Multiple Choice Quiz


1	In general, the people who earned the highest proportion of their income from capital are
		A)	people at the lower end of the income scale.
		B)	people who are young.
		C)	people at the upper end of the income scale.
		D)	people in the middle of the income scale.


2	Which of the following types of income are referred to as "capital income"
		A)	wages.
		B)	salaries.
		C)	tips.
		D)	dividends.


3	For most people their earned income is greater than their capital income until their overall income reaches ________ when the opposite is true
		A)	$50,000
		B)	$100,000
		C)	$750,000
		D)	$5,000,000


4	A Lorenz curve maps
		A)	the income distribution for the races.
		B)	the wealth distribution for men and women.
		C)	the cumulative percentage of income against the cumulative percentage of households.
		D)	the degree to which capital income can grow over time.


5	If the Lorenz curve is ________ then the Gini coefficient is _________ meaning there is absolute equality in income.
		A)	a backwards L; 1
		B)	a line; 0
		C)	highly bowed; .5
		D)	a line; 1


6	Economists who favor "neutrality" generally favor
		A)	taxing capital income more heavily than earned income.
		B)	taxing capital income but less heavily than earned income.
		C)	taxing capital income exactly the same as earned income.
		D)	not taxing capital income at all.


7	The current tax system taxes capital gains
		A)	at death.
		B)	on accrual.
		C)	at realization.
		D)	in absentia.


8	At death the capital gains associated with assets are
		A)	taxed at a higher rate than if it were sold prior to death.
		B)	forgiven and not taxed (through the estate tax may apply).
		C)	taxed but at a lower rate than if it were sold prior to death.
		D)	taxed at the same rate as it would have been if it were sold prior to death.


9	In order to be neutral capital gains income should
		A)	be taxed on accrual rather than realization.
		B)	be taxed at the same rate as other income.
		C)	not treat as income purely inflationary gains.
		D)	all of these


10	The current system attempts to be neutral by
		A)	not taxing capital income.
		B)	taxing on realization, taxing all gains (including those from inflation) but at a lower rate.
		C)	taxing on accrual, taxing only real gains and at the same rate as other income.
		D)	taxing on realization, taxing only real gains but at a higher rate.

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