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116. Flat tax critics
117.
In Figure 33.4, what is the cost of labor to the firm after the imposition of the payroll tax, and how many
workers will be hired?
118.
In Figure 33.4, what is the wage rate received by workers after the imposition of the payroll tax?
119.
In Figure 33.4, what is the burden of the tax on workers?
120.
In Figure 33.4, what is the burden of the tax on employers?
121.
Refer to the labor market in Figure 33.5. Suppose the government imposes a payroll tax on employers. How
much of the tax burden is passed on to workers?
122.
Refer to the labor market in Figure 33.5. Suppose that the government imposes a payroll tax on employers
in this market. How much will the government collect in tax receipts for every worker hired?
123.
Refer to the labor market in Figure 33.5. Suppose that the government imposes a payroll tax on employers
in this market. How much of the tax burden will the employers actually pay?
124. A cartoon in the text says that while the economy has been expanding, the share of income to blacks and
poor whites has decreased. This implies that the
A. Area between the Lorenz curve and the absolute equality line has increased.
125. One World View article is titled "U2 Avoids Taxes, Raising Ire in Ireland." The band U2 moved its
corporate headquarters to Amsterdam because the Irish government
126. One World View article is titled "Top Tax Rates." The highest marginal tax rates in the world in 2013 were found
in
A. France.
127. One World View article is titled "Top Tax Rates." The lowest marginal tax rates in the world in 2013 were in
128. In the article "Obama Pitches Tax Hike on the Rich" all of the following are true except
A. In order to reduce the federal budget deficit, the president proposed a tax increase on higher-
129. The benefits of a flat tax include all of the following except
130. The flat tax was originally proposed by
A. Bill Clinton.
131. Public education is an in-kind benefit.
132. A person can have a great deal of wealth but have very little income.
133. In making comparisons of personal income among countries, care must be exercised because in poor countries
much of what is produced does not pass through markets and thus does not get counted in the nation's income.
134. The greater the area between the Lorenz curve and the diagonal line of absolute equality, the more
inequality exists.
Topic: THE SIZE DISTRIBUTION OF INCOME
135. The values of the Gini coefficient range from zero to +1.
136. The principle of horizontal equity is violated if two people who earn the same amount of income actually pay
a different amount in taxes.
137. The nominal tax rate refers to the actual taxes paid as a percentage of taxable income.
138. The effective tax rate refers to the actual taxes paid as a percentage of taxable income.
139. Loopholes, exemptions, and deductions cause an erosion of the tax base.
140. A sales tax is a proportional tax.
142. High-income families pay a significantly greater percentage of their income in taxes compared to low-
income families.
143. The argument for greater equality of income distribution in the United States hinges on the idea that low-income
earners would be more willing and able participants in the economy if income were distributed more equally.
144. A major attraction of the flat tax is its simplicity.
145. Explain the following statement by Arthur Okun: "Insistence on carving the pie into equal slices would shrink the
size of the pie. This fact poses the trade-off between economic equality and economic efficiency."
146. Why isn't the level of personal income always a good measure of the distribution of goods and services?
147. Define vertical equity and horizontal equity. How do tax loopholes sometimes create vertical and horizontal
inequity?
148. What is the difference between nominal and effective tax rates? What creates the distinction?
149. In what way is the Social Security payroll tax regressive?
Chapter 19 Test Bank Summary
Category
# of Questions
AACSB: Analytic
67
AACSB: Reflective Thinking
82
Accessibility: Keyboard Navigation
122
Blooms: Analyze
26
Blooms: Apply
41
Blooms: Evaluate
1
Blooms: Remember
22
Blooms: Understand
59
Difficulty: 01 Easy
22
Difficulty: 02 Medium
60
Difficulty: 03 Hard
67
Learning Objective: 19-01 How the U.S. tax system is structured.
51
Learning Objective: 19-02 What makes taxes more or less progressive.
69
Learning Objective: 19-03 The nature of the equity-efficiency trade-off.
29
Topic: IN THE NEWS
1
Topic: PAYROLL, STATE, AND LOCAL TAXES
14
Topic: TAXES AND INEQUALITY
4
Topic: THE ECONOMY TOMORROW
2
Topic: THE FEDERAL INCOME TAX
63
Topic: THE SIZE DISTRIBUTION OF INCOME
30
Topic: WHAT IS FAIR?
20
Topic: WHAT IS INCOME?
12
Topic: WORLD VIEW
3
