Chapter 14 Quiz Taxes and Government Spending

What is the purpose of a sin tax? Select the TWO correct answers. (1 point each)

• to raise revenue for the government

• to reduce consumption of a socially undesirable product

• to shift the incidence of a tax to producers

• to encourage productivity and growth

The final burden of a tax is known as (a)   .

• a direct tax

• the average tax rate

• a value-added tax

• the incidence of a tax

Tax loopholes violate which criterion for effective taxes?

• equity

• simplicity

• efficiency

• collectability

A 4 percent sales tax on clothing is an example of a regressive tax, because as a person’s income increases, the percentage of income paid in taxes (a)   .

• stays the same

• increases

• decreases

• fluctuates

Which source is the federal government’s largest source of revenue?

• corporate income tax

• individual income tax

• borrowing

• customs duty

10. Social Security, Medicare, and Medicaid spending are examples of (a)   .

• discretionary spending

• earmarks

• mandatory spending

• deficit spending

What is a cause for deficit spending?

• revenues falling and outlays rising at the same time

• revenues falling and outlays falling at the same time

• a difference between House and Senate appropriations bills

• achieving a balanced budget

What is the term for the total amount borrowed from investors to finance the government’s deficit spending?

• trust fund

• national debt

• deficit spending

• private debt

If a firm decides it will not expand production because it is too expensive to borrow money, it is likely experiencing what impact of the national debt?

• transfer of purchasing power

• a spending cap

• a reduction in economic incentives

• a crowding-out effect