Macroeconomics PREPARE Chapter 6 Dynamic Study Modules

Cash distributions made by government to individuals when no good or service is received in exchange are known as __________. a)transfer payments b)poverty payments c)taxes

A) transfer Payments

Which of the following does a tax rate refer to? a)An income range b)The portion of income exempt from taxes c)A percentage of income

C) percentage of income

which of the following statements is correct about the U.S. tax system? a)Payroll taxes include Social Security and Medicare taxes. b)The sales tax is the largest source of funds for public schools. c)Most taxes are intended to discourage behavior instead of raise money.

a) Payroll taxes include Social Security and Medicare taxes.

Many persons opposed to wealth redistribution maintain that taxing the "winners" of the economic game provides incentive to __________. a)avoid risk-taking and more wealth creation b)make even more money to replace the money taxed away c)save more money instead of spending it

a) avoid risk-taking and more wealth creation

Changes in tax rates impact the economy through: a)both aggregate demand and aggregate supply. b)aggregate demand. c)aggregate supply

a) both aggregate demand and aggregate supply

The federal income tax in the United States is a __________. a)progressive tax b)consumption tax c)regressive tax

a) progressive tax

Tax incidence refers to __________ a)the actual division of the tax between buyers and sellers in a market b)excess burden of the tax c)deadweight loss from the tax

a) the actual division of the tax between buyers and sellers in a market

which of the following is the average tax rate? a)The total tax paid divided by total income b)The tax rate paid by the average taxpayer c)The fraction of each additional dollar of income that must be paid in taxes

a) the total tax paid divided by total income

Which of the following statements about U.S. government revenues is correct? a)Federal revenues have ranged between 17 and 19 percent of gross domestic product for a long time. b)Federal revenues exceeded federal expenditures during 2012. c)Federal revenues are normally within 10 percent of federal expenditures.

a)Federal revenues have ranged between 17 and 19 percent of gross domestic product for a long time.

Which of the following is the marginal tax rate? a)The total tax paid divided by total income. b)The fraction of each additional dollar of income that must be paid in taxes. c)The tax rate paid by the average taxpayer

b) The fraction of each additional dollar of income that must be paid in taxes.

Interest payments made on a bond are known as: a)dividends b)coupon payments c)retained earnings

b) coupon payments

A consumption tax is likely to benefit: a)firms. b)higher income individuals. c)lower income individuals.

b) higher income individuals

which of these statements about the effect of taxes and transfer on income distribution is correct? a)The distribution of income worsens when we take transfer payments into account. b)Income after taxes is more equally distributed than income before taxes. c)The Social Security system has failed to reduce poverty among people older than sixty-five.

b) income after taxes is more equally distributed than income before taxes

Which of the following tax rates is a better indicator of people's willingness to work, save, and invest? a)Both the average tax rate and the marginal tax rate b)The marginal tax rate c)The average tax rate

b) marginal tax rate

A tax imposed by a government on imported products is called a: a)voluntary export restraint b)tariff c)quota

b) tarfii

if the last dollar of income earned by individuals with the highest incomes is taxed at a rate that is less than the average tax rate, which of the following is correct? a)The marginal tax rate is equal to the average tax rate. b)The income tax is a regressive income tax. c)The income tax is a progressive income tax.

b)The income tax is a regressive income tax.

How is the U.S. federal income tax structured? a)The rate at which income is taxed decreases as income increases. b)All taxpayers pay the same tax rate. c)The rate at which income is taxed increases as income increases.

c) The rate at which income is taxed increases as income increases.

How would a consumption tax affect the loanable funds market? a)The supply of loanable funds would decrease. b)The demand for loanable funds would increase. c)The supply of loanable funds would increase.

c) The supply of loanable funds would increase

Payments made by a corporation to the shareholders are known as: a)coupon payments b)retained earnings c)dividends

c) dividends

When the economy is at full employment, a cut in household taxes will __________. a)decrease consumption b)have no impact on consumption c)increase consumption

c) increase consumption

It is not clear if a consumption tax will lead to significantly more saving because: a)households will not understand there is an incentive to save. b)businesses will not demand additional investment funds so rates will be low. c)it is not clear whether the typical household will adjust consumption in favor of more savings.

c) it is not clear whether the typical household will adjust consumption in favor of more savings.

Tax incidence is affected by the: a)Lorenz curve predictions about taxation b)Gini coefficient and poverty levels c)price elasticity of demand and supply for a product

c) price elasticity of demand and supply for a product

When the elasticity of demand for a product is __________ the elasticity of supply, consumers pay __________ of the tax on the product. a)smaller than, very little b)larger than, the majority c)smaller than, the majority

c) smaller than, the majority

Which of the following groups pays the most in federal taxes? a)The third highest 20% of income earners b)The lowest 20% of income earners c)The top 20% of income earners

c) the top 20% of income earners

Based on the information in the table, how much in federal income taxes will someone pay who earns $150,000? a)$42,000 b)$14,653 c)$36,111

c)Based on the information in the table, someone who earns $150,000 will owe $36,111 in federal income taxes. The U.S. tax system is a progressive system so you pay higher tax rates on income as your income increases. To compute the tax owed, you compute the taxes owed on each range of income and then sum those amounts. So, the first $7,825 is taxed at 10% so $7,825 x .10 = $782.50. The next $24,025 of income is in the 15% bracket so $24,025 x .15 = $3,603.75. The next $45,250 of income is in the 25% bracket so $45,250 x .25 = $11,312.50. The last $72,900 of income is in the 28% bracket so the tax on it is $72,900 x .28 = $20,412. The total tax bill is the sum of the amounts due on each income bracket so the total tax = $782.50 + 3,603.75 + 11,312.50 + $20,412.00 = $36,110.75.