MH 2.04 Pay Your Share (Taxes)

The basis of a market economy is

• private enterprise.

• the two-party system.

• democracy.

• the dollar.

The role of government in a market economy is to

• increase personal incomes

• provide as much regulation as possible

• spend the money it receives in tax revenue

• generate sales

The circular flow of income model is a simplified depiction of

• the government taxing businesses and individuals

• businesses paying dividends to shareholders

• investors earning and losing money in the stock market

• money flowing through a market economy

Which of the following is an example of a “leakage” in the circular flow of income model:

• A business buying goods from another business

• A business retaining earnings to pay off debt

• An individual buying retail goods from a business

• A business paying its employees’ salaries

In the United States, payroll taxes are used as

• trust funds

• salaries for Congress members

• interest on the debt

• general funds

Which of the following is an example of an expenditure for which a state/local government
uses tax revenue:

• Church services

• National defense

• Education

• Personal loan

When tax revenue is not enough to cover government expenditures, the government must

• file for bankruptcy

• reduce defense spending

• print more currency

• borrow funds

A business’s profits are subject to __________ taxes.

• property

• payroll

• income

• self-employment

Which of the following is a tax on employment:

• Property tax

• Payroll tax

• Excise tax

• Sales tax

Which of the following is a true statement regarding an employer’s tax obligations:

• Employers may “opt out” of paying payroll taxes

• Employers pay taxes only for full-time employees

• Employers pay the same amount in taxes for each employee

• Employers pay a matching amount of employees’ Social Security and Medicare taxes