Name: 
 

Chapter 12 Practice Questions



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

Which of the following statements is most correct?
a.
As a nation gets richer, the government has larger tax revenue, but typically takes a smaller share of income in taxes.
b.
Poor countries usually have relatively large tax burdens.
c.
As a nation gets richer, the government typically takes a larger share of income in taxes.
d.
There is little evidence of a relationship between income and taxes for most countries.
 

2. 

The largest source of income for the federal government is
a.
individual income taxes.
b.
corporate taxes.
c.
tariffs.
d.
fines and penalties.
 
 
Table 12-1
On Taxable Income
The Tax Rate is
Up To $27,050
15.0%
From $27,050 to $65,550
27.5
From $65,550 to $136,750
30.5
From $136,750 to $297,350
35.5
 

3. 

Refer to Table 12-1. If Danielle makes $38,000 this year on her new job, her tax liability would be approximately
a.
$4,058.
b.
$5,700.
c.
$7,069.
d.
$10,450.
 

4. 

The U.S. federal government spends its revenues in a number of ways. Rank the following spending categories from largest to smallest.
a.
Social Security, national defense, income security, net interest
b.
health care, national defense, net interest, income security
c.
Social Security, health care, national defense, federal judicial system (including prisons)
d.
national defense, social security, net interest, income security
 

5. 

Specific spending programs that are included under the general category of income security include:
a.
Health Programs.
b.
Medicare.
c.
Social Security.
d.
Food Stamps.
e.
All of the above are correct.
 

6. 

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of
a.
A rising population of poor in the economy.
b.
The elderly population growing more rapidly than the overall population.
c.
Immigration policy that continues to promote an influx of migrant farm workers.
d.
All of the above are important factors.
 

7. 

Taxes on specific goods such as cigarettes, gasoline, and alcoholic beverages are called
a.
sales taxes.
b.
excise taxes.
c.
social insurance taxes.
d.
consumption taxes.
 

8. 

Rank the following state and local government expenditure categories from largest to smallest.
a.
education, public welfare, highways
b.
transfer payments to the poor, education, public safety
c.
police, road maintenance, public schools
d.
public health, public safety, public utilities
 

9. 

An efficient tax system is one that imposes small
a.
deadweight losses and administrative burdens.
b.
marginal rates and deadweight losses.
c.
administrative burdens and transfers of money.
d.
marginal rates and transfers of money.
 

10. 

The U.S. income tax
a.
discourages saving.
b.
encourages saving.
c.
has no effect on saving.
d.
will reduce the administrative burden of taxation.
 



 
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