Question

The Gini coefficient for the United States in 1980 was 0.403. In 2009, the coefficient was equal to 0.468. This means that

Question 5 options:

	A) there was a decrease in the amount of government transfer payments from 1980 to 2009.
	B) cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality.
	C) per capita income in the U.S. rose from 1980 to 2009.
	D) income inequality increased from 1980 to 2009.

Question 6 (5 points)

Tax laws affect

Question 6 options:

	A) economic efficiency but not equity.
	B) consumption and production, not efficiency and equity.
	C) equity but not economic efficiency.
	D) both efficiency and equity.

Question 7 (5 points)

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers. Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Question 7 options:

	A) The tax will be borne partly by consumers and partly by sellers (passed on in the form of lower wages or reduced profits to the investors).
	B) The tax is borne entirely by the sellers.
	C) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax
	D) It is not possible to answer the question without information on price elasticities.

Question 8 (5 points)

If, as your taxable income decreases, you pay a larger percentage of taxable income in taxes, the tax is progressive.

Question 8 options:

	True
	False

Question 9 (5 points)

According to the marginal productivity theory, the amount of income people will earn in their lives is influenced by how productive a person's labor is.

Question 9 options:

	True
	False

Question 10 (5 points)

The ability to pay principle of taxation implies that regressive taxes are more equitable than progressive taxes.

Question 10 options:

	True
	False

Question 11 (5 points)

Under the U.S. federal income tax system the lowest income earners pay the highest percentage of income to the federal government.

Question 11 options:

	True
	False

Question 12 (5 points)

When the demand for a product is more elastic than the supply,

Question 12 options:

	A) firms pay the entire tax on the product.
	B) consumers pay the majority of the tax on the product.
	C) consumers pay the entire tax on the product.
	D) firms pay the majority of the tax on the product.

Question 13 (5 points)

Which of the following is not an example of rent seeking behavior?

Question 13 options:

	A) engaging in aggressive advertising that slams a competitor's product
	B) competition for the exclusive right to import a product
	C) competition for subsidies
	D) lobbying the government to impose tariffs on certain imported products

Question 14 (5 points)

What is the United States government's formal definition of the poverty line (there are many, many definitions, by the way)?

Question 14 options:

	A) It is the annual income level below which a household is exempt from taxes.
	B) divided by the population, adjusted for a family of four.
	C) It is a level of annual income equal to three times the amount of money necessary to purchase the minimal quantity of food required for adequate nutrition.
	D) It is a level of annual income equal to total income in society

Question 15 (5 points)

The income distribution in an economy can be illustrated graphically with the Lorenz curve.

Question 15 options:

	True
	False

Question 16 (5 points)

A sales tax on a product is borne to a greater degree (proportion) by sellers than buyers when demand is more price elastic than supply is.

Question 16 options:

	True
	False

Question 17 (5 points)

The federal corporate income tax is regressive.

Question 17 options:

	True
	False

Question 18 (5 points)

What are the two types of taxes that working individuals pay on their earnings?

Question 18 options:

	A) property tax and payroll tax
	B) payroll tax and sales tax
	C) individual income tax and social insurance taxes
	D) individual income tax and sales tax

Question 19 (5 points)

If the actual Lorenz curve runs along the lower horizontal axis and the right side vertical line, the economy has absolute income equality.

Question 19 options:

	True
	False

Question 20 (5 points)

What is logrolling?

Question 20 options:

	A) a situation where a policymaker votes to approve a bill in exchange for favorable votes from his colleagues on other bills
	B) a situation where a policymaker gets the government to fund a non-essential project benefiting her family members
	C) a situation where a policymaker accepts bribes to prevent proposed legislation from coming to a vote
	D) a situation where policymakers transfer resources from those voters who are unlikely to have a huge impact on the political outcome to those who contribute to political campaigns

Answer 1

Q5) The answer is (d) as thte Gini coefficient has increased in US and this means that the income inequality is higher in 2009 than in 1980. All other optionns are incorrect as these statements can not be inferred from Gini.

Q6) The answer is (d) as more progressive taxes, for instance, can reduce efficiency but increase equity. All other optionns are incorrect as taxes affect both equity and efficiency.

Q7) the answer is (a) as if the demand and supply are regular downward and upward slping respectively, the tax burden is always shared between the sellers and the buyers.

Q8) The answer is False. Progressive tax measn that as your taxable income decreases, you pay a smaller percentage of taxable income in taxes.