Question 1

Which of the following statements is false ?

Accepted Answer

A)  The largest source of state and local governments tax revenue is sales and excise taxes.
B)  The largest source of federal government tax revenue is individual income taxes.
C)  A sales tax on food is a regressive tax.
D)  A proportional tax is equal to a fixed dollar amount.E) A) and B)
F) C) and D)

Question 2

Which of the following represents the basic principle of public choice theory?

Accepted Answer

A)  Politicians act consistently in the public's interest.
B)  Politicians follow their own self-interest and seek to maximize their reelection chances, rather than promote the best interests of society.
C)  Politicians act in the public interest once they are elected, but follow their own self-interest and seek to maximize their reelection chances during a political campaign.
D)  None of the above answers are correct.E) A) and C)
F) A) and B)

Question 3

Since the 1950s, total expenditures in the United States nearly tripled to about 60 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 4

Cost-benefit principles can be applied to the decision of:

Accepted Answer

A)  profit-maximizing firms.
B)  majority-rule voting.
C)  which project receives the most votes.
D)  rational ignorance.
E)  all of these.F) All of the above
G) A) and B)

Question 5

Currently, total private sector expenditures in the United States:

Accepted Answer

A)  remained close to one third of GDP.
B)  fell by half to 50 percent of GDP.
C)  fell by half to 65 percent of GDP.
D)  remained close to 60 percent of GDP.E) B) and D)
F) C) and D)

Question 6

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  Benefits-received.
B)  Inexpensive-to-collect.
C)  Ability-to-pay.
D)  Fairness of contribution.E) B) and C)
F) All of the above

Question 7

The benefits-received principle of taxation is most evident in:

Accepted Answer

A)  progressive tax rates.
B)  excise taxes on gasoline.
C)  the personal income tax.
D)  the corporate income tax.E) All of the above
F) B) and D)

Question 8

Since World War II, most of the growth in U.S. government outlays is attributable to rapidly growing federal government transfer programs.

Accepted Answer

A) True 
 B)False

Question 9

A tax system in which the tax rate on everyone's first $10,000 of income is 10 percent, the tax rate on everyone's second $10,000 of income is 15 percent, and the tax rate on all income over $20,000 is 25 percent is a(n) :

Accepted Answer

A)  proportional tax.
B)  equitable tax.
C)  head tax.
D)  unit tax.
E)  progressive tax.F) B) and C)
G) A) and C)

Question 10

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

Accepted Answer

A)  A true flax tax.
B)  A flat sales tax on consumption purchases.
C)  A progressive tax on income.
D)  A fixed federal tax of $5,000 that everyone pays regardless of income status.E) A) and B)
F) None of the above

Question 11

Exhibit 12-4 Marginal tax rate lines  In Exhibit 12-4, line A represents a(n) :

Accepted Answer

A)  regressive tax.
B)  progressive tax.
C)  proportional tax.
D)  ability-to-pay tax.E) C) and D)
F) All of the above

Question 12

Describe the two basic philosophies of taxation fairness.

Accepted Answer

The two basic philosophies of taxation f...

Question 13

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  Fairness of contribution.
B)  Ability-to-pay.
C)  Benefits-received.
D)  Inexperience-to-collect.E) A) and D)
F) A) and C)

Question 14

A problem with the income security program category for federal government outlays is that it excludes unemployment compensation.

Accepted Answer

A) True 
 B)False

Question 15

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n) :

Accepted Answer

A)  excise tax.
B)  flat tax.
C)  proportional tax.
D)  progressive tax.
E)  regressive tax.F) None of the above
G) C) and E)

Question 16

State and local sales taxes are typically progressive.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following answers best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A)  Property tax.
B)  Progressive income tax.
C)  Excise tax on gasoline.
D)  Excise tax on cigarettes.E) A) and B)
F) A) and C)

Question 18

Currently, total government expenditures in the United States:

Accepted Answer

A)  are close to 40 percent of GDP.
B)  fell by half, to 10 percent of GDP.
C)  nearly doubled to one half of GDP.
D)  nearly tripled to about 60 percent of GDP.E) A) and B)
F) B) and C)

Question 19

When the tax rate is constant when a person's income rises, the tax is a:

Accepted Answer

A)  regressive tax.
B)  poll tax.
C)  progressive tax.
D)  constant tax.
E)  proportional tax.F) C) and E)
G) None of the above

Question 20

Which of the following countries devote the smallest percentage of its GDP to taxes?

Accepted Answer

A)  The United Kingdom.
B)  Sweden.
C)  Germany.
D)  The United States.E) A) and B)
F) A) and C)

Exam 12: The Public Sector

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n) :

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Which of the following countries devote the smallest percentage of its GDP to taxes?

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"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

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Currently, total government expenditures in the United States:

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Cost-benefit principles can be applied to the decision of:

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Which of the following answers best reflects the ability-to-pay philosophy of taxation?

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Describe the two basic philosophies of taxation fairness.

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State and local sales taxes are typically progressive.

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"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

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Which of the following represents the basic principle of public choice theory?

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Exhibit 12-4 Marginal tax rate lines In Exhibit 12-4, line A represents a(n) :

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When the tax rate is constant when a person's income rises, the tax is a:

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Since World War II, most of the growth in U.S. government outlays is attributable to rapidly growing federal government transfer programs.

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A tax system in which the tax rate on everyone's first $10,000 of income is 10 percent, the tax rate on everyone's second $10,000 of income is 15 percent, and the tax rate on all income over $20,000 is 25 percent is a(n) :

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The benefits-received principle of taxation is most evident in:

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A problem with the income security program category for federal government outlays is that it excludes unemployment compensation.

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Since the 1950s, total expenditures in the United States nearly tripled to about 60 percent of GDP.

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Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

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Currently, total private sector expenditures in the United States:

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Which of the following statements is false ?

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The two basic philosophies of taxation f...
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