1.
The stabilization function of government involves government's efforts to:
A.
alter the output of specific goods when external costs or benefits are present.
B.
reduce the after-tax incomes of the rich and increase the after-tax incomes of the poor.
C.
deal with the problems of substantial unemployment and rapid inflation.
D.
provide the socially desired output of public goods.
2.
In performing its stabilization function it is appropriate for government to:
A.
increase both government spending and taxes when the economy is experiencing rapid inflation.
B.
reduce government spending and increase taxes when the economy experiences substantial unemployment.
C.
increase government spending and reduce taxes when the economy experiences rapid inflation.
D.
increase government spending and reduce taxes when the economy experiences substantial unemployment.
3.
Which of the following would
not
be appropriate if government were attempting to alleviate a serious recession?
A.
an increase in tax rates
B.
an increase in subsidies to businesses
C.
an increase in transfer payments to households
D.
an increase in government spending
4.
Total governmental purchases--Federal, state, and local combined--account for approximately what percentage of domestic output?
A.
30 percent
B.
20 percent
C.
13 percent
D.
10 percent
E.
5 percent
5.
Which of the following is an exhaustive governmental outlay?
A.
a Federal $5,000 subsidy check to an Illinois farmer
B.
an Aid to Dependent Children payment made by the state of New York
C.
a NASA payment to Boeing Corporation for space hardware
D.
a Federal old age insurance payment to a retired coal miner
6.
The major source of tax revenue for the Federal government is:
A.
personal income taxes.
B.
property taxes.
C.
corporate income taxes.
D.
sales and excise taxes.
7.
The largest category of Federal spending is for:
A.
agriculture and rural development.
B.
science, space, and technology.
C.
pensions and income security.
D.
highway construction.
8.
Which of the following is
not
an important source of revenue for the Federal government?
A.
corporate income taxes
B.
property taxes
C.
payroll taxes
D.
personal income taxes
9.
If you would have to pay $5000 in taxes on a $25,000 taxable income and $7000 on a $30,000 taxable income, we can say that the marginal tax rate on the additional $5000 of income is:
A.
40 percent and the average tax rate is about 23 percent at the $30,000 income level.
B.
50 percent and the average tax rate is 40 percent at the $30,000 income level.
C.
40 percent and the average tax rate is 25 percent at the $25,000 income level.
D.
30 percent but average tax rates cannot be determined from the information given.
10.
Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000. If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?
A.
7 percent
B.
30 percent
C.
16 percent
D.
about 23 percent
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