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Chapter 16
Practice Quiz Tutorial
The Public Sector
©2004 South-Western
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1. Since 1975, total government expenditures as a
percentage of GDP in the United States have
a. fallen by half.
b. remained fairly constant at about one-third.
c. grown one fourth to one-half.
d. grown from one quarter to one-third.
B.
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50
45
Government Expenditures 1929 - 2004
Total government expenditures
40
Percent of GDP
35
30
25
20
15
10
Federal government expenditures
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29 35 40 45 50 55 60 65 70
Year
75 80
85 90 95
00
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2. Which of the following accounted for the
second largest percentage of total federal
government expenditures as of 2004
(excluding other category)?
a. Income security.
b. National defense.
c. Interest on the national debt.
d. Education and health.
B
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2004 Federal Expenditures
3%
1%
3%
1%
3%
Other
14%
International affairs
Veteran's benefits
Agriculture
48.0%
Transportation
7%
Education and health
Interest on federal debt
National defense
Income security
20%
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3. Which of the following contributed the
second largest percentage of total state and
local government revenues in 2004
(excluding federal grants)?
a. Corporate income taxes.
b. Sales and excise taxes.
c. Individual income taxes.
d. Property taxes.
D
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State & Local
Government Receipts 2004
Other
17%
23%
Corporate income taxes
2%
Individual income taxes
Property taxes
22%
20%
State sales tax
16%
Federal Grants
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4. Which of the following countries devotes
about the same percentage of its GDP to
taxes as the United States?
a. Sweden.
b. Italy.
c. United Kingdom.
d. Japan.
D.
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60%
50%
58%
Tax Burden 2004
55%
49% 48%
41% 41%
40%
39%
37%
30%
30%
Sweden
France
Italy
Germany
Canada
Spain
U.K.
Japan
U.S
20%
10%
0%
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5. “The poor should not pay income taxes.”
This statement reflects which of the following
principles for a tax?
a. Fairness of contribution.
b. Benefits received.
c. Inexpensive to collect.
d. Ability to pay.
D. Since the poor lack the ability to pay, the
tax system should be designed so they pay
less taxes than people with higher incomes.
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6. Some cities finance their airports with a
departure tax. Every person leaving the city
by plane is charged a small fixed dollar
amount that is used to help pay for building
and running the airport. The departure tax
follows the
a. benefits-received principle.
b. ability-to-pay principle.
c. flat-rate principle.
d. public-choice principle.
A. Those persons who are gaining the most
from the airport are the ones who are
paying the most for it.
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7. Which of the following statements is true?
a. The most important source of revenue to the
federal government is personal income taxes.
b. The most important source of revenue for state
and local governments is sales and property taxes.
c. The second most important source of revenue for
state and local governments is local property
taxes.
d. The taxation burden, measured by taxes as a
percentage of GDP, is lighter in the U.S. than in
most other advanced industrial countries.
e. All of the above are true.
E. All of the above are true
statements.
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8. Which of the following statements is true?
a. A sales tax on food is a regressive tax.
b. The largest source of federal government
tax revenue is individual income taxes.
c. The largest source of state and local
government tax revenue is sales taxes.
d. All the above are true statements.
D. All the above are true statements.
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9. A tax that is structured so that people with
higher incomes pay a larger percentage of
their income for the tax than do people with
smaller incomes is called a (an)
a. income tax.
b. regressive tax.
c. property tax.
d. progressive tax.
D. Answer a is not specific; b is the
opposite principle, and c is based on
property not income.
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10. Generally, most economists feel that a
______type of income tax is a fairer way to
raise government revenue than a sales tax.
a. regressive.
b. proportional.
c. flat-rate.
d. progressive.
D. A progressive tax is argued to be fair
because people with higher incomes
pay more tax.
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11. The federal personal income tax is an
example of a (an)
a. excise tax.
b. proportional tax.
c. progressive tax.
d. regressive tax.
C. Since the marginal tax rate increases
with income, the federal personal income
tax is a progressive tax.
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12. A 5 percent sales tax on food is an
example of a
a. flat tax.
b. progressive tax.
c. proportional tax.
d. regressive tax.
D. A sales tax on food is a regressive tax
because people with higher incomes do not
spend proportionately more on food.
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13. Margaret pays a local income tax of 2
percent, regardless of the size of her income.
This tax is
a. proportional.
b. regressive.
c. progressive.
d. a mix of (a) and (b).
A. Less tax is paid by a regressive tax and
more tax is paid by a progressive tax as
people’s incomes rise.
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14. Which of the following statements relating to
public choice is true?
a. A low voter turnout may result when voters
perceive that the marginal cost of voting
exceeds its marginal benefit.
b. If the marginal cost of voting exceeds its
marginal benefit, the vote is unimportant.
c. Special-interest groups always cause the will
of a majority to be imposed on a minority.
d. All of the above are true.
A. This is the rational ignorance public choice
theory.
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END
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