct AnswerverifiedShow Answer

The opportunity cost of borrowing funds to finance government deficits is

Correct AnswerverifiedShow Answer

Economists agree that corporations always shift the corporate income tax to consumers by raising product prices.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The tax revenues of local governments are typically

Correct AnswerverifiedShow Answer

Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

Correct AnswerverifiedShow Answer

In general for an excise tax on a product, given supply, the more elastic is the demand for the product, the larger will be the portion of the tax shouldered by the buyers.

Correct AnswerverifiedShow Answer

The largest category of federal spending is for

Correct AnswerverifiedShow Answer

With a tax of $2,000 on $30,000 of income and $2,000 on $70,000 of income, we can describe the structure of this tax as

Correct AnswerverifiedShow Answer

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