Question 1

Rank the following state and local government expenditure categories from largest to smallest.

Accepted Answer

A)   Education,public welfare,highways
B)   Education,highways,public welfare
C)   Highways,education,public welfare
D)   Public welfare,education,highwaysE) A) and B)
F) A) and C)

Question 2

Table 12-17
 
-Refer to Table 12-17.A progressive tax is illustrated by tax

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) B) and D)
F) A) and D)

Question 3

Which of the following countries has the largest tax burden?

Accepted Answer

A)   Brazil
B)   Germany
C)   United States
D)   SwedenE) All of the above
F) A) and B)

Question 4

Medicare is the

Accepted Answer

A)   government's health plan for the elderly.
B)   government's health plan for the poor.
C)   another name for Social Security.
D)   Both a and c are correct.E) B) and D)
F) A) and D)

Question 5

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000.What is the average tax rate when income is $60,000?

Accepted Answer

A)   21.7 percent
B)   25.0 percent
C)   46.7 percent
D)   50.0 percentE) A) and D)
F) A) and C)

Question 6

In the United States,the marginal tax rate on individual federal income tax

Accepted Answer

A)   decreases as income increases.
B)   increases as income increases.
C)   is constant at all income levels.
D)   applies only to payroll taxes.E) A) and D)
F) All of the above

Question 7

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 8

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 B)
F) B) and D)

Question 9

Table 12-7
 
-Refer to Table 12-7.What is the average tax rate for a person who makes $120,000?

Accepted Answer

A)   25%
B)   35%
C)   45%
D)   60%E) B) and D)
F) None of the above

Question 10

Table 12-16
United States Income Tax Rates for a Single Individual,2002 and 2003.
 
-Refer to Table 12-16.What type of tax structure does the United States have in 2003 for single individuals?

Accepted Answer

A)   A proportional tax structure
B)   A regressive tax structure
C)   A progressive tax structure
D)   A lump-sum tax structureE) A) and D)
F) None of the above

Question 11

The U.S.tax code gives preferential treatment to investors in municipal bonds.This is an example of

Accepted Answer

A)   a tax loophole.
B)   tax evasion.
C)   an administrative burden.
D)   tax enforcement.E) A) and C)
F) None of the above

Question 12

State and local governments receive the largest portion of their tax revenues from

Accepted Answer

A)   sales taxes and income taxes.
B)   income taxes and property taxes.
C)   payroll taxes and income taxes.
D)   property taxes and sales taxes.E) None of the above
F) All of the above

Question 13

Taxes can create deadweight losses because they

Accepted Answer

A)   allow the government to fund private goods.
B)   create administrative burdens as people comply with tax laws.
C)   allow the government to fund public goods.
D)   Both b and c are correct.E) B) and C)
F) C) and D)

Question 14

The revenue that the federal government collects from payroll taxes is earmarked to pay for

Accepted Answer

A)   National defense and income security (welfare) programs
B)   National defense and Medicare
C)   Social Security and public schools
D)   Social Security and MedicareE) A) and D)
F) B) and C)

Question 15

Table 12-2
Consider the tax rates shown in the table below.
 
-Refer to Table 12-2.If Max has taxable income of $227,000,his marginal tax rate is

Accepted Answer

A)   26%.
B)   31%.
C)   34%.
D)   36%.E) A) and D)
F) A) and B)

Question 16

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Accepted Answer

A) True 
 B)False

Question 17

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) None of the above
F) C) and D)

Question 18

Vertical equity and horizontal equity are associated with

Accepted Answer

A)   the benefits principle of taxation.
B)   the ability-to-pay principle of taxation.
C)   taxes that have no deadweight losses.
D)   falling marginal tax rates.E) B) and C)
F) B) and D)

Question 19

For state and local governments,sales taxes and property taxes make up approximately

Accepted Answer

A)   17 percent of all receipts.
B)   20 percent of all receipts.
C)   36 percent of all receipts.
D)   57 percent of all receipts.E) C) and D)
F) A) and C)

Question 20

If a tax takes a constant fraction of income as income rises,it is

Accepted Answer

A)   regressive.
B)   proportional.
C)   progressive.
D)   based on the ability-to-pay principle.E) None of the above
F) All of the above

Exam 12: The Design of the Tax System

The U.S.tax code gives preferential treatment to investors in municipal bonds.This is an example of

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The revenue that the federal government collects from payroll taxes is earmarked to pay for

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The largest category of federal government spending is growing because

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Taxes can create deadweight losses because they

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Vertical equity and horizontal equity are associated with

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If a tax takes a constant fraction of income as income rises,it is

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Table 12-17 -Refer to Table 12-17.A progressive tax is illustrated by tax

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Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Max has taxable income of $227,000,his marginal tax rate is

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State and local governments receive the largest portion of their tax revenues from

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Table 12-7 -Refer to Table 12-7.What is the average tax rate for a person who makes $120,000?

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In the United States,the marginal tax rate on individual federal income tax

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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.

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Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000.What is the average tax rate when income is $60,000?

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When interest income from savings is taxed,

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Medicare is the

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The equity of a tax system concerns whether the tax burden is distributed equally among the population.

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Rank the following state and local government expenditure categories from largest to smallest.

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Table 12-16 United States Income Tax Rates for a Single Individual,2002 and 2003. -Refer to Table 12-16.What type of tax structure does the United States have in 2003 for single individuals?

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Which of the following countries has the largest tax burden?

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For state and local governments,sales taxes and property taxes make up approximately

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The three most important expenditure pro...
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