ECON 102: Chapter 10
Which constitutional amendment permanently established the income tax in the U.S.?
16th
Three statements regarding the concepts of corruption and the underground economy
>It leads to illegal activities. >It is a type of government failure. >It is a result of government intervention.
In an economy, there is a high level of social inequality. This causes the government to implement a wealth tax on its citizens who earn a high level of income and, therefore, are capable of holding assets. Which of the following what are three results of the implementation of the wealth tax?
>introduction of deadweight loss. >A conflict between equity and efficiency. >Distortion of decisions of individuals that affects efficiency.
homework (5&6&7)
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In the first graph, what best describes what happened to surplus after the tax was added?
B and E were transferred to the government, C and D became Dead Weight Loss
Which of the following is a cost associated with government intervention in an economic system?
Bureaucracies
Which of the following is the largest source of revenue for state governments?
Miscellaneous taxes and fees, such as tolls on roads and public transportation tickets.
Is the entire burden of the tax always borne by those on whom it is imposed?
Not necessarily, since the burden of the tax depends on price elasticity.
Criminals spend vast resources trying to avoid taxes and regulations, break laws, and undermine bans and, in turn, authorities spend resources to catch criminals. What does this reflect?
Problems generated by the underground economy.
Professor Trevon Logan described how income taxes can be used as a tool to encourage certain behaviors. Which activity did he NOT mention?
Saving for Health Care Expenses
In the second graph, who paid more of the tax and why?
The consumers, because demand was more inelastic than supply
According to the podcast, which war lead to the middle class beginning to pay the income tax?
World War II
Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to ____________.
address externalities
In an economy with an equity-efficiency trade-off, the newly elected government implements proportional taxes and plans to have a lesser hold on consumer choice. This will lead to __________ in efficiency and __________ in social inequality compared to the existing level of social inequality in the economy. (increase/decrease)
both increase
A ________ occurs when government spending exceeds tax revenue.
budget deficit
The sources of revenue for state and local governments are _________ those of the federal government.
different from
Consumer sovereignty suggests that ____________.
government should not interfere with consumer choices.
The largest source of revenue for the federal government is ___________.
individual income taxes.
Raising the top federal marginal tax on earned personal income to 70% would raise substantially _________________ revenue without _______________ economic activity.
more, lowering
Paternalism is the view that ___________.
people do not always know what is best for them, and government should encourage them to make the right choices.
A rent control is an example of a ________.
price ceiling
To reduce inequality and poverty in an economy, the government uses a ___________.
progressive tax system to fund transfer payments.
The federal government relies on ________ to limit inequality.
progressive taxes
The government runs a budget surplus when ____________.
tax revenue exceeds its spending.
Consumer sovereignty is the view that consumers have the right to choose ________, and the government should not interfere with these choices.
the goods that they will consume
Government failures refer to ________.
the inefficiencies caused by a government's interventions
An increase in the income tax rate leads to a large increase in deadweight loss if ________.
the labor supply curve is highly elastic
Tax incidence refers to ____________.
who bears the burden of a tax.
The two most important goals for government policy involve a trade-off between __________ and __________.
equity; efficiency.