Question 1

Tax equity means that all people should pay equal taxes.

Accepted Answer

Tax equity means that people should pay taxes according to their ability to pay, taking into account factors such as income, wealth, and other relevant circumstances. This may result in people with higher incomes or more wealth paying a greater proportion of their income or wealth in taxes compared to those with lower incomes or less wealth. It is not about everyone paying equal taxes, but rather about a fair distribution of the tax burden based on an individual's ability to contribute.

Question 2

The federal government uses the tax code to encourage certain behaviors.

Accepted Answer

The federal government can use the tax code to incentivize certain behaviors, such as charitable donations or investing in renewable energy.

Question 3

According to the equimarginal principle,the efficient level of government expenditures occurs when the benefit of the last dollar spent for each purchase is greater than the last dollar of cost.

Accepted Answer

The equimarginal principle states that the efficient allocation of resources occurs when the ratio of the marginal utility (benefit) to the marginal cost is equal for all choices. Therefore, the efficient level of government expenditures would occur when the marginal benefit of the last dollar spent is equal to the marginal cost of that dollar, not when it is greater than the last dollar of cost.

Question 4

Horizontal equity means that people in identical economic positions should pay equal taxes.

Accepted Answer

Horizontal equity is a principle of tax fairness where individuals or households with the same income or economic circumstances should pay an equal amount of taxes. Therefore, people in identical economic positions should pay equal taxes.

Question 5

A lower interest rate encourages private investment spending.

Accepted Answer

When interest rates are lower, it becomes cheaper for individuals and businesses to borrow money, which often leads to increased investment spending.

Question 6

An output tax will be shifted completely forward if demand is price elastiC.

Accepted Answer

When demand is price elastic, consumers are very responsive to price changes, making it harder for producers to pass the full burden of an output tax onto consumers through higher prices.

Question 7

Transfer payments are government expenditures for currently produced goods and services.

Accepted Answer

Transfer payments are government expenditures for income support or subsidies, and do not involve the purchase of goods and services produced currently.

Question 8

In the absence of externalities,government actions are needed to ensure the efficiency of the market system.

Accepted Answer

In the absence of externalities, there is no need for government actions to ensure the efficiency of the market system. The market can efficiently allocate resources and determine prices. However, externalities such as pollution or income inequality may require government intervention to correct market failures.

Question 9

The United States has not had a federal budget surplus since the 1960s.

Accepted Answer

The United States had a federal budget surplus in the late 1990s, during the Clinton administration. However, since then, there have not been any federal budget surpluses.

Question 10

A budget deficit occurs when tax revenues exceed government spending.

Accepted Answer

The statement is false. A budget deficit occurs when government spending exceeds tax revenues. If tax revenues exceed government spending, there is a budget surplus.

Question 11

The first budget surplus since 1969 occurred in 1998.

Accepted Answer

This is true. The first budget surplus since 1969 occurred in 1998 during the Clinton administration.

Question 12

There are currently 14 tax brackets ranging from 11% to 50%.

Accepted Answer

As of 2021, there are 7 tax brackets in the United States ranging from 10% to 37%.

Question 13

The federal tax system is much more progressive than is generally believeD.

Accepted Answer

The answer of The federal tax system is much more...

Question 14

The enforcement and collection of the personal income tax is the responsibility of the Internal Revenue ServicE.

Accepted Answer

The Internal Revenue Service (IRS) is responsible for enforcing and collecting personal income taxes in the United States.

Question 15

The equal tax treatment doctrine pertains to vertical equity.

Accepted Answer

The equal tax treatment doctrine pertains to horizontal equity, which means that individuals with similar income or ability to pay should be taxed equally. Vertical equity, on the other hand, deals with the idea that those with greater ability to pay should contribute more in taxes.

Question 16

The personal income tax is the single most important source of tax revenue for the federal government of the United States.

Accepted Answer

According to the Congressional Budget Office, personal income taxes provide about 50% of the federal government's total tax revenue. Therefore, it is the most important source of tax revenue for the government.

Question 17

The Economic Growth and Taxpayer Relief Reconciliation Act,the Job Creation and Worker Assistance Act,and the Jobs and Growth Tax Relief Act each reduced effective tax rates on incomE.

Accepted Answer

All three acts mentioned in the statement reduced effective tax rates on income.

Question 18

When marginal benefits equal marginal costs then net benefits are maximizeD.

Accepted Answer

Net benefits are maximized when the marginal benefits equal the marginal costs because at that point, the additional benefit gained from an action is equal to the additional cost incurred. Any further increase in the action will result in a decrease in net benefits. Therefore, it is necessary to find the point where the marginal benefits equal the marginal costs to maximize net benefits.

Question 19

According to the equal tax treatment doctrine,people in identical economic circumstances should pay equal taxes.

Accepted Answer

The equal tax treatment doctrine states that individuals in the same economic situation should receive the same tax treatment. It is based on the principle of horizontal equity, which emphasizes that people in similar circumstances should be taxed the same way. This doctrine is a fundamental principle of many tax systems around the world, and it helps to ensure fairness and equity in taxation.

Question 20

Bond prices and interest rates are inversely relateD.

Accepted Answer

When interest rates go up, bond prices generally go down, and vice versa. This is because higher interest rates make newly issued bonds more attractive to investors, which reduces the demand for existing bonds and causes their prices to decrease. Conversely, when interest rates decrease, the demand for existing bonds increases, which drives up their prices.

Quiz 14: Government Spending,Taxation,and the National Debt: Who Wins and Who Loses