Question 1

In 2018, the so-called Tax Freedom Day in the U.S. occurred in

Accepted Answer

A)  February.
B)  April.
C)  August.
D)  June.E) None of the above
F) C) and D)

Question 2

If the U.S. population in 2012 were grouped into quintiles by income,

Accepted Answer

A)  only the top income quintile paid more in taxes than the benefits they received from government spending.
B)  the top two income quintiles paid more in taxes than the benefits they received from government spending.
C)  the top three income quintiles paid more in taxes than the benefits they received from government spending.
D)  only the bottom income quintile paid less in taxes than the benefits they received from government spending.E) None of the above
F) B) and D)

Question 3

If you would have to pay $5,000 in taxes on $50,000 taxable income and $8,000 in taxes on $60,000 taxable income, then the marginal tax rate on the additional $10,000 of income is

Accepted Answer

A)  30 percent, and the average tax rate is about 13 percent at the $60,000 income level.
B)  15 percent, and the average tax rate is 30 percent at the $60,000 income level.
C)  30 percent, and the average tax rate is 20 percent at the $50,000 income level.
D)  30 percent, but average tax rates cannot be determined from the information given.E) All of the above
F) A) and C)

Question 4

When the government is doing "deficit spending," it will be increasing its total debt.

Accepted Answer

A) True 
 B)False

Question 5

A regressive tax means that if someone earning $25,000 pays $5,000, someone earning $50,000 must pay

Accepted Answer

A)  less than $5,000.
B)  less than $10,000.
C)  more than $10,000 but less than $15,000.
D)  more than $15,000 but less than $20,000.E) C) and D)
F) None of the above

Question 6

In the figure, S is the before-tax supply curve and Sₜ is the supply curve after an excise tax is imposed. The burden of this tax is borne

Accepted Answer

A)  equally by consumers and producers.
B)  more heavily by consumers.
C)  more heavily by producers.
D)  only by consumers.E) None of the above
F) All of the above

Question 7

Tax shifting refers to the fact that

Accepted Answer

A)  sellers will try to pass the burden of an excise tax on to the buyers.
B)  high-income groups tend to pay a higher average tax rate than low-income groups.
C)  as one earns a higher income, one shifts to a high tax bracket.
D)  a nation can sometimes shift from a progressive tax structure to one that is regressive.E) A) and B)
F) C) and D)

Question 8

With a proportional tax, higher-income persons will pay

Accepted Answer

A)  the same amount of taxes as lower-income persons.
B)  a bigger amount in taxes compared to lower-income persons.
C)  a higher proportion of their income in taxes than lower-income persons.
D)  a higher marginal tax rate as their incomes rise.E) B) and C)
F) B) and D)

Question 9

Which of the following taxes is least likely to be shifted?

Accepted Answer

A)  a state excise tax on the sellers of football tickets
B)  a personal income tax
C)  a general sales tax on retailers who sell foodstuffs and clothing
D)  a federal excise tax on the producers of whiskeyE) None of the above
F) All of the above

Question 10

Refer to the graph. The relationship between the average tax rate and the tax base in a proportional tax would be represented by

Accepted Answer

A)  curve A.
B)  curve B.
C)  curve C.
D)  none of the curves.E) None of the above
F) A) and B)

Question 11

The graph shows the supply curve for a product before tax ( S ₀ ) and after an excise tax is imposed ( S ₁) . The excise tax on the product is ultimately paid

Accepted Answer

A)  by buyers only.
B)  by sellers only.
C)  75 percent by buyers and 25 percent by sellers.
D)  25 percent by buyers and 75 percent by sellers.E) B) and D)
F) B) and C)

Question 12

The graph illustrates the market for a product on which an excise tax has been imposed by government. What is the amount of the tax per unit of product?

Accepted Answer

A)  $3
B)  $5
C)  $6
D)  $8E) B) and D)
F) All of the above

Question 13

If you would have to pay $5,000 in taxes on $25,000 taxable income and $7,000 in taxes on $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

Accepted Answer

A)  40 percent, and the average tax rate is about 23 percent at the $30,000 income level.
B)  50 percent, and the average tax rate is 40 percent at the $30,000 income level.
C)  40 percent, and the average tax rate is 25 percent at the $25,000 income level.
D)  30 percent, but average tax rates cannot be determined from the information given.E) B) and D)
F) B) and C)

Question 14

According to data compiled by the Bureau of Economic Analysis, in 2018, total government spending (comprising purchases and transfers) in the U.S. was about

Accepted Answer

A)  10 percent of the economy's total output.
B)  32 percent of the economy's total output.
C)  58 percent of the economy's total output.
D)  27 percent of the economy's total output.E) A) and D)
F) C) and D)

Question 15

Government assumes some responsibility for providing a minimum standard of living for all citizens to compensate for the increase in income inequality caused by government tax revenues and expenditures.

Accepted Answer

A) True 
 B)False

Question 16

Government borrowing

Accepted Answer

A)  is the primary means of financing public expenditures.
B)  provides a stimulus to government spending with no opportunity cost.
C)  may crowd out private sector investment.
D)  is prohibited by the U.S. constitution.E) A) and B)
F) All of the above

Question 17

An income tax is progressive if the

Accepted Answer

A)  absolute amount paid as taxes varies directly with income.
B)  percentage of income paid as taxes is the same regardless of the size of income.
C)  percentage of income paid as taxes increases as income increases.
D)  tax rate varies inversely with income.E) A) and B)
F) None of the above

Question 18

Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by producers.

Accepted Answer

A) True 
 B)False

Question 19

The ability-to-pay principle of taxation

Accepted Answer

A)  has been declared unconstitutional because it deprives individuals of property without due process of law.
B)  suggests that people should pay taxes in proportion to the benefits they derive from public goods and services.
C)  suggests that taxes should vary directly with people's income and wealth.
D)  suggests that taxes should vary inversely with people's income and wealth.E) B) and D)
F) A) and D)

Question 20

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the

Accepted Answer

A)  ability-to-pay principle of taxation.
B)  benefits-received principle of taxation.
C)  single-tax theory of taxation.
D)  pay-as-you-go theory of taxation.E) A) and C)
F) None of the above

Exam 20: Public Finance: Expenditures and Taxes

Tax shifting refers to the fact that

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The graph illustrates the market for a product on which an excise tax has been imposed by government. What is the amount of the tax per unit of product?

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According to data compiled by the Bureau of Economic Analysis, in 2018, total government spending (comprising purchases and transfers) in the U.S. was about

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An income tax is progressive if the

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If the U.S. population in 2012 were grouped into quintiles by income,

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Government assumes some responsibility for providing a minimum standard of living for all citizens to compensate for the increase in income inequality caused by government tax revenues and expenditures.

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The ability-to-pay principle of taxation

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If you would have to pay $5,000 in taxes on $25,000 taxable income and $7,000 in taxes on $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

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The graph shows the supply curve for a product before tax ( S ₀ ) and after an excise tax is imposed ( S ₁) . The excise tax on the product is ultimately paid

Correct AnswerverifiedShow Answer

In 2018, the so-called Tax Freedom Day in the U.S. occurred in

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Given demand, the more inelastic the supply of a product, the larger the portion of an excise tax that is borne by producers.

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Refer to the graph. The relationship between the average tax rate and the tax base in a proportional tax would be represented by

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Which of the following taxes is least likely to be shifted?

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Government borrowing

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In the figure, S is the before-tax supply curve and Sₜ is the supply curve after an excise tax is imposed. The burden of this tax is borne

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A regressive tax means that if someone earning $25,000 pays $5,000, someone earning $50,000 must pay

Correct AnswerverifiedShow Answer

When the government is doing "deficit spending," it will be increasing its total debt.

Correct AnswerverifiedShow Answer

If you would have to pay $5,000 in taxes on $50,000 taxable income and $8,000 in taxes on $60,000 taxable income, then the marginal tax rate on the additional $10,000 of income is

Correct AnswerverifiedShow Answer

With a proportional tax, higher-income persons will pay

Correct AnswerverifiedShow Answer

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the

Correct AnswerverifiedShow Answer

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