Economics (McConnell) AP Edition, 19th Edition

Chapter 16: Public Finance: Expenditures and Taxes

Quiz

1
The largest component of federal spending is:
A)national defense
B)health and education
C)income security
D)interest on the public debt
2
Refer to the following:

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The tax represented in the table above is:
A)regressive
B)proportional
C)progressive
D)optimal
3
Considering average state-level spending and revenue:
A)most spending is for police and fire protection
B)most spending is for health care and hospital administration
C)the largest source of revenue is taxes on income
D)the largest sources of revenue are sales and excise taxes
4
Refer to the following, in which solid arrows are real flows and broken arrows are monetary flows.

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Flow 3 might represent:
A)federal government bond purchases
B)wages paid to chemists at the Environmental Protection Agency
C)tax refunds from filing federal income taxes
D)federal disability payments
5
Suppose that product X is taxed at a constant rate of 10%. However, high-income individuals spend a greater proportion of their income on X than low-income individuals. The tax on product X is:
A)regressive
B)proportional
C)progressive
D)elastic
6
Sellers will bear the largest burden of an excise tax if:
A)both demand and supply are elastic
B)both demand and supply are inelastic
C)demand is elastic and supply is inelastic
D)demand is inelastic and supply is elastic
7
Which of the following federal taxes is most progressive?
A)Corporate income tax
B)Personal income tax
C)Social security tax
D)Medicare tax
8
By law, the payroll tax is levied equally on workers and their employees, each paying 7.65%. In the aggregate, the supply of labor is essentially perfectly inelastic. Combining these two observations, we can conclude that the true burden of the tax:
A)is equally shared by employers and workers
B)falls mostly on employers
C)falls fully on employers
D)falls fully on workers
9
If your income increases from $40,000 per year to $41,000 per year and your tax increases from $1000 to $1050, the marginal tax rate is:
A)$50
B)2.5%
C)5%
D)10%
10
The demand for gasoline is more elastic in the long run than the short run. All else equal, this implies that over time, an excise tax on gasoline will:
A)increasingly be passed onto consumers
B)increasingly be passed back onto sellers
C)have a shrinking efficiency loss
D)generate increasing tax revenues
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