Question 1

Which of the following is not a means-tested transfer program?

Accepted Answer

Social Security is not a means-tested transfer program because benefits are based on a worker's earnings history, rather than their current income or assets. Medicaid, Aid to Families with Dependent Children, Food Stamps, and Head Start are all means-tested programs where eligibility is determined by income or need.

Question 2

Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate the tax to be paid on $45,000 in gross income when the standard deduction and exemptions total $7,500.

Accepted Answer

The answer of Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate...

Question 3

Exhibit 14-3 
-An individual receiving money from the government because his or her income is very low is receiving a(n)

Accepted Answer

The term "means-tested" refers to benefits that are only given to individuals based on their income or other financial resources. Therefore, receiving money from the government because of low income would qualify as a means-tested transfer. The other options (A, B, C, and E) either do not accurately describe this type of transfer or are not commonly used terms.

Question 4

The U.S. social security retirement program is considered a transfer payment system.

Accepted Answer

The U.S. social security retirement program is funded by payroll taxes and provides benefits to retirees, survivors, and disabled individuals. It is considered a transfer payment system because it transfers income from current workers to retirees and other beneficiaries.

Question 5

All transfer payments are means-tested.

Accepted Answer

Transfer payments can be means-tested or not means-tested. It depends on the specific program. For example, Medicaid is means-tested, while Social Security benefits are not means-tested.

Question 6

If a tax is imposed on a good to be paid by the seller of the good, what will happen to the market price and quantity? State whether the price will go up or down and whether the change in price will be as large as the tax.

Accepted Answer

The answer of If a tax is imposed on a...

Question 7

Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate the average tax rate of an individual whose taxable income is $65,000 and who has total deductions and exemptions of $10,000.

Accepted Answer

The answer of Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate...

Question 8

A more efficient tax system imposes smaller deadweight losses and fewer administrative burdens on society.

Accepted Answer

A more efficient tax system aims to minimize deadweight losses (the loss in economic efficiency caused by taxes) and administrative burdens, leading to a more optimal allocation of resources in society. Therefore, it is true that a more efficient tax system imposes smaller deadweight losses and fewer administrative burdens on society.

Question 9

A government payment to an individual because he/she is elderly is called a(n)

Accepted Answer

Social insurance transfers are government payments made to individuals based on programs typically designed to provide support due to age, disability, or unemployment. In the context of payments to the elderly, these are often referred to as social security or pensions, but the term "social insurance transfer" broadly encompasses these types of government payments.

Question 10

Head Start is a program that gives interest-free loans to poor people to help them start their own businesses.

Accepted Answer

Head Start is actually a program that provides comprehensive early childhood education, health, nutrition, and parent involvement services to low-income families with children ages birth to five.

Question 11

Explain the difference between a marginal income tax rate and an average income tax rate.

Accepted Answer

The answer of Explain the difference between a marginal income...

Question 12

With income below $10,000, the earned income tax credit makes the effective tax rate equal to

Accepted Answer

The answer of With income below $10,000, the earned income...

Question 13

Why is it irrelevant whether the employer or the worker directly pays a payroll tax?

Accepted Answer

The answer of Why is it irrelevant whether the employer...

Question 14

To keep deadweight losses to a minimum, products with high elasticities of supply and demand should be taxed.

Accepted Answer

Taxing products with high elasticities of supply and demand typically leads to larger deadweight losses because consumers and producers are more responsive to price changes, causing significant reductions in quantity traded.

Question 15

What is the difference between a proportional tax and a flat tax on income?

Accepted Answer

The answer of What is the difference between a proportional...

Question 16

A means-tested transfer program intended to help poor preschool children is

Accepted Answer

Head Start is a means-tested transfer program specifically aimed at assisting low-income preschool children with educational, health, nutritional, and social services to prepare them for school. The other options listed are not targeted specifically toward preschool children. The earned income tax credit provides tax relief for low-wage workers and their families, Medicaid is a health insurance program for low-income individuals, UNICEF is an international organization that provides assistance to children in developing countries, and Aid to Families with Dependent Children no longer exists as a federal program.

Question 17

Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate the tax if an individual makes a total of $150,000 in income, has deductions of $8,000, and receives an exemption of $2,500 for each of five dependents.

Accepted Answer

The answer of Exhibit 14-3 
-Refer to Exhibit 14-3. Calculate...

Question 18

Above ____ in income, the earned income tax credit effectively adds ____ percent to the marginal tax rate.

Accepted Answer

The earned income tax credit phases out for taxpayers with income above $13,100 (for single filers without children). The credit effectively adds 21% to the marginal tax rate for each additional dollar earned above this income threshold. Therefore, choice D is the correct answer.

Question 19

Suppose that a four-person family can earn up to $15,120 and pay no income tax, and that income in the lowest tax bracket is taxed at 15 percent. Given the fact that the earned income tax credit falls by 21 cents for every additional dollar of gross income earned above $11,000, what is the marginal tax rate for a family of four if its gross income is $20,000?

Accepted Answer

The marginal tax rate at a gross income of $20,000 includes the 15% income tax plus the reduction in the earned income tax credit, which is 21 cents (or 21%) for every dollar earned above $11,000. Therefore, the marginal tax rate is 15% (income tax) + 21% (reduction in credit) = 36%.

Question 20

The ability-to-pay principle is the idea that only those who have very high incomes should pay any taxes at all.

Accepted Answer

The ability-to-pay principle actually states that those with higher incomes should pay a higher percentage of their income in taxes, as they have a greater ability to contribute to the functioning of society through taxes. It does not suggest that only those with very high incomes should pay taxes.

Quiz 14: Taxes, Transfers, and Income Distribution

Which of the following is not a means-tested transfer program?

Exhibit 14-3 -Refer to Exhibit 14-3. Calculate the tax to be paid on $45,000 in gross income when the standard deduction and exemptions total $7,500.

Exhibit 14-3 -An individual receiving money from the government because his or her income is very low is receiving a(n)

The U.S. social security retirement program is considered a transfer payment system.

All transfer payments are means-tested.

If a tax is imposed on a good to be paid by the seller of the good, what will happen to the market price and quantity? State whether the price will go up or down and whether the change in price will be as large as the tax.

Exhibit 14-3 -Refer to Exhibit 14-3. Calculate the average tax rate of an individual whose taxable income is $65,000 and who has total deductions and exemptions of $10,000.

A more efficient tax system imposes smaller deadweight losses and fewer administrative burdens on society.

A government payment to an individual because he/she is elderly is called a(n)

Head Start is a program that gives interest-free loans to poor people to help them start their own businesses.

Explain the difference between a marginal income tax rate and an average income tax rate.

With income below $10,000, the earned income tax credit makes the effective tax rate equal to

Why is it irrelevant whether the employer or the worker directly pays a payroll tax?

To keep deadweight losses to a minimum, products with high elasticities of supply and demand should be taxed.

What is the difference between a proportional tax and a flat tax on income?

A means-tested transfer program intended to help poor preschool children is

Exhibit 14-3 -Refer to Exhibit 14-3. Calculate the tax if an individual makes a total of $150,000 in income, has deductions of $8,000, and receives an exemption of $2,500 for each of five dependents.

Above in income, the earned income tax credit effectively adds percent to the marginal tax rate.

The ability-to-pay principle is the idea that only those who have very high incomes should pay any taxes at all.