optional quiz 5

Which of the following accounted for the highest percentage of federal government spending in 2010? a. Net interest on the national debt b. Income security c. Medicare d. Social Security

D. Social Security

Exhibit 9-1 A flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages. Assume that the flat tax rate is 12%. Refer to Exhibit 9-1. Above $25,000 in wages, the average tax rate: a. would remain flat with an increase in income. b. would increase with an increase in income. c. would decrease with an increase in income. d. none of the above

b. would increase with an increase in income.

Exhibit 9-1 A flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages. Assume that the flat tax rate is 12%. Refer to Exhibit 9-1. If you were earning $50,000 a year, your average tax rate would be: a. 12 percent. b. 15 percent. c. 6 percent. d. 9 percent.

c. 6 percent.

Exhibit 9-1 A flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages. Assume that the flat tax rate is 12%. Refer to Exhibit 9-1. If you were earning $100,000 a year, your average tax rate would be: a. 15 percent. b. 12 percent. c. 9 percent. d. 6 percent.

c. 9 percent.

Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why?

A tax on prescriptions drugs would most likely be regressive. Prescription medication is essentially a necessity. The dollar amount of the taxes would not vary between households based on income. However, the same dollar amount would represent a smaller percentage of the income for a high-income household while representing a larger percentage of the income of a low-income household.

What is the ability to pay principle? Does the U.S. federal income tax follow this principle or not? Explain your answer.

The ability to pay principle is simply that those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes. The federal income tax is a good example of this principle because the rich pay more taxes than the poor.

Exhibit 9-1 A flat tax plan allows individuals to deduct a standard allowance of $25,000 from their wages. Assume that the flat tax rate is 12%. Refer to Exhibit 9-1. How much income tax would you have to pay if you were earning $100,000 a year? a. $9,000 b. $6,000 c. $3,000 d. $1,200

a. $9,000

Which of the following is not an option that could be used to save Social Security? a. Decreasing the age required for full-time benefits. b. Implementing means testing c. Allowing individuals to opt out of the Social Security system d. Increasing the return to Social Security funds

a. Decreasing the age required for full-time benefits.

Which of the following accounted for the highest percentage of state and local spending in 2010? a. Education b. Public Welfare c. Transportation d. Social Security

a. Education

Which of the following statements best summarizes the essence of public choice analysis? a. Public choice analysis applies economic principles to political science issues. b. Public choice analysis applies political science principles to traditionally economic issues. c. Public choice analysis assumes that government leaders are primarily motivated by what is best for the community, unlike private interest groups. d. none of the above

a. Public choice analysis applies economic principles to political science issues.

Which of the following explains why it is difficult to reduce government spending by reducing one program at a time? a. There is limited support from millions of taxpayers who will save only a few dollars each if a program is eliminated. b. The views of the masses generally outweigh those of the special interest groups. c. Most people are willing to cut spending on programs that affect them but are not willing to do so for programs that affect others. d. none of the above

a. There is limited support from millions of taxpayers who will save only a few dollars each if a program is eliminated.

A progressive tax: a. is designed to take a larger percentage of higher incomes as compared to lower incomes. b. takes a greater proportion of the income of lower-income groups than of higher-income groups. c. is designed so that everybody would be charged the same percentage of their income. d. is designed to take a smaller percentage of higher incomes as compared to lower incomes.

a. is designed to take a larger percentage of higher incomes as compared to lower incomes.

If Stephen earns $100,000 this year and pays $20,000 in taxes and Chris earns $50,000 this year and pays $5,000 in taxes, this tax system would appear to be a. progressive. b. proportional. c. regressive. d. none of the above

a. progressive.

If a flat tax plan allowed individuals to deduct a standard allowance of $15,000 and the flat tax rate was 10 percent, an individual earning $12,000 a year would not pay any income taxes. a. true b. false

a. true

The motivation for an individual citizen to spend the necessary time and effort to resist an interest group is minimal, even if she had a guarantee that this resistance would be effective. a. true b. false

a. true

The self-interest assumption is central to the analysis of behavior in both private and public sectors. a. true b.false

a. true

The median voter model implies that: a. most voters will have about the same preferences for goods and services provided through government. b. a candidate may adopt more extreme views when seeking her party's nomination than during the general election. c. political voting will be as economically efficient as voting with dollars in competitive markets. d. none of the above

b. a candidate may adopt more extreme views when seeking her party's nomination than during the general election.

Voters will gather information on voting alternatives: a. when the cost of acquiring such information is exorbitantly high. b. as long as the marginal benefit to them of acquiring additional information exceeds the marginal cost to them. c. as long as the marginal benefit to them of the information is less than the marginal cost to them of gathering the information. d. because the welfare of the community is always perceived to be more important than the welfare of the individual.

b. as long as the marginal benefit to them of acquiring additional information exceeds the marginal cost to them.

Government expenditures as a percentage of GDP in the U.S. increased from 1950 to 1975 but decreased sharply during the recession that began in 2008. a. true b. false

b. false

Which of the following is an example of a progressive tax? a. Social Security tax b. federal income tax c. excise tax d. payroll tax

b. federal income tax

The administrative burden of taxation relates to the a. the disincentive for individuals and businesses to work generate income. b. individuals' cost of preparing tax returns and the government's cost of enforcing tax laws. c. the opportunity cost of social programs. d. the net interest that must be paid on the national debt.

b. individuals' cost of preparing tax returns and the government's cost of enforcing tax laws.

The process by which a legislator votes in favor of the legislation of other lawmakers in order to gain support for her own legislation is known as: a. pork barrel legislation. b. logrolling. c. the median vote model. d. none of the above

b. logrolling.

The benefits received principle would not work well in which of the following cases? a. gasoline tax b. national defense c. taxing those people who use a private good d. admission fees to a national park

b. national defense

If Jim earns $300,000 this year and pays $75,000 in taxes and Sharon earns $80,000 this year and pays $20,000 in taxes, this tax system would appear to be a. progressive. b. proportional. c. regressive. d. none of the above

b. proportional.

Public choice theory applies ____ principles to politics. a. altruistic b. ceteris paribus c. economic d. the fallacy of composition

c. economic

Which of the following is generally considered the most regressive type of tax? a. gift tax b. federal income tax c. excise tax d. payroll tax

c. excise tax

Which of the following accounts for the largest percentage of federal taxes? a. gift taxes b. social security tax c. individual income taxes d. corporate income taxes

c. individual income taxes

A flat tax: a. is designed so that everybody would pay the same number of dollars in taxes. b. Is designed in such a way that as a person's income rises, the tax rate falls. c. is designed so that everybody would be charged the same percentage of their income. d. is designed to take a smaller percentage of higher incomes as compared to lower incomes.

c. is designed so that everybody would be charged the same percentage of their income.

A special interest issue is best described as: a. one in which both sides utilize paid lobbyists to represent them. b. one which one party strongly supports and the other party strongly opposes. c. one in which a large number will each suffer small costs and a small number will each receive large benefits. d. one decided in a special session of the legislature.

c. one in which a large number will each suffer small costs and a small number will each receive large benefits.

Public choice theory assumes that each voter will tend to favor the political candidate who offers: a. programs with the largest social benefits. b. equality of government-provided benefits across all citizens. c. programs that will yield the greatest personal benefits net of personal cost. d. a plan requiring the least amount of tax dollars, regardless of the level of benefits provided.

c. programs that will yield the greatest personal benefits net of personal cost.

A special interest issue is one that: a. provides large private benefits and large social benefits. b. provides small private benefits and large social benefits. c. provides large benefits to each of a small number of people and small costs to each of a large number of people. d. provides small benefits to each of a small number of people and large costs to each of a large number of people.

c. provides large benefits to each of a small number of people and small costs to each of a large number of people.

If Mike earns $80,000 this year and pays $16,000 in taxes and David earns $50,000 this year and pays $11,000 in taxes, this tax system would appear to be a. progressive. b. proportional. c. regressive. d. none of the above

c. regressive.

A regressive tax: a. is designed to take a larger percentage of higher incomes as compared to lower incomes. b. is designed in such a way that as a person's income rises, the amount of tax as a proportion of income rises. c. takes a greater proportion of the income of lower-income groups than of higher-income groups. d. is considered to be the most equitable type of tax.

c. takes a greater proportion of the income of lower-income groups than of higher-income groups.

Rational voter ignorance can lead politicians to: a. favor programs with immediate and clear benefits and unclear and deferred costs. b. fail to take all the benefits and costs of a program fully into account in deciding on which policies to favor. c. do a poor job of overseeing the actions of public sector bureaus. d. all of the above

d. all of the above

Which of the following is potentially an option to save Social Security? a. Increasing the payroll tax rate b. Increasing the age required for full-time benefits. c. Implementing means testing d. all of the above

d. all of the above

The ability to pay principle suggests that: a. traditional exemptions should be removed since they are more frequently used by people with ability to pay more taxes. b. people with different levels of income should be treated in the same manner. c. individuals receiving the benefits should be those who pay for them. d. those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes.

d. those with the greatest ability to pay taxes should pay more than those with the least ability to pay taxes.