Macro Chapter 7

The largest federal government transfer payment is ____.

Social Security

Name basic economic influences of the federal government: ________, ________, and __________.

spend, tax, regulate economy, provide public goods, economic stabilization, income redistribution

The average tax rate is found by dividing ____ by the ____.

taxes paid by the taxable income

The most important source of federal tax revenue is the ____ tax.

personal income tax

11. The most progressive tax listed here is the ____. a) Social Security tax b) federal personal income tax c) federal excise tax d) state sales tax

b) federal personal income tax

If you earned $10,000 in 2019, how much did the federal government collect in payroll tax? (Hint: both you and your employer pay this tax)

$1530 (7.65% employee & 7.65% employer contribution)

Progressive taxes place the greatest burden on the _____.

rich

As disposable income rises, C+I+G ____.

rises

Examples of regressive taxes include ____ and ____.

sales, social security, excise

The marginal tax rate for a married couple with a combined income of $24,000 is ____ percent.

12%

The economic role of the federal government began to get very large in the year ____.

1933

The maximum tax rate that large corporations pay is ____ percent.

21%

The marginal tax rate of a person with a taxable income of $1 million is ____ percent.

37%

The maximum marginal tax rate of the federal personal income tax today is ____ percent.

37%

In 2019 the social Security tax rate was _____ percent.

6.2% social security 1.45% medicare

19. Until 1981 the maximum marginal tax rate on the federal income tax was ___ percent. a) 70 b) 50 c) 37 d) 28

a) 70

16. Which statement is the most accurate? a) Although almost half of all Americans pay no federal income tax, most of them pay a substantial percentage of their income in other federal taxes b) Most millionaires pay no federal income tax c) Most millionaires pay about 35 percent of their income in federal income tax d) The typical middle-class American pays more money in federal taxes than the average millionaire.

a) Although almost half of all Americans pay no federal income tax, most of them pay a substantial percentage of their income in other federal taxes

7. Which statement is true? a) Bill Gates pays more Social Security tax than most American workers b) The rich pay a higher proportion of their income in Social Security tax than in federal personal income tax c) Most wage earners pay more in federal personal income tax than in Social Security tax d) The rich pay Social Security tax on nearly their entire income

a) Bill Gates pays more Social Security tax than most American workers

31. Which of these statements is true? a) Everyone must pay payroll tax of 1.45 percent on all their wages and salaries. b) We pay Social Security taxes on all income up to $250,000 c) Individuals earning high salaries and wages pay a Medicare tax of 2.35 percent on earnings in excess of $125,000. d) The Medicare tax will be completely phased out by 2024

a) Everyone must pay payroll tax of 1.45 percent on all their wages and salaries.

2. The seeds of the expansion of the federal government's economic role were sown during the administration of ___. a) Franklin Roosevelt b) Dwight Eisenhower c) Richard Nixon d) Ronald Reagan

a) Franklin Roosevelt

29. Which is the most accurate statement about the federal personal income tax top MTR? a) It has been higher than 90 percent b) It is now the lowest it has ever been. c) It is nearly the highest it has ever been d) It was at its highest in the 1980s e) I was at its lowest in the 1950s

a) It has been higher than 90 percent

4. Which statement is the most accurate? a) The rich pay most of the federal personal income tax. b) President George W. Bush raised taxes that the poor must pay c) As a result of the events of 9/11, Americans are very supportive of tax cuts. d) Government spending on defense declined between 2001 and 2006.

a) The rich pay most of the federal personal income tax.

18. The most important source of federal tax revenue is the ___. a) personal income tax b) corporate income tax c) federal excise tax d) payroll tax

a) personal income tax

14. A tax with an average rate of 20 percent for the rich and 2 percent for the middle class ___. a) progressive b) regressive c) proportional d) none of the above

a) progressive

21. The most important source of local tax revenue is the ___ tax. a) property b) income c) excise d) sales

a) property

34. Under the Tax Cut and Jobs Act of 2017 the federal income tax rate for large corporations was ___. a) raised b) left unchanged c) reduced slightly d) reduced substantially

a) raised

33. The greatest beneficiaries of the Tax Cut and Jobs Act of 2017 were the ___. a) wealthy families and large corporations b) middle-class families and large corporations c) wealthy families d) middle-class families and small business owners

a) wealthy families and large corporations

1. The role of government grew most rapidly during the period ___. a) 1920-33 b) 1933-45 c) 1945-60 d) 1960-75

b) 1933-45

35. The top tax bracket of the federal income tax is ____. a) 5 percent b) 37 percent c) 39.6 percent d) 50 percent

b) 37 percent

6. Transfer payments to individuals are ___ percent of the federal budget. a) 25 b) 50 c) 65 d) 85

b) 50

3. Which couple pays the most in federal taxes? a) Todd Lhuillier and Stacey Lhuillier derive their entire $100,00 income from dividents and have two young children, Chloe Lhuillier and Taylor Lhuillier b) Eric Church and Kim Swanson Church each have jobs that pay $50,000; they have no children c) Teodor Barnett and Miriam Barnett each have jobs that pay $51,000 and have two dependent grandchildren living with them--Sarah Jones and Emma Jones d) Patricia Judge has a job paying $55,000 and her husband, John Judge, has one that pays $52,000. They have five dependent grandchildren living with them -- Jack Alaska Watt, William Watt, Matthew Watt, Blake Armstrong, and Susan Armstrong.

b) Eric Church and Kim Swanson Church each have jobs that pay $50,000; they have no children

36. Who pays the most in Social Security tax? a) a retired multimillionaire b) an Amtrak train engineer c) a single mother receiving $100,00 a year in child support and alimony payments d) a professional gambler

b) an Amtrak train engineer

10. If Kathie Barnes earns $50,000 and Katie Harvey earns $500,000 a year, they both will pay social security tax ___. a) at the same average tax rate b) but Kathie Barnes will pay at a higher average tax rate. c) but Katie Harvey will pay at a higher average tax rate d) but it is impossible to tell what their average tax rates are.

b) but Kathie Barnes will pay at a higher average tax rate.

9. The largest federal government purchase of final goods and services is ___. a) Social Security b) defense c) interest on the national debt d) foreign aid

b) defense

26. Major league baseball stars like Justin Verlander, Mike Trout, and CLayton Kershaw all pay ___. a) more social security tax than medicare tax b) more Medicare tax than social security tax c) neither Medicare tax nor social security tax

b) more Medicare tax than social security tax

If Adam Smith were alive today, he would say that our government is too ____.

big

20. Taxes (including federal, state, and local) are about ____ of our GDP. a) 10 percent b) 20 c) 30 d) 40

c) 30

17. Which would be the most accurate description of the top marginal tax rate of the federal income tax? a) It is higher than it has ever been b) It is lower than it has ever been c) It is much lower than it was in 1980 d) It is much higher than it was in 1980

c) It is much lower than it was in 1980

5. The federal government's fiscal year begins on __. a) January 1 b) July 1 c) October d) November 1

c) October

30. Which of the following taxes is the most regressive? a) the federal income tax b) the state sales tax c) a tax on cigarettes d) a tax on gasoline

c) a tax on cigarettes

8. Compared to federal spending, state and local is ___. a) almost twice as large b) about the same c) half as large d) one-quarter as large

c) half as large

28. State and local taxes are basically ___. a) progressive b) proportional c) regressive

c) regressive

32. Which statement is false? a) A person earning a salary of $20 million pays more Medicare tax than Social Security tax. b) A person who earns a salary of more than $125,000 a year pays a higher percentage of her income in Medicare tax than a person who earns less than $125,000. c) A person earning $12,000 pays no federal income tax. d) None of these statements are false.

d) None of these statements are false.

24. An example of a public good is ___. a) a Honda Accord b) a movie theater c) a Boeing 747 d) a lighthouse

d) a lighthouse

12. Each of the following is a direct tax except the ___ tax. a) Social Security b) federal personal income c) corporate income d) federal excise

d) federal excise

23. Adam Smith endorsed each of the following roles of government EXCEPT ____. a) providing for defense b) establishing a system of justice c) erecting a limited number of public works d) guaranteeing a job to every person ready, willing, and able to work

d) guaranteeing a job to every person ready, willing, and able to work

25. Which statement is true? a) Americans pay the highest taxes in the world. b) Public goods are provided by private enterprise. c) The economic role of the federal government has shrunk over the last 30 years d) in 1990 and in 1993 tax rates for the rich were increased substantially.

d) in 1990 and in 1993 tax rates for the rich were increased substantially.

15. In 2019 Brian Murray earned $400,00; he paid social security tax on ___. a) none of his income b) all of his income c) nearly all of his income d) less than half of his income

d) less than half of his income

27. Gasoline taxes in the United States are ___ than they are in other leading industrial nations. a) much higher b) a little higher c) a little lower d) much lower

d) much lower

13. Which statement is true? a) The rich are hurt more than the poor by regressive taxes. b) The poor are hurt more than the rich by progressive taxes. c) The federal personal income tax is a regressive tax. d) none of the above.

d) none of the above.

22. Compared with the citizens of other rich countries, Americans are ___. a) much more heavily taxed b) somewhat more heavily taxed c) taxed at about the same rate d) not as heavily taxed

d) not as heavily taxed