Chapter 16 Post Quiz
Government Taxation and Expenditure

Matching Questions:

Match the terms on the left with the definition in the column on the right. Enter the lowercase letter of that definition in the box to the left of the question number.

	1. Tools of government	a. A branch of economics and political science that studies the way that governments make decisions.
	2. Government's share of the economy	b. States that the amount of taxes people pay should relate to their income or wealth.
	3. Improve economic efficiency	c. Taxes, expenditures, transfer payments, and regulations.
	4. Public choice theory	d. A tax that causes higher-income individuals to pay a higher percentage of their income as tax than lower-income individuals.
	5. Benefit principle	e. A tax that takes a larger fraction of income in taxes from lower-income individuals from higher-income individuals.
	6. Ability-to-pay principle	f. Has increase since 1900 in the United States.
	7. Horizontal equity	g. The extra tax that is paid per dollar of additional income.
	8. Vertical equity	h. Holds that individuals should be taxed in proportion to the benefit they receive from government programs.
	9. Progressive tax	i. Concerns the tax treatment of people with different levels of income.
	10. Proportional tax	j. A tax that makes all taxpayers pay exactly the same proportion of their income.
	11. Regressive tax	k. States that those who are essentially equal should be taxed equally.
	12. Marginal tax rate	l. One function of government in a free market economy.
	13. Effective tax rate	m. The way the tax burden ultimately is borne by consumers and producers.
	14. Tax incidence	n. Total taxes divided by total income.
	15. Direct taxes	o. Those taxes that are levied upon individuals or firms.