Chapter 16 Preliminary Quiz
Government Taxation and Expenditure

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. Which of the following are tools of government? a. taxes b. expenditures c. transfer payments d. regulations e. all of the above
	2. Government's share of the economy has _______ since 1900 in the United States. a. decreased b. increased c. stayed the same d. equaled zero
	3. Which of the following is not a function of government in a free market economy? a. Improve economic efficiency. b. Set prices in the economy. c. Conduct international economic policy. d. Reduce economic inequality.
	4. Which of the following is not true about public-choice theory? a. A branch of economics and political science that studies the way that governments make decisions. b. Examines the way different voting mechanisms can function and shows that there are no ideal mechanisms to sum up individual preferences into social choices. c. Analyzes government failures. d. All of the above are correct about public-choice theory.
	5. Which of the following holds that individuals should be taxed in proportion to the benefit they receive from government programs? a. ability-to-pay principle b. horizontal equity principle c. vertical equity principle d. benefit principle
	6. Which of the following states that the amount of taxes people pay should relate to their income or wealth? a. ability-to-pay principle b. horizontal equity principle c. vertical equity principle d. benefit principle
	7. Which of the following states that those who are essentially equal should be taxed equally? a. ability-to-pay principle b. horizontal equity c. vertical equity d. benefit principle
	8. Which of the concerns the tax treatment of people with different levels of income? a. ability-to-pay principle b. horizontal equity c. vertical equity d. benefit principle
	9. What do economists call a tax that causes higher-income individuals to pay a higher percentage of their income as tax than lower-income individuals? a. horizontal b. proportional c. progressive d. regressive
	10. A _______ tax is one in which all taxpayers pay exactly the same proportion of their income. a. horizontal b. proportional c. progressive d. regressive
	11. A _______ tax takes a larger fraction of income in taxes from lower-income individuals than from higher-income individuals. a. horizontal b. proportional c. progressive d. regressive
	12. The effective tax rate is: a. the extra tax that is paid per dollar of additional income. b. total taxes divided by total income. c. total income divided by total taxes. d. none of the above.
	13. The marginal tax rate is: a. the extra tax that is paid per dollar of additional income. b. total taxes divided by total income. c. total income divided by total taxes. d. none of the above.
	14. Which of the following involves the way the tax burden ultimately is borne by consumers and producers? a. marginal tax b. tax effectiveness c. tax incidence d. all of the above
	15. _______ taxes are those that are levied on goods and services. _______ taxes are those that are levied upon individuals or firms. a. Indirect; Direct b. Direct; Indirect c. Effective; Indirect d. Indirect; Effective