ECO 450 Week 9 Quiz – Strayer
Click on the Link Below to
Purchase A+ Graded Course Material
Quiz 7 Chapter 13 and 14
Chapter 13
The
Theory of Income Taxation
True/False Questions
1. The actual
federal income tax currently taxes all income irrespective of its source or use
at the same tax rate.
2. Comprehensive
income excludes unrealized capital gains.
3. Under a comprehensive
income tax, transfer payments received by Social Security recipients would be
fully taxable.
4. Homeowners
earn rental income-in-kind from their home that would be taxable under a comprehensive
income tax.
5. A
comprehensive income tax is a lump-sum tax.
6. A
comprehensive income tax will result in a divergence between gross wages paid
by employers and net wages received by workers.
7. A
comprehensive income tax will always reduce work effort by taxpayers.
8. The
substitution effect of a tax-induced decline in wages always leads workers to
work less.
9. The market
wage elasticity of labor is zero. If this is the case, the excess burden of a
tax on labor income will also be zero.
10. Points on a
compensated labor supply curve are always more elastic than points for
corresponding wage levels on a regular labor supply curve.
11. Comprehensive
income is the sum of annual consumption and the change in net worth.
12. A tax on
interest income does not prevent credit market from efficiently allocating
resources.
13. If an
individual is subject to a 30-percent income tax, then the net interest on a
certificate of deposit yielding 5 percent would be 3.5 percent after
taxes.
14. Because a tax
on interest income results in income and substitution effects, it is not
possible to predict the effect it will have on saving.
15. Most empirical
studies indicate that the interest elasticity of supply of savings is close to
zero.
16. Income tax became a
permanent fixture in the United States starting in the early nineteenth
century.
17. The Haig-Simons
definition of income is different from comprehensive income.
18. Comprehensive
income equals consumption plus the change in net worth.
Multiple
Choice Questions
1. Comprehensive
income:
a. is
the sum of annual consumption and realized capital gains.
b. is
the sum of annual consumption and changes in net worth.
c. excludes
corporation income.
d. is
the sum of annual consumption and net worth.
2. A tax on labor
income:
a. results
only in an income effect that always decreases hours worked per year.
b. results
in a substitution effect that always decreases hours worked per year.
c. results
in an income effect that increases hours worked per year if leisure is a normal
good.
d. both
(a) and (b)
e. both
(b) and (c)
3. The market
supply of labor is perfectly inelastic. Then it follows that:
a. the
substitution effect of wage changes is zero.
b. the
income effect of wage changes is zero.
c. leisure
is a normal good and the income effect of wage changes exactly offsets the
substitution effect.
d. the
excess burden of a tax on labor income will be zero.
4. The
compensated labor supply curve:
a. will
always be vertical.
b. will
always be upward sloping.
c. will
always be downward sloping.
d. reflects
both the income and substitution effects of wage changes.
5. Using a
regular labor supply curve instead of a compensated supply curve to calculate
the excess burden of a tax on labor income will:
a. result
in an accurate estimate of the excess burden.
b. overestimate
the excess burden.
c. underestimate
the excess burden.
d. accurately
estimate the excess burden only if the market supply of labor is perfectly
inelastic.
6. Most empirical research indicates that the market
supply curve of labor hours by prime-age males is:
a. very
elastic.
b. almost
perfectly inelastic.
c. always
upward sloping.
d. perfectly
elastic.
7. A flat-rate tax on labor income
will:
a. always
reduce hours worked per year.
b. always
increase hours worked per year.
c. either
increase or decrease hours worked per year.
d. never
have any effect on the amount of leisure hours per year.
8. A tax on
interest income:
a. causes
the gross interest rate paid by investors to exceed the net interest rate
received by savers.
b. will
always reduce saving.
c. will
always increase saving.
d. is
equivalent to a lump-sum tax.
9. If the market
supply curve of savings is upward sloping, a tax on interest income will:
a. increase
the amount of saving.
b. increase
the market rate of interest.
c. decrease
the market rate of interest.
d. have
no effect on the market rate of interest.
10. If the supply
of labor is perfectly inelastic, then the incidence of a payroll tax levied
entirely on employers will be:
a. borne
by employers as a reduction in profits.
b. split
between workers and employers.
c. paid
entirely by workers.
d. shifted
forward to consumers.
11. Which of the
following is true about comprehensive income?
a. Only
labor income is included.
b. Only
capital income is included.
c. Capital
gains are not included.
d. Both
realized and unrealized capital gains are included.
12. Which of the
following will increase a person’s comprehensive income?
a. an
increase in the market value of the person’s home
b. a
decrease in the value of the person’s stock portfolio
c. a
decrease in labor income
d. a
decrease in consumption
13. A tax on labor
income will:
a. increase
the net wage received by workers.
b. decrease
the net wage received by workers.
c. cause
that net wage received by workers to decline below the gross wage paid by
employers.
d. both
(b) and (c)
14. If the return
to savings, r, is subject to taxation at rate t, then in equilibrium a saver’s
marginal rate of time preference will equal:
a. r
b. t
c. (1
+ r)
d. [1
+ r(1 – t)]
15. The higher the
compensated elasticity of supply of savings,
a. the
lower the excess burden of a tax on capital income.
b. the
higher the excess burden of a tax on capital income.
c. the
higher the excess burden of a tax on labor income.
d. both
(b) and (c)
16. The
Haig-Simons definition of income:
a. is
the sum of annual consumption and realized capital gains.
b. is
the sum of annual consumption and changes in net worth.
c. excludes
corporation income.
d. is
the sum of annual consumption and net worth.
17 Comprehensive
income:
a. includes
realized capital gains, but not unrealized capital gains
b. includes
both realized and unrealized capital gains.
c. excludes
cash from the sale of assets.
d. excludes
increases in the value of assets.
18. Income-in-kind:
a. is
exemplified by nonpecuniary returns.
b. is
generally non-taxable because there is no monetary transaction.
c. is
generally taxable.
d. both
(a) and (b).
19. An example of
a nonpecuniary return is:
a. job
satisfaction.
b. unemployment
benefits.
c. employer
contributions to a retirement plan.
d. both
(b) and (c).
20. Income from
labor services (wages) account for what percentage of gross income in the U.S.?
a. 90%
b. 75%
c. 60%
d. 50%
Chapter 14
Taxation
of Personal Income
in the United States
in the United States
True/False Questions
1. Taxable income
in the United States exceeds adjusted gross income.
2. Taxable income
in the United States includes all capital gains earned, whether or not they are
realized.
3. Taxable income
in the United States amounts to less than 50 percent of personal income.
4. Tax
preferences are really subsidies to certain activities.
5. A tax
deduction allowed for an activity for which positive externalities are not likely
to exist (such as home ownership) is likely to cause the marginal social cost
of the activity to exceed its marginal social benefit.
6. The value of a
personal exemption to a taxpayer varies with his or her marginal tax
rate.
7. The U.S.
personal income tax is not a progressive tax.
8. The highest
statutory marginal tax rate under the federal personal income tax is 50
percent.
9. Under current
rules, only real interest earned is subject to income tax.
10. Realized,
long-term capital gains that reflect inflation are currently exempt from
taxation.
11. The tax base
under the personal income tax in the United States is the Haig-Simons
definition of comprehensive income.
12. Tax credits
vary with a person’s marginal tax rate.
13. The cuts in
marginal tax rates initiated in 2001 are likely to reduce the excess burden of
tax preferences.
14. The earned income tax credit is a negative tax the
subsidizes the earnings of low-income workers.
15. If a progressive
income tax is replaced with an equal-yield, flat-rate tax, then work effort
will unequivocally increase.
16. As of 2009, there is no marriage penalty for an adjusted
gross income of $60,000.
17. Tax preferences are exclusions, exemptions, and deductions
from the tax base.
18. Income-in-kind is not considered a tax preference.
Multiple
Choice Questions
1. Adjusted gross
income, as defined by the United States Tax Code,
a. exceeds
taxable income.
b. equals
taxable income.
c. is
less than taxable income.
d. is
greater than comprehensive income.
2. Tax
preferences:
a. are
exclusions, exemptions, and deductions from the tax base.
b. are
in the tax code by accident.
c. are
extra taxes on certain taxpayers.
d. increase
the amount of income that is taxable.
e. both
(a) and (d)
3. Currently, the
tax treatment of capital gains in the United States is such that:
a. all
capital gains are taxed.
b. all
realized capital gains are taxed.
c. most
realized capital gains are taxed.
d. only
capital gains adjusted for inflation are taxed.
4. The exclusion
of interest of state and local bonds from taxation by the federal government:
a. decreases
interest costs for state and local governments.
b. increases
interest costs for state and local governments.
c. benefits
lower-income taxpayers more than upper-income taxpayers.
d. discourages
borrowing by local governments.
5. The value of
personal exemptions in terms of taxes saved:
a. is
the same for all taxpayers.
b. varies
with family size.
c. varies
with taxpayers’ marginal tax rates.
d. both
(b) and (c)
6. A taxpayer is
in a 33-percent tax bracket and itemizes deductions. He obtains a mortgage from
a bank at 9-percent interest. The actual rate of interest he pays is:
a. 6
percent.
b. 9
percent.
c. 20
percent.
d. 25
percent.
7. Tax
expenditures are:
a. expenditures
made to collect taxes.
b. losses
in revenue due to tax preferences.
c. less
than 1 percent of tax revenue.
d. both
(b) and (c)
8. Under the federal personal income tax rules
prevailing as of 2009,
a. all
interest expense is tax deductible.
b. the
interest expense for mortgages on first and second homes is tax deductible.
c. the
interest expense for mortgages only on first homes is tax deductible.
d. no
interest is tax deductible.
9. The reduction
in marginal tax rates will:
a. increase
the excess burden of tax preferences.
b. increase
tax expenditures.
c. decrease
the excess burden of tax preferences.
d. have
no effect of tax expenditures.
10. “Bracket
creep” is no longer a problem in the United States because:
a. the
tax brackets are indexed.
b. capital
gains are now fully taxable.
c. only
real interest is taxed.
d. capital
gains are indexed.
11. Which of the
following is true for the federal income tax in the United States?
a. All
income irrespective of its source or use is taxed at the same rate.
b. Comprehensive
income is the tax base.
c. The
tax base is less than 50 percent of comprehensive income.
d. All
realized and unrealized capital gains are included in the tax base.
12. Because of the
Earned Income Tax Credit, the effective tax rate for the lowest-income
taxpayers in the United States is:
a. only
15 percent.
b. higher
than that paid by upper-income taxpayers.
c. zero.
d. negative.
13. The excess
burden of tax preferences:
a. depends
on average tax rates.
b. will
be higher, the higher the marginal tax rate is.
c. will
be lower, the higher the marginal tax rate is.
d. is
independent of marginal tax rates.
14. A shift to an
equal-yield, flat-rate personal income tax from the current progressive income
tax rate structure will:
a. reduce
the tax burden on upper-income groups.
b. increase
the tax burden on upper-income groups.
c. increase
the share of taxes paid by lower-income groups.
d. both
(a) and (c)
15. Removing savings from the tax base of the
personal income tax is likely to:
a. increase
work effort.
b. decrease
work effort.
c. lower
market equilibrium interest rates by increasing the supply of loanable funds.
d. increase
market equilibrium interest rates, thereby increasing the demand for loanable
funds.
16. Which is a justification for tax preferences?
a. administrative
difficulties
b. improving
equity
c. encouraging
private expenditures that create external benefits
d. all
of the above
17. If the excess burden from tax is $10 million,
lowering marginal tax rates should make the excess burden:
a. more
than $10 million.
b. less
than $10 million.
c. remain
at $10 million.
d. none
of the above is certain to occur
18. Which of the following is the result of The
Economic Growth and Tax Relief Reconciliation Act enacted in 2001?
a. reduction
of the highest marginal tax rate
b. increased
the marriage penalty
c. created
a new 40% tax bracket
d. both
(a) and (c)
19. As of 2009, the highest marginal tax rate is:
a. 39.6%
b. 38%
c. 35%
d. 32.5%
20. Which is an example of an itemized deduction
under the U.S. code as of 2009?
a. state
and local income tax
b. state
and local property tax
c. all
medical expenses
d. both
(a) and (b)
Comments
Post a Comment