Chapter 7 - The Government Sector

1		Direct payments to individuals account for about ______ the federal budget.
			A)	one-tenth
			B)	one-quarter
			C)	one-half
			D)	three-quarters
2		Defense spending today is about _____ percent of GDP.
			A)	3
			B)	7
			C)	11
			D)	15
			E)	19
3		The federal income tax has three tax brackets. If you are in the highest tax bracket,
			A)	your average tax rate would be higher than your marginal tax rate.
			B)	your marginal tax rate would be higher than your average tax rate.
			C)	your average tax rate would be equal to your marginal tax rate.
			D)	there would be no way to tell whether your average tax rate were higher than, equal to, or lower than your marginal tax rate.
4		Which statement is true?
			A)	Most Americans pay more in payroll tax than in federal personal income tax.
			B)	The federal government gets close to three-quarters of its tax revenue from personal income taxes.
			C)	Most middle class people pay a higher percentage of the personal income in federal income tax than most rich people.
			D)	The poor have a very high tax burden from the federal personal income tax.
5		Which statement is false?
			A)	The corporate income tax is a direct tax.
			B)	The federal government gets most of its tax revenue from indirect taxes.
			C)	The Social Security tax is regressive.
			D)	The corporate income tax is the federal government's third largest revenue source.
6		The Social Security tax rate on someone with wages of $40,000 is _____ percent.
			A)	1.45
			B)	6.2
			C)	7.65
			D)	15
			E)	28
7		Which statement is true?
			A)	Most of the federal personal income tax revenue comes from middle class taxpayers.
			B)	The wealthiest five percent of Americans pay over half of all federal income taxes.
			C)	The top federal income tax bracket is the highest it has ever been since World War II.
			D)	The Social Security trust fund will run out of money within 20 years.
8		Compared to other leading industrial countries, the top marginal income tax rate in the United States is
			A)	the highest.
			B)	one of the highest.
			C)	about average.
			D)	among the lowest.
			E)	the lowest.
9		Which statement is false?
			A)	The federal and state excise taxes on cigarettes is regressive.
			B)	Americans pay less in gasoline taxes than the citizens of virtually every other industrial country.
			C)	State and local governments collect more tax revenue than the federal government.
			D)	Most local tax revenue comes from the property tax.
10		Which statement is true?
			A)	Americans are among the most heavily taxed people in the world.
			B)	We spend more on foreign aid than we do on anything else except defense and Social Security.
			C)	The economic role of the government includes the redistribution of income.
			D)	Federal spending is over one third of GDP.
11		The main public good provided by the federal government is
			A)	Social Security benefits.
			B)	Interstate toll roads.
			C)	Medicare and Medicaid.
			D)	Defense spending.
12		If Adam Smith were alive today, which of these statement would reflect his view of our government's economic role?
			A)	It is not doing nearly enough.
			B)	It is doing just about what it should be doing.
			C)	The government is doing way too much.
			D)	The government should be abolished entirely.
13		If you had a taxable income (all from wages) of $100,000, you would pay the federal government taxes of more than
			A)	0
			B)	$7,650
			C)	$15,000
			D)	$20,000
			E)	$40,000
14		The federal personal income tax is
			A)	direct and progressive
			B)	direct and regressive
			C)	indirect and progressive
			D)	indirect and regressive
15		Statement I: The payroll tax and the Social Security tax are not identical. Statement II: The wage base for the Social Security tax is raised each year to keep pace with inflation.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statement are true.
			D)	Both statement are false.