Wk 3 - Practice: Public Finance [due Day 5]

A budget ____ occurs when a government receives more revenue than it spends in any given fiscal year.

surplus

The average tax rate: determines whether the tax is imposed on individuals or businesses. determines whether the tax imposed is regressive, progressive, or proportional. determines whether or not the tax is binding. identifies which members of society benefit from the tax and which members do not.

determines whether the tax imposed is regressive, progressive, or proportional.

A regressive tax is one in which the average tax rate ____ (increases/decreases) as income increases.

decreases

A budget ____ occurs when the government expenditures exceed government revenues in any given fiscal year.

deficit

Suppose that tax revenue is $400 billion and that government spending is $450 billion. The budget is:

deficit

The national debt is the accumulation of ____ and ____ over time.

deficit surplus

To provide goods and services, the government needs a source of ____ .

income

Interest on the national debt is a major expenditure for the federal government which indicates that the federal government:

spends more than it receives in revenue forcing it to borrow to finance its deficits.

Suppose that the government runs a budget deficit of $75 billion in year 1. Assume that the year began with a national debt of $0. In year 2 the government ran a budget surplus of $50 billion. In year 3, the government spent $200 billion more than it collected in taxes. The debt is ____ $ billion.

225 or -225

Most economists prefer measuring the deficit relative to _______ because it places the deficit in better context and allows a comparison across time or across governments from different countries.

GDP

At the federal government level, which of the following are the main sources of income? Individual and corporate income taxes Tariffs Excise taxes Payroll taxes

Individual and corporate income taxes Excise taxes Payroll taxes

State governments spend money on all of the following except:

National Defense

The federal government finances its deficits via

borrowings

The federal government finances its deficits via ______.

borrowings

Most economists prefer measuring the deficit relative to GDP because:

it allows a comparison across time. it allows a comparison across countries.

The main source of income for ____ governments is property taxes.

local

A(n) ____ tax is one in which the average tax rate increases as income increases.

progressive

Daniel has an annual taxable income of $25,000 and pays $2,500 in income taxes. Julia has a taxable income of $45,000 and pays $5,000 in income taxes. This tax is:

proportional

The main source of income for local governments is ____ taxes.

property

The government budget may be in ____ , in_____ ,or in ____.

Blank 1: balance Blank 2: deficit Blank 3: surplus

A(n) ____ tax rate equals the amount of tax paid divided by income and multiplied by 100.

average

The type of tax (progressive, regressive, or proportional) is determined by using the ____ tax rate.

average

The national _____ is the accumulation of deficits and surpluses over time.

debt

An average tax rate equals the amount of tax paid ____ by income and multiplied by 100

divided

Which of the following is not an area of most federal spending?

education

A budget is balanced when the government's revenue ____ what the government spends in any given fiscal year.

equals

Medicare taxes are an example of a:

proportional tax.

A progressive tax is one in which the average tax rate ____ (one word) as income increases.

increases

When the government needs to borrow money, it _____ the demand for loanable funds in the economy.

increases

More often than not, the federal government spends ____ than it receives in revenue forcing it to borrow to finance its deficits.

more

Sales taxes are ____ in that the tax rate falls as the amount taxed rises.

regressive

If the demand for loanable funds increases, interest rates _____ which can have big effects on consumers.

rise

At the state government level, the main sources of income are: social insurance and retirement receipts. sales and excise taxes. payroll taxes. tariffs. state individual and corporate income taxes.

sales and excise taxes. state individual and corporate income taxes.

Suppose that tax revenue is $300 billion and that government spending is $250 billion. The budget is:

surplus

Revenue sources are different for federal, state, and local governments. (True or False)

true