Question 1

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government hiring of teachers, soldiers, police, and judges would be illustrated by arrows

Accepted Answer

A)  5 and 6.
B)  7 and 8.
C)  9 and 10.
D)  10 and 11.E) B) and D)
F) C) and D)

Question 2

The marginal tax rate is the

Accepted Answer

A)  sum of all individual tax rates.
B)  tax rate paid by those with the lowest family incomes.
C)  total amount of taxes paid as a percentage of total income.
D)  increase in taxes as a percentage of an increase in income.E) B) and C)
F) All of the above

Question 3

The graph represents the market for a product where D ₁ and S ₁ show the initial supply and demand curves, and supply shifts to S ₂ due to a sales tax. The deadweight loss due to the tax is represented by area

Accepted Answer

A)  EIG.
B)  EFI.
C)  BCEF.
D)  ABFG.E) A) and C)
F) None of the above

Question 4

Refer to the graph. A 3-percent general sales tax would have a structure that is illustrated by

Accepted Answer

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

Question 5

A progressive tax means that if someone earning $40,000 pays $10,000, someone earning $80,000 must pay

Accepted Answer

A)  less than $10,000.
B)  more than $20,000.
C)  more than $10,000 but less than $30,000.
D)  more than $30,000 but less than $40,000.E) B) and D)
F) None of the above

Question 6

From 1960 to 2018, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Accepted Answer

A) True 
 B)False

Question 7

The opportunity cost of borrowing funds to finance government deficits is

Accepted Answer

A)  greatest when the economy is doing well.
B)  greatest when the economy is in a recession.
C)  zero.
D)  the same regardless of the state of the economy.E) B) and C)
F) A) and D)

Question 8

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Accepted Answer

A) True 
 B)False

Question 9

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s) a proportional tax?

Accepted Answer

A)  II and IV
B)  III and V
C)  IV only
D)  I onlyE) B) and D)
F) B) and C)

Question 10

When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

Accepted Answer

A)  all cultural and educational services and events need to be taxed.
B)  taxes are the major source of funding for the goods and services provided by government.
C)  tax rates should be higher on higher-income well-educated households.
D)  we should collect taxes mostly from those who benefit from the government-provided goods and services.E) B) and D)
F) All of the above

Question 11

"Transfer payments" may be thought of as

Accepted Answer

A)  wages and salaries.
B)  purchases of services.
C)  taxes in reverse.
D)  expenditures on products.E) A) and D)
F) A) and B)

Question 12

The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the incidence of the tax will be

Accepted Answer

A)  $3 on the buyers and $0 on the sellers.
B)  $0 on the buyers and $3 on the sellers.
C)  $2 on the buyers and $1 on the sellers.
D)  $1 on the buyers and $2 on the sellers.E) A) and B)
F) B) and D)

Question 13

The largest source of tax revenue for state governments is the property tax.

Accepted Answer

A) True 
 B)False

Question 14

The major expenditure of local governments is for education.

Accepted Answer

A) True 
 B)False

Question 15

The supply curve for a product has infinite elasticity. An excise tax is levied on the product. The likely effect will be to

Accepted Answer

A)  reduce the amount the producer receives for each unit sold by the amount of the tax.
B)  increase the price the consumer pays per unit by the amount of the tax.
C)  increase the price to consumers by an amount less than the tax.
D)  increase the amount received by producers by less than the tax.E) B) and D)
F) B) and C)

Question 16

In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about ____, whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

Accepted Answer

A)  5.5 percent; 50 percent
B)  1.9 percent; 33.3 percent
C)  8.4 percent; 27.5 percent
D)  1.5 percent; 26.7 percentE) B) and C)
F) A) and B)

Question 17

Differentiate between government purchases of goods and services and government transfer payments.

Accepted Answer

Government purchases are exhaustive. The...

Question 18

The table represents a personal income tax schedule. As income increases, the marginal tax rate

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  has no definite pattern.E) All of the above
F) None of the above

Question 19

The largest source of local government's revenue is the sales tax.

Accepted Answer

A) True 
 B)False

Question 20

Public finance is the subdiscipline of economics that studies the various ways in which

Accepted Answer

A)  the general public acquire financing for their purchases.
B)  governments raise and expend money.
C)  firms in the financial sector provide services to households and firms.
D)  governments may regulate and promote the stability of the financial sector.E) A) and D)
F) All of the above

Exam 20: Public Finance: Expenditures and Taxes

Differentiate between government purchases of goods and services and government transfer payments.

Correct AnswerverifiedGovernment purchases are exhaustive. The...View AnswerShow Answer

The major expenditure of local governments is for education.

Correct AnswerverifiedShow Answer

When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

Correct AnswerverifiedShow Answer

The largest source of local government's revenue is the sales tax.

Correct AnswerverifiedShow Answer

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Correct AnswerverifiedShow Answer

The marginal tax rate is the

Correct AnswerverifiedShow Answer

"Transfer payments" may be thought of as

Correct AnswerverifiedShow Answer

The table represents a personal income tax schedule. As income increases, the marginal tax rate

Correct AnswerverifiedShow Answer

The largest source of tax revenue for state governments is the property tax.

Correct AnswerverifiedShow Answer

The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the incidence of the tax will be

Correct AnswerverifiedShow Answer

A progressive tax means that if someone earning $40,000 pays $10,000, someone earning $80,000 must pay

Correct AnswerverifiedShow Answer

From 1960 to 2018, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Correct AnswerverifiedShow Answer

Refer to the graph. A 3-percent general sales tax would have a structure that is illustrated by

Correct AnswerverifiedShow Answer

Public finance is the subdiscipline of economics that studies the various ways in which

Correct AnswerverifiedShow Answer

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s) a proportional tax?

Correct AnswerverifiedShow Answer

The opportunity cost of borrowing funds to finance government deficits is

Correct AnswerverifiedShow Answer

The graph represents the market for a product where D ₁ and S ₁ show the initial supply and demand curves, and supply shifts to S ₂ due to a sales tax. The deadweight loss due to the tax is represented by area

Correct AnswerverifiedShow Answer

The supply curve for a product has infinite elasticity. An excise tax is levied on the product. The likely effect will be to

Correct AnswerverifiedShow Answer

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government hiring of teachers, soldiers, police, and judges would be illustrated by arrows

Correct AnswerverifiedShow Answer

In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about ____, whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

Correct AnswerverifiedShow Answer

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Government purchases are exhaustive. The...
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In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes) of about , whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .

Correct Answer
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