Question 1

Jamal earns $160,000 per year and Josephina earns $80,000 per year. They both pay the same price to buy the identical automobile and each pays $1,600 in sales tax. In relation to their relative incomes, this is an example of a

Accepted Answer

A regressive tax takes a larger percentage of income from low-income earners than from high-income earners. Since Jamal and Josephina pay the same amount in sales tax despite their different incomes, the tax is regressive relative to their incomes.

Question 2

-Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes, the income tax system would be

Accepted Answer

A progressive tax system is one in which the tax rate increases as the income increases. In this case, Jamal earns twice as much as Josephina, but he pays more than three times as much in taxes. This means that the tax system is progressive.

Question 3

Jamal earns $160,000 per year and Josephina earns $80,000 per year. If Jamal pays $16,000 in income taxes and Josephina pays $8,000 in income taxes, the income tax system would be

Accepted Answer

Both Jamal and Josephina are paying 10% of their income in taxes, which indicates a proportional tax system where the tax rate is the same regardless of income level.

Question 4

The marginal tax rate is

Accepted Answer

The marginal tax rate is the increase in taxes as a percentage of the increase in income. It represents the rate at which an individual's tax liability increases with each additional dollar of income earned.

Question 5

-The Social Security tax is considered to be a

Accepted Answer

The Social Security tax is considered regressive because it takes a larger percentage of income from low-income earners than from high-income earners, due to the income cap on which the tax is levied.

Question 6

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,000 per year. Based on this information, the income tax system is

Accepted Answer

The answer of Suppose you are making $50,000 per year...

Question 7

Another name for a "flat-rate tax" in which the same tax rate applies to all income earners is a

Accepted Answer

A flat-rate tax is also known as a proportional tax because it applies the same tax rate or percentage to all income earners, regardless of their income level. This means that everyone pays the same percentage of their income in taxes, resulting in a proportional distribution of the tax burden.

Question 8

If a tax system is progressive, then

Accepted Answer

A progressive tax system means that the higher the income, the higher the percentage paid in tax. This leads to the marginal tax rate (the tax rate on the last dollar earned) being higher than the average tax rate (total tax paid divided by total income). As income rises, the marginal tax rate increases, leading to a progressive tax system.

Question 9

-Using the above figure, which of the lines in the above diagram represents a proportional tax?

Accepted Answer

The answer of 
-Using the above figure, which of the...

Question 10

Assume that Mr. Smith's income increased from $50,000 last year to $55,000 this year and that he paid an additional $2,000 in taxes. This would indicate that his marginal tax rate is

Accepted Answer

The answer of Assume that Mr. Smith's income increased from...

Question 11

What is a government's budget constraint in the long run as opposed to a given time period?

Accepted Answer

The answer of What is a government's budget constraint in...

Question 12

In a progressive income tax system

Accepted Answer

In a progressive income tax system, as income increases, the tax bracket increases. This means that individuals who earn a higher income pay a higher percentage of their income in taxes. As a result, the marginal tax rate (the tax rate applied to the last dollar earned) is higher than the average tax rate (total taxes paid divided by total income).

Question 13

When income is $15,000, the amount of income taxes owed is $1,500; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is

Accepted Answer

The average income tax rate is calculated by dividing the amount of taxes owed by the income. For an income of $15,000 with taxes owed of $1,500, the average tax rate is $1,500 / $15,000 = 0.10, or 10%.

Question 14

-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Accepted Answer

A progressive tax is characterized by an increasing tax rate as income increases. Line A, which shows an upward slope, represents this concept.

Question 15

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Accepted Answer

The answer of What are the three sources of funding...

Question 16

If you were to face a marginal tax rate of 20 percent, how much would your tax bill increase when your income increased from $50,000 to $52,000?

Accepted Answer

The marginal tax rate of 20% means that for every additional dollar earned above $50,000, 20 cents will be taken as tax. Therefore, the increase in income from $50,000 to $52,000 is $2,000.

20% of $2,000 = $400

So, the tax bill will increase by $400.

Question 17

When income is $15,000, the amount of income income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The marginal tax rate in this case is

Accepted Answer

The marginal tax rate is calculated by dividing the change in taxes owed by the change in income. Here, taxes increase by $1,000 ($3,000 - $2,000) when income increases by $5,000 ($20,000 - $15,000). Thus, the marginal tax rate is $1,000 / $5,000 = 0.20, or 20 percent.

Question 18

-Using the above figure, which of the lines in the above diagram represents a regressive tax?

Accepted Answer

A regressive tax is one where the tax rate decreases as the taxable amount increases. Line C represents a regressive tax because it shows a decreasing tax rate as income increases.

Question 19

Why is the government budget constraint different between the short run and the long run?

Accepted Answer

The answer of Why is the government budget constraint different...

Question 20

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Accepted Answer

The income tax system is progressive because as your income increases, your tax rate also increases. In this case, when the individual's income increased by $10,000, their tax liability increased by $1,500 (from $5,000 to $6,500), which is a higher percentage increase than the percentage increase in their income.

Quiz 6: Funding the Public Sector