Quiz 549

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Quiz 549

1. Which of the following is true about the percent of total income all levels of government in the
U.S. take as taxes?
a. In 1902 the government collected about 7 percent of total income. In recent years, it collected
about 30 percent of total income.
b. In 1902 the government collected about 30 percent of total income. In recent years, it collected
about 7 percent of total income.
c. In 1902 the government collected about 7 percent of total income. In recent years, it collected
about 7 percent of total income.
d. In 1902 the government collected about 30 percent of total income. In recent years, it collected
about 30 percent of total income.

2. Over the past 100 years, as the U.S. economy's income has grown,
a. tax rates have decreased, while tax revenues have increased.
b. tax rates have increased, while tax revenues have decreased.
c. both tax rates and tax revenues have increased.
d. both tax rates and tax revenues have decreased.

3. Which of the following countries has the largest tax burden?

a. Mexico
b. Canada
c. United States
d. Denmark

4. Of the following countries, which country’s government collects the largest amount of tax
revenue as a percentage of that country’s total income?
a. Denmark
b. United States
c. Canada
d. Greece
5. Which of the following countries has lower total government tax revenue as a percentage of
GDP than the United States?
a. Canada
b. Germany
c. Sweden
d. Mexico

6. The U.S. tax burden is

a. about the same as most European countries.
b. higher than most European countries.
c. lower than most European countries.
d. higher than all European countries.

7. Of the following countries, which country’s government collects the least amount of tax
revenue as a percentage of that country’s total income?
a. Japan
b. United States
c. Mexico
d. Denmark

8. The U.S. federal government collects about

a. one-third of the taxes in our economy.
b. one-half of the taxes in our economy.
c. two-thirds of the taxes in our economy.
d. three-fourths of the taxes in our economy.

9. In 2011, the U.S. federal government collected approximately what percentage of the taxes in
the economy?
a. 10%
b. 40%
c. 50%
d. 67%

10. In 2011, the average American paid approximately how much to the federal government in
taxes?
a. $2,000
b. $2,500
c. $8,000
d. $10,500

11. In 2011, the U.S. federal government collected approximately how much in total tax
receipts?
a. $800 million
b. $2.5 billion
c. $5.2 billion
d. $8.7 billion
12. In 2011, which category represented the largest source of receipts for the U.S. federal
government?
a. Medicare
b. Social Security
c. corporate income taxes
d. individual income taxes

13. The largest source of income for the federal government is

a. individual income taxes.
b. corporate taxes.
c. tariffs.
d. “sin” taxes on alcohol and cigarettes.

14. The largest source of revenue for the federal government is the
a. individual income tax.
b. property tax.
c. sales tax.
d. corporate income tax.

15. In 2011, approximately what percentage of the U.S. federal government's receipts came from
individual income taxes?
a. 9%
b. 15%
c. 43%
d. 67%

16. The U.S. federal government collects taxes in a number of ways. Rank the following sources
of revenue from the largest to the smallest.
a. corporate income taxes, individual income taxes, social insurance taxes
b. social insurance taxes, individual income taxes, corporate income taxes
c. individual income taxes, social insurance taxes, corporate income taxes
d. individual income taxes, corporate income taxes, social insurance taxes

17. A person's tax liability refers to

a. the percentage of income that a person must pay in taxes.
b. the amount of tax a person owes to the government.
c. the amount of tax the government is required to refund to each person.
d. deductions that can be legally subtracted from a person's income each year.

18. The amount of income tax owed by a family is

a. not simply proportional to its total income.
b. unaffected by deductions.
c. total income minus tax credits.
d. a constant fraction of income.
19. A family's income tax liability is
a. a standard percentage of all income earned.
b. determined by wage income rather than dividend and interest income.
c. based on total income.
d. constant from year to year.

20. The federal taxes owed by a taxpayer depend

a. only upon the marginal tax rate on the taxpayer’s first $25,000 of income.
b. only upon the marginal tax rate on the taxpayer’s last $10,000 of income.
c. upon all the marginal tax rates up to the taxpayer’s overall level of income.
d. upon all the marginal tax rates, including those for income levels that exceed the taxpayer’s
overall level of income.

21. The marginal tax rate for an unmarried taxpayer in the highest taxable income category for
2013 is approximately
a. 80 percent.
b. 50 percent.
c. 40 percent.
d. 20 percent.

22. The two taxes that together provide the U.S. federal government with almost 80 percent of its
revenue are
a. individual income taxes and property taxes.
b. individual income taxes and corporate income taxes.
c. individual income taxes and payroll taxes.
d. sales taxes and payroll taxes.

23. Which of the following is an example of a payroll tax?

a. a tax on the wages that a firm pays its workers
b. a “sin” tax on distilled alcohol
c. a tax on corporate profits
d. the portion of federal income taxes earmarked to pay for national defense

24. In the United States, the payroll tax is also called a

a. dividend income tax.
b. social insurance tax.
c. value added tax.
d. capital gains tax.

25. Which type of tax is used to finance the Social Security program in the United States?
a. consumption tax
b. income tax
c. payroll tax
d. property tax
26. The revenue that the federal government collects from payroll taxes is earmarked to pay for
a. national defense and income security (welfare) programs
b. national defense and Medicare
c. Social Security and public schools
d. Social Security and Medicare

27. In 2011, social insurance taxes represented approximately what percentage of total receipts
for the federal government?
a. 5%
b. 12%
c. 36%
d. 44%

28. A payroll tax is a tax on

a. the wages that a firm pays its workers.
b. earned and unearned income.
c. specific goods like gasoline and cigarettes.
d. corporate profits.

29. The payroll tax differs from the individual income tax because the payroll tax is primarily
earmarked to pay for
a. employer-provided pensions.
b. Social Security and Medicare.
c. employer-provided health benefits.
d. job loss and training programs.

30. A tax on the wages that a firm pays its workers is called
a. an income tax.
b. an excise tax.
c. a consumption tax.
d. a payroll tax.

31. In 2011, what percentage of federal government receipts came from corporate income taxes?
a. 7%
b. 12%
c. 25%
d. 43%

32. Corporate profits distributed as dividends are

a. tax free.
b. taxed once.
c. taxed twice.
d. taxed three times.

33. The government taxes corporate income on the basis of

a. profit.
b. the amount the firm receives for the goods or services it sells.
c. the number of employees.
d. All of the above are correct.

34. Corporate profits are

a. included in payroll taxes.
b. exempt from taxes.
c. taxed twice, once as profit and once as dividends.
d. taxed to pay for Medicare.

35. Which of the following are taxed?

a. both corporate profits and dividends shareholders receive
b. corporate profits but not dividends shareholders receive
c. dividends shareholders receive but not corporate profits
d. neither corporate profits nor dividends shareholders receive

36. Taxes on specific goods such as gasoline and alcoholic beverages are called
a. excise taxes.
b. payroll taxes.
c. sales taxes.
d. social insurance taxes.

37. Which of the following is an example of an excise tax?

a. a tax on the wages that a firm pays its workers
b. a tax on tobacco
c. a tax on corporate profits
d. the portion of federal income taxes earmarked to pay for Social Security and Medicare

38. If New York City imposed a 50 cent tax on soft-drink beverages that contain sugar or high-
fructose corn syrup, it would
a. be an excise tax.
b. be an income tax.
c. reduce tax revenue.
d. cause the supply of corn to rise.

39. Taxes on specific goods such as cigarettes, gasoline, and alcoholic beverages are called
a. sales taxes.
b. excise taxes.
c. social insurance taxes.
d. consumption taxes.

40. An estate tax is an example of a(n)

a. individual income tax.
b. social insurance tax.
c. corporate income tax.
d. None of the above is correct.
41. In 2011, federal government receipts were approximately
a. $4,000 per person and federal government spending was approximately $8,000 per person,
resulting in a budget deficit.
b. $8,000 per person and federal government spending was approximately $12,000 per person,
resulting in a budget deficit.
c. $12,000 per person and federal government spending was approximately $8,000 per person,
resulting in a budget surplus.
d. $8,000 per person and federal government spending was approximately $4,000 per person,
resulting in a budget surplus.

42. In 2011, which category represented the largest category of spending for the U.S. federal
government?
a. health
b. income security
c. national defense
d. net interest

43. The largest budgetary expense for the federal government in 2011 was
a. interest on the national debt.
b. health.
c. highways.
d. income security.

44. The U.S. federal government spends its revenues in a number of ways. Rank the following
spending categories from largest to smallest.
a. income security, health, national defense, net interest
b. health, national defense, net interest, income security
c. net interest, health, income security, national defense
d. national defense, income security, net interest, health

45. The three largest categories of spending by the Federal government in order from first to
third would be
a. income security, net interest, and national defense
b. national defense, net interest, and income security
c. income security, health, and national defense
d. health, income security, and national defense

46. In 2011, approximately how much of federal government spending went to income security?
a. 10%
b. 25%
c. 33%
d. 50%

47. In 2011 the largest percentage of federal government spending was on

a. national defense. The largest source of federal revenues was from corporate income taxes.
b. health. The largest source of federal revenues was from individual income taxes.
c. income security. The largest source of federal revenues was from corporate income taxes.
d. income security. The largest source of federal revenues was from individual income taxes.

48. A transfer payment is a government payment

a. to companies that provide goods or services to government agencies.
b. designed to transfer funds from one government agency to another.
c. which transfers revenue from the federal government to state government.
d. not made in exchange for a good or service.

49. All of the following are transfer payments except

a. welfare payments.
b. unemployment compensation.
c. personal income taxes.
d. Social Security.

50. Which of the following is not true about government spending on national defense?
a. It is the third-largest spending category for the U.S. federal government.
b. It includes salaries of military personnel.
c. It fluctuates over time as the political climate changes.
d. It is not financed with tax revenue.

51. The government's health plan for the elderly is called

a. Medicaid.
b. Medicare.
c. Social Security.
d. food stamps.

52. Medicare is the

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.

53. Like spending on Social Security, the share of federal government spending on Medicare has
risen substantially over time. This is most likely a result of
a. a rising population of poor in the economy.
b. a rising population of the elderly in the economy.
c. an immigration policy that promotes an influx of migrant farm workers.
d. All of the above are important factors.

54. The share of federal government spending on healthcare has risen substantially over time.
This is most likely a result of
a. medical advances that provide new, better, but often more expensive medical treatments.
b. a rising population of the elderly in the economy.
c. health insurance reform that will include government subsidies for health insurance for many
low-to-moderate income families.
d. All of the above are important factors.

55. The federal healthcare spending program that specifically targets the poor is called
a. Medicaid.
b. Medicare.
c. National Institutes of Health.
d. Blue Cross/Blue Shield.

56. Medicaid is
a. the government's health plan for the elderly.
b. the government's health plan for the poor.
c. another name for Social Security.
d. Both a and c are correct.

57. Federal government spending on Social Security, Medicare, and Medicaid as a percentage of
GDP rose from
a. 10 percent in 1950 to more than 50 percent today.
b. 10 percent in 1950 to more than 20 percent today.
c. 1 percent in 1950 to more than 10 percent today.
d. 1 percent in 1950 to more than 20 percent today.

58. Which of the following programs is not included in the federal income security spending?
a. Social Security
b. welfare
c. education
d. unemployment compensation

59. As government debt increases,

a. Congress will reduce spending by an equal proportion.
b. the government must spend more revenue on interest payments.
c. a trade-off with government deficits is inevitable.
d. tax rates must rise to cover the deficit.

60. In 2011, the federal government spent 9 percent of the budget on net interest. Which of the
following statements regarding net interest is correct?
a. If the government pays down its debt, the amount of the budget needed for net interest
decreases.
b. If the government accrues more debt, the amount of the budget needed for net interest
increases.
c. In 2011, the federal government spent 325 billion dollars to cover interest payments on its
loans.
d. All of the above are correct.

61. The “other” category of federal spending consists of many less expensive functions of
government, including all of the following except
a. housing credit programs.
b. farm support programs.
c. funding for the National Institutes of Health.
d. the federal court system.

62. A budget deficit

a. occurs when government receipts are less than spending.
b. occurs when government spending is less than receipts.
c. occurs when government receipts are equal to spending.
d. is the accumulation of years of government overspending.

63. The U.S. federal government finances budget deficits by

a. selling stock, much like a corporation.
b. printing additional currency.
c. borrowing from the public.
d. raising property taxes.

64. Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal
spending is $10,824 per person. In 2020, the federal government will have
a. a budget surplus.
b. a budget deficit.
c. horizontal equity.
d. vertical equity.

65. Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal
spending is $10,824 per person. In 2020, the federal government will have
a. a budget surplus.
b. a budget deficit.
c. horizontal equity.
d. vertical equity.

66. Suppose that in 2020 the average citizen’s federal tax bill is $11,888 per person, and total
federal spending is $13,997 per person. In 2020, the federal government will have
a. a per person budget surplus of $2,109.
b. a per person budget deficit of $2,109.
c. horizontal equity.
d. vertical equity.

67. If government spending exceeds government receipts, the government has a

a. budget surplus. Other things the same, the surplus rises if taxes rise.
b. budget surplus. Other things the same the surplus rises if taxes fall.
c. budget deficit. Other things the same, the deficit rises if taxes rise.
d. budget deficit. Other things the same, the deficit rises if taxes fall.

68. If a government sells debt to help meet its expenditures, then the government has a
a. budget surplus. Other things the same, the surplus rises if government expenditures rise.
b. budget surplus. Other things the same, the surplus rises if government expenditures fall.
c. budget deficit. Other things the same, the deficit rises if government expenditures rise.
d. budget deficit. Other things the same the deficit rises if government expenditures fall

69. The government finances the budget deficit by

a. borrowing from the public.
b. borrowing solely from the Federal Reserve Bank.
c. printing currency in the amount of the budget deficit.
d. requiring that budget surpluses occur every other year to pay off the deficits.

70. From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World
War II. The primary reason for the record-large deficits was
a. the recession experienced during this time.
b. severe budget tightening by members of Congress.
c. the shift in political power from Republicans to Democrats.
d. All of the above are correct.

71. Which of the following contributes to the projected rise in government spending on Social
Security and Medicare as a percentage of GDP?
a. increasing life expectancies
b. increasing healthcare costs
c. increasing fertility rates
d. Both a and b are correct.

72. From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a
percentage of GDP has
a. decreased from about ten percent to less than one percent.
b. increased from less than one percent to about ten percent.
c. remained constant at less than one percent.
d. remained constant at about ten percent.

73. In 1950 there were approximately 7 working age people for every elderly person; however,
in 2050 there will be
a. only 2.5 working people for every elderly person.
b. only 5 working age people for every elderly person.
c. 10 working age people for every elderly person.
d. 14 working age people for every elderly person.

74. When government receipts exceed total government spending during a fiscal year, the
difference is
a. a budget surplus.
b. a budget deficit.
c. the national debt.
d. automatically refunded.
75. Suppose that in 2020 the average citizen’s federal tax bill is $14,888 per person, and total
federal spending is $13,997 per person. In 2020, the federal government will have
a. a per person budget surplus of $891.
b. a per person budget deficit of $891.
c. horizontal equity.
d. vertical equity.

76. Suppose that in 2020 the average citizen's federal tax bill is $11,987, and total federal
spending is $12,294 per person. In 2020, the federal government will have
a. a budget surplus.
b. a budget deficit.
c. horizontal equity.
d. vertical equity.

77. As the economy's income has grown, the government has

a. grown at about the same pace.
b. grown at a faster pace.
c. grown at a slower pace.
d. shrunk.

78. Most analysts expect the largest federal spending category to continue to grow in importance
for many years into the future. What category of spending is this?
a. national defense
b. education
c. income security
d. farm support programs

79. The most common explanation for Social Security payments accounting for a larger share of
federal government expenditures is
a. increases in life expectancy.
b. people becoming eligible for Social Security benefits at an earlier age.
c. increases in birth rates among teenagers and the poor.
d. falling payroll tax receipts.

80. Which of the following is an important reason for the projected increase in government
spending as a percentage of GDP over the next several decades?
a. the increase in life expectancy resulting from advances in healthcare
b. an increase in the average number of children per family.
c. the increase in the number of jobs lost each year to foreign countries as a result of outsourcing
d. the reduction in the number of high-cost medical procedures

81. The largest category of federal government spending is growing because

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. expenditures on school voucher programs have increased dramatically.
82. Which of the following statements is correct?
a. National defense and health are the two largest spending categories for the federal
government.
b. Welfare programs and highways are the two largest spending categories for state and local
governments.
c. Sales taxes and property taxes are the two most important revenue sources for state and local
governments.
d. Corporate income taxes are the largest source of revenue for the federal government.

83. Which of the following statements is not correct?

a. All states have state income taxes, but the percentages vary widely.
b. Sales taxes and property taxes are important revenue sources for state and local governments.
c. Medicare spending has increased because the percentage of the population that is elderly and
the cost of healthcare have both increased.
d. A budget deficit occurs when government spending exceeds government receipts.

84. Which of the following statements about state income taxes is correct?
a. Some states do not tax income at all.
b. If states tax income, they must follow federal guidelines for designing the tax structure.
c. States are not allowed to have a higher marginal tax rate than the federal marginal tax rate.
d. All of the above are correct.

85. The two types of taxes that are most important to state and local governments as sources of
revenue are
a. individual income taxes and corporate income taxes.
b. sales taxes and individual income taxes.
c. sales taxes and property taxes.
d. social insurance taxes and property taxes.

86. The tax that generates the most revenue for state and local government is the
a. corporate income tax.
b. individual income tax.
c. property tax.
d. sales tax.

87. State and local governments receive the largest portion of their tax revenues from
a. sales taxes and income taxes.
b. income taxes and property taxes.
c. payroll taxes and income taxes.
d. property taxes and sales taxes.

88. When a state levies a sales tax, the tax

a. is paid only by the state's residents.
b. occasionally excludes items that are deemed to be necessities.
c. is commonly levied on labor services.
d. applies to wholesale purchases but not retail purchases.
89. For state and local governments, in 2011, sales taxes and property taxes made up
approximately
a. 10 percent of all receipts.
b. 22 percent of all receipts.
c. 33 percent of all receipts.
d. 43 percent of all receipts.

90. State and local governments

a. are funded entirely by their own tax base.
b. receive the majority of their tax revenues from corporate income taxes.
c. are generally not responsible for collecting sales taxes.
d. receive some of their funds from the federal government.

91. State and local governments

a. use a mix of taxes and fees to generate revenue.
b. are required by federal mandate to levy income taxes.
c. are required to tax property at a standard rate set by the federal government.
d. must tax wages more heavily than interest and dividend income.

92. State and local governments generate revenue from all of the following sources except
a. sales taxes.
b. the federal government.
c. corporate income taxes.
d. customs duties.

93. A tax levied on the total amount spent in retail stores is called
a. a sales tax.
b. an excise tax.
c. a retail tax.
d. an income tax.

94. The largest budgetary expense for a typical state or local government is
a. education.
b. Medicare.
c. highways.
d. income security.

95. The largest budgetary expense for a typical state or local government is
a. public order and safety.
b. welfare.
c. highways.
d. education.

96. The single largest expenditure by state and local governments is on

a. highways.
b. police.
c. public welfare.
d. education.

97. The typical state spends the most on

a. education.
b. Medicare and Social Security.
c. highways.
d. defense.

98. Public schools, which educate most students through high school, are paid for primarily by
a. state governments.
b. local governments.
c. the federal government.
d. taxpayers directly.

99. For state and local governments, in 2011, education accounted for approximately what
percentage of spending?
a. 25 percent
b. 34 percent
c. 50 percent
d. 75 percent

100. Rank the following state and local government expenditure categories from largest to
smallest.
a. education, health, highways
b. education, highways, income security
c. highways, education, public order and safety
d. public order and safety, highways, health

101. Rank the following state and local government expenditure categories from smallest to
largest.
a. education, health, highways
b. education, highways, health
c. highways, health, education
d. health, education, highways.

102. Suppose Ron is willing to pay $200 to see a professional basketball game and Felix is
willing to pay $150.Assume the normal price of a ticket is $125.The local government decides to
impose a $35/ticket surcharge to raise revenue, causing the ticket price to rise to $160.The
resulting deadweight loss is:
a. $75
b. $25
c. $35
d. $150
103. In 2015, the federal government collected $3.25 trillion dollars in tax revenues and spent
$3.69 trillion dollars. This means:
a. The federal government had a budget deficit of $0.44 billion in 2015
b. The federal government had a budget surplus of $0.44 billion in 2015
c. The national debt is equal to $0.44 billion
d. Taxes should be increased

104. In general, the largest sources of revenue for state and local governments come from:
a. Sales taxes and property taxes
b. Sales taxes and corporate taxes
c. Property taxes and individual income taxes
d. Individual income taxes and sales taxes

105. Karole’s income rises from $50,000 to $75,000 and her income tax increases from $8,000 to
$9,500.Her average tax rate is 6%.
a. True
b. False