Activity 6
Advocates of a progressive income tax use arguments EXCEPT for which of the following?
A progressive tax system taxes according to benefits received.
Mr. Smith earns $100,000 per year. Each year he spends $50,000 and saves $50,000. He pays a 5 percent sales tax on all of his spending.
Assuming the sales tax is the only tax he pays, his average tax rate out of his income is 2.5 percent.
When imports are greater than exports, as is usually the case for the United States, which of these must be true?
The United States must be a net foreign borrower from abroad.
Which of these equals the amount of public saving?
The government's tax revenue minus the sum of government purchases and transfer payments to households.
If the government begins running a budget deficit, what impact will the deficit have on the loanable funds market?
The supply of loanable funds will decrease.
What happens when government spending is greater than government tax revenues?
There is dissaving by the government and the national debt rises.
A federal government budget deficit will:
decrease the supply of loanable funds and increase the equilibrium interest rate
Which of these statements about the federal debt is correct?
At some point, the government may have to raise taxes or cut spending to pay interest on the debt.
Using the figure at right, if the government levies a new unit tax in this market, S represents the original supply curve, and represents the after-tax supply curve, then the revenues that the government collects from imposing this tax is represented on this graph by
BAEC.
Which of these countries is a net lender to the rest of the world?
China
Which of the following is an argument that the incidence of corporate taxation falls entirely on consumers?
Corporations pass their tax burdens on to consumers by charging higher prices.
In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?
Dynamic tax analysis
Which of these are the largest sources of federal government revenues?
Individual income taxes and social security withholdings
Every time the federal government runs a budget deficit, the Treasury must:
borrow funds from savers by selling U.S. Treasury securities.
Budget deficits may reduce:
both domestic investment and net foreign investment.
A government that spends more than it collects in taxes experiences a:
budget deficit
The pending problems with Social Security have been known for years but solutions have not been implemented due to:
the political costs.
Should the government wish to lower the price of gasoline to the consumer, one approach might be
to reduce the gasoline excise tax.
The national debt is best measured as the:
total value of U.S. Treasury securities outstanding.
In 2010, the United States ran a __________ with all of its major trading partners and with every region of the world.
trade deficit
The largest and fastest growing category of federal expenditures is __________.
transfer payments
Some economists argue that corporate income taxes are typically not paid by firms, but by
stockholders, employees, and consumers.
One criticism of the corporate income tax is that
a portion of the corporations' tax burden is passed on to consumers via higher prices for goods and services and to workers via lower wages.
A government that collects more in taxes than it spends experiences a:
budget surplus
If the federal government's expenditures are less than its revenue, there is a __________.
budget surplus
In 2008, spending on Social Security, Medicare and Medicaid was less than 10% of the GDP. By 2030 this amount is expected to be around 17% of GDP. One government option to solve this problem is to:
decrease benefits.
The balance of trade is:
equal to the difference between exports of goods and imports of goods
The federal government periodically has to debate spending because the total federal debt:
has a maximum legal limit.
Budget deficits automatically __________ during recessions and __________ during expansions.
increase, decrease
The cyclically adjusted budget deficit:
is measured as if the economy were at potential real GDP.
One problem associated with the recent fiscal stimulus designed to move the economy out of the 2009 recession is __________.
it contributed to higher budget deficits
If a country has a deficit in its balance of trade, it means that this country imports __________.
more goods than it exports
Most economists are __________ a balanced federal budget mandate.
not in favor of
Another name for a "flat-rate tax" in which the same tax rate applies to all income earners is a
proportional tax.
A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of
proportional taxation.
If the government wishes to maximize its tax revenue, it should
recognize that too high of a tax rate can decrease the tax base.
Reduction or elimination of dividend taxes is designed, in part, to
reduce the double taxation burden on individuals.
The U.S. Social Security tax is an example of a
regressive tax.
The corporate income tax in the United States
results in individuals' being doubly taxed on corporate earnings.
In a progressive tax system,
the marginal tax rate and the average tax rate increase as income levels increase and the marginal tax rate exceeds the average tax rate.
