Macroeconomics: Taxes and Trade Quiz

What is the primary purpose of taxes in an economy?

• To increase government debt

• To fund public services and infrastructure

• To discourage international trade

• To reduce inflation

Which of the following is an example of a direct tax?

• Sales tax

• Income tax

• Value-added tax (VAT)

• Import duty

Explain how a tariff on imported goods can affect domestic producers.

• It decreases the cost of production for domestic producers.

• It increases competition from foreign producers.

• It provides a competitive advantage to domestic producers by making imported goods more expensive.

• It has no effect on domestic producers.

Calculate the total tax revenue if a government imposes a flat tax rate of 10% on an income of $50,000.

• $4,000

• $5,000

• $6,000

• $7,000

Discuss the potential impact of a high corporate tax rate on international trade.

• It encourages foreign investment.

• It may lead to companies relocating to countries with lower tax rates.

• It has no impact on international trade.

• It increases the competitiveness of domestic products abroad.

What is the term for a tax that increases in percentage as the taxable amount increases?

• Regressive tax

• Proportional tax

• Progressive tax

• Flat tax

Identify the effect of a subsidy on domestic goods in the context of international trade.

• It makes domestic goods more expensive.

• It reduces the competitiveness of domestic goods.

• It lowers the price of domestic goods, making them more competitive internationally.

• It has no effect on international trade.

If a country imposes a 15% tariff on imported electronics, what is the new price of an electronic item originally priced at $200?

• $210

• $220

• $230

• $240

Analyze the role of taxes in reducing income inequality.

• Taxes have no role in income distribution.

• Progressive taxes can help reduce income inequality by redistributing wealth.

• Regressive taxes are more effective in reducing income inequality.

• Taxes increase income inequality by taking more from the poor.

What is the effect of a trade deficit on a country's economy?

• It indicates that a country is exporting more than it imports.

• It can lead to a depletion of foreign exchange reserves.

• It strengthens the domestic currency.

• It has no impact on the economy.