Federal Budget and Monetary Policy Quiz

What is the Federal Surplus?

• The government spent more than they collected in tax revenues

• The government has money left over at the end of the year

• The government borrowed money when they ran out

• The government spent all the money they had

What is the largest category of federal spending?

• Income Security

• Social Security

• Medicare

• National Defense

What is the purpose of the Federal Income Tax?

• To tax the wages earned by individuals

• To fund the social security system

• To provide for the operation of the government administration

• To tax corporate income

What is the purpose of the Social Security Tax?

• To fund the social security system

• To tax corporate income

• To tax the wages earned by individuals

• To tax the sale of select items

What is the purpose of the Medicare Tax?

• To tax the wages earned by individuals

• To tax corporate income

• To fund a health care program for the handicapped and elderly

• To fund the social security system

What is the purpose of the Corporate Income Tax?

• To fund the social security system

• To tax the sale of select items

• To tax corporate income

• To tax the wages earned by individuals

What is the purpose of Excise Taxes?

• To fund the social security system

• To tax corporate income

• To tax the sale of select items

• To tax the wages earned by individuals

What are Transfer Taxes?

• Taxes on the wages earned by individuals

• Taxes on corporate income

• Taxes on large gifts and assets transfer after death

• Taxes on the sale of select items

What are State and Local Taxes used for?

• To fund the social security system

• To provide for the operation of the government administration

• To tax the sale of select items

• To tax the wages earned by individuals

What is the Benefit Principle of taxation?

• Imposing a higher rate of taxation on low incomes than high incomes

• Everyone should pay the same percentage of income

• Those who benefit from government goods and services should pay in proportion to the amount of benefits they receive

• People should be taxed according to their ability to pay