Quiz 20: Taxation and the Public Budget

One reason governments impose taxes is to: A) raise government revenues. B) increase consumer spending. C) spur economic growth. D) encourage more production.

One of the primary aims of taxation is: A) to increase government revenues. B) to reduce the equilibrium quantity. C) to alter the incentives of market participants. D) All of these are primary goals of taxation.

Many tax-funded programs are intended to: A) decrease surplus. B) increase income inequality. C) provide basic human needs. D) fail due to underfunding.

Which of the following is not an example of a commonly tax-funded program? A) Public education. B) Highways. C) Housing to those in need. D) Oil and gas production.

An example of a tax-funded program primarily intended to stimulate economic growth is the: A) maintenance of public highways. B) provision of housing to those in need. C) provision of basic healthcare. D) provision of national defense.

An example of a tax-funded program intended to provide basic human needs is the provision of: A) public education. B) police protection. C) health care. D) national defense.

In deciding which programs the government should fund with tax revenues there is: A) perfect consensus before a program is funded. B) often widespread disagreement. C) always a popular vote for new programs. D) the ability of each individual to decide where his tax dollars are spent.

Taxes change behavior for all of the following reasons except they: A) alter the incentives faced by market participants. B) drive a wedge between the price paid by buyers and the price received by sellers. C) result in a lower equilibrium quantity of the good or service being consumed. D) increase consumer and producer surplus experienced at market.

When a tax is present in a market,the price paid by consumers: A) equals that received by suppliers, but it is higher than the market price in the absence of taxes. B) is greater than that received by suppliers. C) is less than that received by suppliers. D) equals that received by suppliers, but it is lower than the market price in the absence of taxes.

An example of a tax specifically designed to reduce consumption of a good is a tax on: A) chocolate. B) cigarettes. C) coffee. D) automobiles.

An example of a tax specifically designed to reduce consumption of a good is a tax on: A) automobiles. B) dairy products. C) gasoline. D) fast food.

The primary intent of the tax on tobacco is to: A) reduce its consumption. B) raise government revenues. C) increase market surplus. D) support producers of tobacco.

When a tax alters consumers' incentives,it is: A) always the explicit purpose of the policy. B) sometimes a side effect of a tax designed to raise revenue. C) called a sin tax. D) meant to encourage increased consumption.

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.According to the graph shown,the tax caused: A) positive government revenue and decreased consumption. B) zero government revenue and decreased consumption. C) a transfer of revenue to surplus and increased consumption. D) positive government revenue and increased consumption.

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.According to the graph shown,the tax caused: A) an increase in consumption from Q₁ to Q₂. B) a decrease in consumption from Q₂ to Q₁. C) a decrease in the price consumers pay from P₃ to P₁. D) a decrease in the price the suppliers receive from P₃ to P₁.

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.The amount of the tax imposed in the graph shown is equal to: A) (P₁ P₃). B) (P₂ P₁). C) (P₄ P₂). D) (P₄ P₃).

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.The amount of tax revenue being generated by the tax imposed in the graph shown is: A) area P₂CAP₄. B) area P₁DBP₃. C) area ABC. D) area ABCD.

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.The deadweight loss associated with the tax imposed in the graph shown is: A) equal to area CBD. B) equal to area ABC. C) due to the decrease in consumption from Q₁ to Q₂. D) equal to area P₁DCP₂.

This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.The distance AC in the graph shown represents all of the following except the: A) amount of the tax. B) difference between what the consumer pays and what the seller receives. C) "tax wedge." D) total tax revenue generated for the government by imposing the tax.

Concepts useful in evaluating the costs and benefits of alternative types of taxes are: A) efficiency, incidence and scarcity. B) revenue, scarcity, and shortage. C) incidence, scarcity, and shortage. D) efficiency, revenue and incidence.

One cost associated with the imposition of taxes is: A) deadweight loss. B) scarcity. C) shortages. D) overconsumption.

One cost associated with taxes is the: A redistribution of surplus. A) redistribution of surplus. B) resulting under consumption. C) administrative burden. D) change in relative values.

The difference between the loss of surplus to taxpayers and the tax revenue collected is called: A) an externality. B) deadweight loss. C) consumer surplus. D) producer surplus.

The effort to collect and manage revenue from taxes is called: A) an externality. B) deadweight loss. C) administrative burden. D) transfer of surplus.

A tax in an efficient market: A) increases efficiency. B) decreases total surplus. C) maximizes total surplus. D) often fails to generate revenue.

Deadweight loss as a result of taxation occurs because the: A) quantity of a good that is bought and sold is above the market equilibrium quantity. B) price that is charged to the consumer is lower than the price the seller receives. C) price that is charged to the consumer is above the market equilibrium quantity. D) quantity of a good that is bought and sold is below the market equilibrium quantity.

The total amount of surplus lost due to taxation is: A) greater than the amount of revenue generated. B) less than the amount of revenue generated. C) transferred to the government in the form of tax revenues. D) used to fund public services.

Part of the surplus lost to market participants when a tax is imposed is: A) transferred to others who are affected. B) transferred to the government in revenues. C) redistributed from seller to buyer. D) redistributed from buyer to seller.

When a tax is imposed,the surplus that is lost to buyers and sellers but converted into tax revenue is: A) considered a cost of taxation. B) part of deadweight loss. C) the sole source of deadweight loss. D) not part of deadweight loss.

When a tax is imposed,the surplus that is lost to buyers and sellers but converted into tax revenue is: A) transferred to others through public programs. B) lost and considered a cost of taxation. C) part of deadweight loss. D) All of these statements are true.

The surplus that is lost and not converted to tax revenue when a tax is imposed is: A) deadweight loss. B) value that disappears. C) not transferred to anyone else. D) All of these statements are true.

When a tax is imposed,some of the lost surplus becomes tax revenues and the rest is: A) transferred to consumers. B) transferred to producers. C) transferred to recipients of government services. D) simply lost.

When a tax is imposed and some of the lost surplus becomes tax revenues,the group that benefits is: A) consumers. B) producers. C) recipients of government services. D) Only the government benefits from that lost surplus.

How much deadweight loss a tax causes is primarily determined by: A) how responsive buyers and sellers are to a price change. B) how much tax revenue the government generates. C) whether the tax is imposed on the buyer or seller. D) the ability of the government to impose the tax.

The deadweight loss a tax causes depends on all of the following except: A) how responsive buyers and sellers are to a price change. B) the price elasticity of supply. C) the price elasticity of demand. D) who the tax is imposed upon.

Considering a given increase in price due to a tax,the more price elastic the supply curve is,the: A) larger the drop in equilibrium quantity. B) smaller the drop in equilibrium quantity. C) smaller the amount of deadweight loss created. D) less surplus that is transferred to consumers.

Considering a given increase in price due to a tax,the less price elastic the demand curve is,the: A) larger the drop in equilibrium quantity. B) smaller the amount of deadweight loss created. C) larger the amount of deadweight loss created. D) more surplus that is transferred to consumers.

In order to minimize deadweight loss generated by taxation,a tax should be placed on goods that are: A) price elastic. B) price inelastic. C) expensive. D) popular.

Deadweight loss is minimized when a tax is levied on something for which people: A) are not likely to change their behavior much in response to a price change. B) are very likely to change their behavior in response to a price change. C) have a large income elasticity of demand. D) have a small income elasticity of demand.

A lump-sum tax: A) charges the same amount to each taxpayer, regardless of economic behavior or circumstances. B) refers to annual, rather than quarterly tax payments throughout the year. C) is tied to spending habits, not income levels. D) is tied to income levels, not spending habits.

An example of a lump-sum tax is a(n): A) income tax. B) property tax. C) sales tax. D) head tax.

A lump-sum tax is: A) a head tax. B) the most efficient form of taxation. C) a tax that charges the same amount to each taxpayer. D) All of these statements are true.

If the primary goal in implementing a tax is to maximize efficiency and minimize deadweight loss,the government should impose a(n): A) income tax. B) lump sum tax. C) sin tax. D) proportional tax.

In the real world,lump-sum taxes are: A) rarely used. B) commonly used. C) applied only to the wealthy in the U.S. D) very common in non-western nations.

In the real world,lump-sum taxes are: A) perceived as unfair. B) rarely used. C) very efficient. D) All of these statements are true.

Lump-sum taxes reduce the total amount of revenue that can be raised because: A) people perceive them to be unfair. B) they have large administrative burdens. C) the size of the tax is limited by the poorest citizens' ability to pay. D) they are often applied inefficiently.

All taxes carry which of the following costs? A) Time in creating procedures for collecting revenues B) Enforcing tax payments C) Managing collected funds D) All taxes incur all of these costs.

The administrative burden of taxes is: A) smallest with a lump-sum tax. B) the same if the revenue generated is the same for any kind of tax. C) smaller the larger the amount of the tax. D) the same across all types of taxes.

The logistical costs associated with implementing a tax are called the: A) deadweight loss. B) administrative burden. C) total surplus. D) tax revenue.

The administrative burden of a tax is: A) the difference between the revenues generated from the tax and the cost of the government program it is supposed to fund. B) what portion of the revenues come from the government. C) what portion of the revenues come from the producers versus the consumers. D) the logistical costs associated with implementing a tax.

In general,more efficient taxes have: A) lower administrative burdens. B) more complexity. C) lower revenues given the size of the tax. D) All of these statements are true.

In general,the more complex the tax the: A) more tax revenues it will generate. B) more efficient it will be. C) higher the administrative burden will be. D) more deadweight loss it will create.

The federal income tax _______________ compared to a state sales tax. A) has a higher administrative burden B) has a lower administrative burden C) is less complex D) is administered basically the same as

The federal income tax _____________ compared to a state sales tax. A) has a lower administrative burden B) is less efficient C) is less complex D) is easier to administer

To calculate tax revenue: A) divide total revenues by the tax per unit. B) multiply total revenues by the tax per unit. C) multiply the tax per unit by the number of units of the item being taxed. D) multiply the tax per unit by the price of the unit being taxed.

A new toll of $0.50 per car is in place on a bridge,and 1,000 cars have used the bridge.Total tax revenues would be: A) $500. B) $2,000. C) $1,000. D) $5,000

A bridge that typically gets 1,000 cars per day is installing a new toll next week of $0.50 per car.The tax revenues generated will be: A) $1,000. B) $500. C) less than $500. D) between $500 and $1,000.

Imposing taxes in markets where demand and supply are price inelastic: A) causes less inefficiency than imposing them in price-elastic markets. B) causes more inefficiency than imposing them in price-elastic markets. C) causes no inefficiency. D) cause the same amount of inefficiency because efficiency is unrelated to market elasticity.

For any given tax,the revenue generated is: A) larger in markets with price-elastic demand and supply. B) the same regardless of price elasticity. C) always maximized in markets with price-elastic demand and supply. D) smaller in markets with price-elastic demand and supply.

For any given tax,imposing a tax in a market with a highly inelastic demand will: A) cause more deadweight loss than a market with an elastic demand. B) generate higher revenues than a market with an elastic demand. C) Both of these statements are true. D) Neither of these statements is true.

The market for cigarettes likely has a: A) highly elastic demand. B) slightly elastic demand. C) highly inelastic demand. D) slightly inelastic demand.

Taxing the market for alcohol at the same rate as the market for juice will likely: A) raise more revenue. B) cause more inefficiency. C) cause a very big reaction in terms of decreased quantity demanded. D) produce very similar results in terms of revenue and inefficiency because the rate is the same.

When raising taxes,the price effect tells us that the: A) higher tax rate causes fewer units to be sold. B) government gets more revenue per units sold. C) government gets less revenue per unit sold. D) higher tax rate causes more units to be supplied.

When raising taxes,the quantity effect tells us that the: A) government gets more revenue per units sold. B) higher tax rate causes fewer units to be sold. C) government gets less revenue per unit sold. D) higher tax rate causes more units to be supplied.

The _____________ tells us when the government raises taxes,it gets more revenue per unit sold. A) quantity effect B) income effect C) price effect D) substitution effect

The __________ tells us when the government raises taxes,the higher tax rate causes fewer units to be sold. A) quantity effect B) price effect C) government spending effect D) quality effect

It is more likely at lower tax rates than higher tax rates that the: A) quantity effect will outweigh the price effect. B) quantity effect will outweigh the income effect. C) price effect will outweigh the quantity effect. D) income effect will outweigh the price effect.

In general,raising taxes has: A) increasing returns to revenue. B) diminishing returns to revenue. C) increasing then decreasing returns to revenue. D) constant returns to revenue.

If the price effect outweighs the quantity effect,then a tax: A) increase will raise revenue. B) decrease will raise revenue. C) increase will lower revenue. D) increase will not change revenue.

If the ________ effect is greater than the ___________ effect,a tax cut will increase revenues. A) price; quantity B) quantity; income C) income; price D) quantity; price

A $0.50 tax on lemons currently generates $200 in revenues per day.If the tax were increased to $2,the revenues generated would drop to $70.This tells you that in this range of tax rates the: A) quantity effect outweighs the price effect. B) quantity effect outweighs the income effect. C) price effect outweighs the quantity effect. D) price effect outweighs the income effect.

Raising taxes: A) always raises tax revenues. B) always decreases tax revenues. C) can sometimes decrease tax revenues. D) None of these statements is true.

When considering different tax levels,the revenue-maximizing point will be reached more: A) slowly when demand is more elastic. B) quickly when demand is more elastic. C) quickly when demand is less elastic. D) quickly if demand is unit elastic.

When considering the interplay of the price and quantity effect of different tax levels,we realize that: A) there is one tax level that maximizes tax revenues. B) tax revenues will continue to increase at all levels where the price effect outweighs the quantity effect. C) tax revenues will continue to decrease at all levels where the quantity effect outweighs the price effect. D) All of these statements are true.

The Laffer curve demonstrates that raising tax rates: A) increases then decreases tax revenues. B) always increases tax revenues. C) always decreases tax revenues. D) decreases then increases tax revenues.

The idea that people change their behavior in response to taxes is A) highly controversial among economists. B) accepted by economists, but debated by those in Congress. C) uncontroversial among economists. D) None of these statements is true.

The question of how people's behavior changes in response to taxes: A) has been studied and is well known today. B) is the subject of much research. C) was generally accepted and has recently come under examination again. D) None of these statements is true.

Most research suggests that the elasticity of the labor supply with respect to taxes is: A) very low for most people. B) very high for most people. C) highly variable across people. D) unpredictable in most settings.

When tax rates fall,people tend to: A) increase the amount they work a great deal. B) hardly increase the amount they work. C) hardly decrease the amount they work. D) decrease the amount they work, although to what degree is still being researched.

Research shows that people rearrange their income from different sources to reduce their: A) tax rate. B) necessary work hours. C) total bill. D) tax burden.

The tax rate that maximizes the government's revenues is: A) not always the level that is "best" for the economy. B) the level that is "best" for the economy. C) 30 percent. D) 85 percent.

The concept of incidence is used to: A) indicate which tax bears the bigger burden. B) describe unexpected tax revenue generated. C) describe who bears the burden of a tax. D) describe how often people are taxed.

We can describe who bears the burden of a tax by using the concept of: A) marginal burden. B) incidence. C) payee. D) marginal tax rate.

The burden a tax places on buyers versus sellers is: A) independent of which side is charged the tax. B) always split in half. C) never shared. D) depends on which side is charged with the tax.

The burden of a tax placed on buyers is: A) shared between buyers and sellers. B) the buyers' incidence. C) the sellers' incidence. D) higher if the tax is placed on buyers.

When a tax is placed on sellers,the actual incidence: A) falls solely on the seller. B) falls solely on the buyer. C) may be shared between the seller and buyer. D) is higher because it is being placed on the seller.

The statutory incidence of the tax means who: A) is legally obligated to pay the tax to the government. B) actually loses surplus as a result of the tax. C) bears the burden of any sort of tax. D) gains surplus as a result of the government redistributing tax revenue.

The economic incidence of the tax means who: A) is legally obligated to pay the tax to the government. B) actually loses more surplus as a result of the tax. C) benefits the most from of any sort of tax. D) gains surplus as a result of the government redistributing tax revenue.

The statutory incidence of a tax ______________ the economic incidence of the tax. A) determines B) often can predict C) is the same as D) has no effect on

The side of the market that is more inelastic: A) will bear more of the tax burden. B) will bear less of the tax burden. C) will share an equal amount of the tax burden. D) determines whether to shoulder the majority of the tax burden or pass it on.

The side of the market that will bear a greater share of the tax burden is the side that: A) responds more to a change in prices. B) is more inelastic. C) changes quantity by a larger percentage when the price changes by a given percentage. D) bears the statutory burden of the tax.

When policy makers are deciding where to place the statutory incidence of a tax,it is helpful to remember that: A) it will have no effect on the economic incidence of the tax. B) the economic incidence will fall to the more-elastic party. C) it will largely determine the economic incidence of the tax. D) it will have a large impact on efficiency of the tax.

Policymakers have the ability to affect: A) the economic incidence of a tax burden on the buyer and seller. B) the relative economic incidence of the tax burden on the rich and the poor. C) whether the buyer or seller will bear the actual burden of the tax. D) how the tax is shared between buyer and seller.

Taxes are generally classified into these three categories: A) progressive, regressive, lump-sum B) progressive, regressive, proportional C) proportional, flat tax, gradual D) gradual, proportional, progressive

Which of the following is not one of the general classifications of taxes? A) Regressive. B) Progressive. C) Proportional. D) Gradual.

A proportional tax: A) takes the same percentage of taxes from income from all taxpayers. B) requires those with low incomes to pay a smaller percentage of their income than high-income people. C) is levied so that low-income taxpayers pay a greater proportion of their income toward taxes than high-income taxpayers. D) taxes everyone the same amount, regardless of their income.

A progressive tax: A) takes the same percentage of taxes from income from all taxpayers. B) requires those with low incomes to pay a smaller percentage of their income than high-income people. C) is levied so that low-income taxpayers pay a greater proportion of their income toward taxes than high-income taxpayers. D) taxes everyone the same amount, regardless of their income.

A lump-sum tax: A) takes the same percentage of taxes from income from all taxpayers. B) requires those with low incomes to pay a smaller percentage of their income than high-income people. C) is levied so that low-income taxpayers pay a greater proportion of their income toward taxes than high-income taxpayers. D) taxes everyone the same amount, regardless of their income.

A flat tax: A) takes the same percentage of taxes from income from all taxpayers. B) requires those with low incomes to pay a smaller percentage of their income than high-income people. C) is levied so that low-income taxpayers pay a greater proportion of their income toward taxes than high-income taxpayers. D) taxes everyone the same amount, regardless of their income.

A regressive tax: A) takes the same percentage of taxes from income from all taxpayers. B) requires those with low incomes to pay a smaller percentage of their income than high-income people. C) is levied so that low-income taxpayers pay a greater proportion of their income toward taxes than high-income taxpayers. D) taxes everyone the same amount, regardless of their income.

A tax that takes the same percentage of tax from all taxpayers is called a: A) progressive tax. B) regressive tax. C) flat tax. D) lump-sum tax.

A tax that takes the same percentage of tax from all taxpayers is called a: A) proportional tax. B) progressive tax. C) regressive tax. D) lump-sum tax.

A tax that requires those with low incomes to pay a smaller percentage of their income than high-income earners is a: A) proportional tax. B) progressive tax. C) regressive tax. D) flat tax.

A tax that is levied in such a way that low-income taxpayers pay a greater proportion of their income toward taxes than do high-income taxpayers is called a: A) proportional tax. B) progressive tax. C) regressive tax. D) flat tax.

If Bob earns $20,000 per year and Sue earns $100,000 a year,and there is a flat tax of 10 percent imposed,then Bob would pay __________,Sue would pay ___________,and this is a __________ tax. A) $2,000; $10,000; proportional B) $2,000; $10,000; progressive C) $2,000; $10,000; lump-sum tax D) $200; $1,000; flat tax

If Bob earns $20,000 a year and pays $2,000 in taxes,and Cindy earns $40,000 a year and pays $4,000 in taxes,there is a _______________ tax in place. A) progressive B) regressive C) proportional D) lump-sum

If Bob earns $20,000 a year and pays $2,000 in taxes,and Cindy earns $40,000 a year and pays $4,000 in taxes,then Bob's tax rate is _______ and Cindy's tax rate is_____. A) 5%, 10% B) 2%, 4% C) 10%, 10% D) 20%, 10%

If Janice earns $50,000 a year and pays $500 in taxes,and Cam earns $100,000 a year and pays $20,000 in taxes,the tax system must be: A) regressive. B) progressive. C) proportional. D) lump-sum.

If Janice earns $50,000 a year and pays $500 in taxes,and Cam earns $100,000 a year and pays $20,000 in taxes,then Janice's effective tax rate is _____ and Cam's effective tax rate is____. A) 2%, 20%. B) 5%, 20%. C) 5%, 10%. D) 10%, 10%.

If Jen earns $80,000 a year and pays $16,000 in taxes,and Gary earns $100,000 a year and pays $16,000 a year in taxes,the tax system must be: A) flat. B) proportional. C) progressive. D) lump-sum.

One of the basic trade-offs inherent in designing a tax system is between: A) surplus and revenues. B) supply and demand. C) efficiency and equity. D) price and quantity.

In general,the most efficient taxes: A) are often not the most equitable. B) are often the most equitable. C) raise the most revenues. D) do not raise the most revenues.

In general,the more equitable the incidence of a tax system is the: A) less complicated and more efficient is its design B) more complicated and less efficient is its design. C) more complicated and more efficient is its design. D) less complicated and less efficient is its design.

Over 90 percent of the U.S.government's tax revenues come from: A) two sources. B) one single source. C) three sources. D) None of these is true.

The two sources that contribute roughly 80 percent together of total tax revenues are: A) personal income tax and payroll tax. B) personal income tax and corporate income tax. C) corporate income tax and payroll tax. D) personal income tax and excise tax.

The third largest source of government tax revenues that contributes roughly 10 percent to total revenues is: A) payroll tax. B) personal income tax. C) corporate income tax. D) excise tax.

An income tax is a tax: A) charged on the earnings of individuals and corporations. B) on income earned by buying investments and selling them at a higher price. C) on the wages paid to an employee. D) charged on the value of a good or service being purchased.

A capital gains tax is a tax on the: A) earnings of individuals and corporations. B) income earned by buying assets and selling them at a higher price. C) wages paid to an employee. D) value of a good or service being purchased.

A payroll tax is a tax on the: A) earnings of individuals. B) income earned by buying investments and selling them at a higher price. C) wages paid to an employee. D) value of a good or service being purchased.

A sales tax is a tax on the: A) earnings of individuals and corporations. B) income earned by buying investments and selling them at a higher price. C) wages paid to an employee. D) value of a good or service being purchased.

The largest source of income for most people is: A) income from interest in savings accounts. B) wages earned at work. C) rental income from properties that they own. D) investment income.

The marginal tax rate refers to the tax rate charged on the: A) last dollar a taxpayer earns. B) income earned from buying investments and selling them at a higher price. C) earnings of individuals. D) value of a good or service being purchased.

For a person earning $15,000,the marginal tax rate for the amount from 10,001 to $15,000 is: A) 10% B) 15% C) 25% D) 27.5%

For a person earning $15,000,the average tax rate is: A) 10% B) 15% C) 12.5% D) 11.7%

For a person earning $15,000,the marginal tax amount from 10,001 to $15,000 is: A) $500 B) $750 C) $1,750 D) $2,000

For a person earning $75,000,the marginal tax rate for the amount from 10,001 to $15,000 is: A) 10% B) 15% C) 25% D) 27.5%

For a person earning $75,000,the average tax rate is: A) 10% B) 15% C) 19% D) 17%

For a person earning $75,000,the marginal tax amount from 10,001 to $15,000 is: A) $500 B) $750 C) $1,750 D) $2,000

For a person earning $75000,the marginal tax amount from 40,001 to $75000 is: A) $5,000 B) $7,500 C) $8,750 D) $14,250

The American individual income tax is: A) progressive. B) regressive. C) proportional. D) a lump sum.

A tax on individuals' earnings is called the: A) payroll tax. B) personal income tax. C) corporate income tax. D) excise tax.

A tax on the income earned by buying investments and selling them at a higher price is called the: A) sales tax. B) corporate income tax. C) capital gains tax. D) excise tax.

A tax on the wages paid to an employee is called the: A) payroll tax. B) personal income tax. C) corporate income tax. D) excise tax.

A tax on the value of a good or service being purchased is called the: A) sales tax. B) payroll tax. C) personal income tax. D) excise tax.

The taxes used to pay for Social Security and Medicare are: A) income taxes. B) sales taxes. C) corporate income taxes. D) payroll taxes.

The payroll tax and the income tax differ in that: A) the employer pays the payroll tax, and the individual pays the income tax. B) the payroll tax is tied directly to specific programs while the personal income tax goes toward general government revenue. C) employers have to pay both payroll and corporate income taxes, and individuals only have to pay personal income tax. D) the employer pays the payroll tax, but the income tax burden is shared between employer and employee.

The Social Security system pays: A) current retirees from funds paid by current employees. B) retirees the money accumulated from the payroll tax collected throughout their working lives. C) current retirees from current general government revenues. D) current retirees from general government revenue surpluses they contributed to through taxes.

FICA,the tax that supports Medicare and Social Security,is generally: A) proportional. B) progressive. C) regressive. D) a flat tax that adjusts with inflation.

While corporations bear the statutory incidence of corporate income tax,the economic incidence is likely borne by: A) shareholders. B) employees. C) customers. D) All of these likely bear some of the economic incidence.

Corporate taxes in the US are: A) regressive. B) proportional. C) progressive. D) a flat tax that adjusts with inflation.

A helpful way to put government revenues into context is to think about it: A) as an average amount paid per taxpayer. B) as a percentage of the country's GDP. C) by comparing the percentage of a country's GDP collected in taxes to other countries' percentage of GDP. D) All of these approaches can be helpful in understanding tax revenues.

Higher income countries tend to collect _____________ as a percentage of their GDP than do low-income countries. A) greater tax revenues B) smaller tax revenues C) about the same in tax revenues D) There is really no correlation between a country's wealth and the tax revenues it generates.

One interesting feature of federal government spending in the United States is that: A) it has historically always been greater than the revenues generated. B) little of it is discretionary. C) the majority of it is discretionary. D) it has historically always been less than the revenues generated, until the last 20 years.

Discretionary spending involves public expenditures that: A) have to be approved each year. B) are planned in the federal budget and do not need annual approval. C) are mandated and regulated by permanent laws. D) "entitle" people to benefits by virtue of age, income, or some other factor.

A public expenditure that has to be approved each year is called: A) discretionary spending. B) nondiscretionary spending. C) entitlement spending. D) earmarked spending.

Entitlement spending: A) is public expenditure that is mandated and regulated by permanent laws. B) rises and falls with the number of people who are eligible recipients. C) cannot be reduced without changing the laws outlining eligibility. D) All of these statements are true.

An example of entitlement spending is: A) national defense. B) Social Security. C) police protection. D) garbage collection.

When a government spends more than it earns in revenue,we say that it has a: A) budget surplus. B) budget deficit. C) budget crisis. D) federal debt.

When a government earns more than it spends in revenue,we say that it has a: A) budget surplus. B) budget deficit. C) federal debt. D) federal deficit.

Deficits and surpluses are commonly calculated as: A) debt per taxpayer. B) average debt per state. C) a percentage of national GDP. D) absolute values.

If the federal government brings in $1.1 trillion in tax revenues and spends $0.7 trillion,the government has a budget: A) deficit of $0.4 trillion. B) surplus of $0.4 trillion. C) deficit of $1.8 trillion. D) surplus of $1.1 trillion.

The federal debt is ____________ and the federal deficit is ______________. A) the cumulative total of what the federal government owes; the amount the federal government overspent in a given year B) the amount the federal government overspent in a year; the cumulative total of what the federal government owes C) the total of what is projected to be spent in a given year; the total of what is projected to be earned in revenues in a given year D) None of these statements is true.

If the federal government brings in $3 trillion in tax revenues and spends $4 trillion,the government has a budget: A) surplus of $1 trillion. B) deficit of $1 trillion. C) surplus of $7 trillion. D) deficit of $0.75 trillion.

It is difficult to balance the budget every year because: A) political battles often cause blatant deficit spending that could be avoided. B) while economic downturns are easy to predict, booms are not. C) it is hard to get agreement on how to spend discretionary funds. D) it is unlikely that revenues will exactly equal planned expenditures in any given year.

Instead of trying to balance the budget every year,it is easier to: A) balance the budget over the business cycle. B) allow deficit spending only in times of economic downturn. C) allow surpluses to build during times of economic booms. D) All of these statements are true.

During a time of an economic downturn,it is likely that projected tax revenues will be __________ than anticipated,and expenditures will be _______ than anticipated. A) higher; higher B) lower; lower C) lower; higher D) higher; lower