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.