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ECON CH-14 TAXES AND GOV SPENDING

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 
What do Social Security taxes pay for?
a.
benefits to older citizens, surviving family members of wage earners, and people with certain disabilities
b.
transportation and training expenses for low-income people
c.
benefits to federal workers and military personnel
d.
benefits to those who are unemployed
 

 2. 
What do taxes collected under the Federal Insurance Contribution Act (FICA) fund?
a.
Social Security and Medicaid
b.
Social Security and Medicare
c.
Medicare and Medicaid
d.
Medicaid and Supplemental Security Income
 

 3. 
Which of the following is an example of state spending?
a.
the state police who stopped to assist you when you had a flat tire
b.
state water quality inspections
c.
the state campground where your family vacations
d.
all of the above
 

 4. 
Which is an example of discretionary spending?
a.
Medicare
c.
education
b.
Social Security
d.
Medicaid
 

 5. 
All of the following are constitutional limits on the power to tax EXCEPT that
a.
tax money must not go to individual interests.
b.
federal taxes must be the same in every state.
c.
imports must not be taxed.
d.
exports must not be taxed.
 

 6. 
Your aunt is a state employee. Her salary comes out of the state’s
a.
general accounting budget.
c.
federal budget.
b.
capital budget.
d.
operating budget.
 

 7. 
The sales tax on a $20.00 hammer is 7%, or $1.40. Why is this tax a bigger burden for Josh, who has a $15,000 income, than for Aaron, who has a $150,000 income?
a.
The tax rate is higher for Josh than for Aaron.
b.
The tax represents a larger proportion of Josh’s income.
c.
Josh will have to pay a greater property tax on the hammer than will Aaron.
d.
The burden is the same for both Josh and Aaron.
 

 8. 
Suppose your total taxable income this year is $75,000. You are taxed at a rate of 10% on the first $25,000, 20% on the next $25,000, and 30% on the final $25,000. What is your total income tax?
a.
$15,000
c.
$2,500
b.
$25,00
d.
$7,500
 

 9. 
Your pay stub deducts money for FICA. What does this mean?
a.
Money is being withheld for federal, state, and city taxes.
b.
Money is being withheld for excise and estate taxes.
c.
Money is being withheld to fund Social Security and Medicare.
d.
Money is being withheld for personal exemptions and deductions.
 

 10. 
Your department store receipt says that you paid a 5% sales tax on sports equipment. This sales tax is an example of a
a.
regressive tax.
c.
progressive tax.
b.
income tax.
d.
proportional tax.
 

 11. 
Which of the following is NOT tax exempt?
a.
the convenience store on the corner
b.
the homeless shelter in your neighborhood
c.
the federal military base near your home
d.
your family’s church
 

 12. 
What is a major difference between an operating budget and a capital budget?
a.
An operating budget is for day-to-day expenses; a capital budget is for investment spending.
b.
In an operating budget, legislation is needed; in a capital budget, no legislation is needed.
c.
An operating budget is raised by bonds; a capital budget is raised by taxes.
d.
An operating budget consists of small amounts of money; a capital budget consists of large amounts of money.
 

 13. 
What happens to the money that your employer withholds from your paycheck?
a.
Your employer sends it to the federal government to help pay your income tax bill.
b.
Your employer holds it in case you damage his property.
c.
Your employer holds it until you leave your job and then returns it to you.
d.
Your employer returns to you at the end of the year so that you can pay your federal taxes.
 

 14. 
Which of the following is one reason the federal government collects income taxes as a person earns?
a.
so that the government can pay bills as they come due
b.
so that taxpayers can qualify for refunds of excess tax
c.
so that the money can be put aside until it is needed
d.
so that people do not realize exactly how much they are paying
 

 15. 
What is an entitlement?
a.
a social welfare program providing payments that the government receives for certain services
b.
a social welfare program paying bills for government spending such as supplies and utilities
c.
a social welfare program spending funds over which legislators have direct control
d.
a social welfare program providing benefits to people who meet certain eligibility requirements
 

 16. 
The demand for cable television is relatively elastic, since if the price gets too high, people will rent DVDs or videos instead of watching cable. Who is likely to bear the incidence of a 10 percent tax on cable television?
a.
the consumer and producer equally
c.
the consumer
b.
the government
d.
the producer
 

 17. 
The main source of funding for your school probably comes from
a.
state sales taxes.
c.
local property taxes.
b.
federal income taxes.
d.
payroll taxes.
 

 18. 
What is the major source of tax revenue for local governments?
a.
inheritance taxes
c.
income taxes
b.
sales taxes
d.
property taxes
 

 19. 
The federal government spends the largest amount of its budget on Social Security, which is an example of
a.
discretionary spending.
b.
defense spending.
c.
mandatory spending.
d.
federal aid to state and local governments.
 

 20. 
All but which of the following may be claimed as a tax deduction?
a.
interest on a home mortgage
c.
some medical expenses
b.
money spent on household expenses
d.
donations to charity
 

 21. 
When you drive away from the gas pump, you have just paid a(n)
a.
import fee.
c.
corporate income tax.
b.
estate tax.
d.
excise tax.
 

 22. 
Who generally bears most of a sales tax when the demand for the good taxed is inelastic?
a.
the producer
c.
the wholesaler
b.
the retailer
d.
the consumer
 

 23. 
Which of the following defines a means-tested program?
a.
Age is a major criterion for eligibility.
b.
People pay first and receive benefits later.
c.
Eligibility depends on income.
d.
Any person who is a U.S. citizen is eligible.
 

Matching
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
corporate income tax
g.
incidence of a tax
b.
estate tax
h.
deductions
c.
regressive tax
i.
real property
d.
proportional tax
j.
Medicaid
e.
individual income tax
k.
withholding
f.
gift tax
l.
Social Security
 

 24. 

 a tax for which the percentage of income paid in taxes remains the same for all income levels
 

 25. 

 physical possessions, such as land and buildings
 

 26. 

 variable amounts that you can subtract from your gross income
 

 27. 

 a tax on the value of a company’s profits
 

 28. 

 taking tax payments out of an employee’s pay before he or she receives it
 

 29. 

 a tax on the total value of the money and property of a person who has died
 

 30. 

 a tax on the amount of money a person earns
 

 31. 

 a tax for which the percentage of income paid in taxes decreases as income increases
 

 32. 

 entitlement program that benefits low-income families, some people with disabilities, and elderly people in nursing homes
 

 33. 

 the final burden of a tax
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
individual income tax
g.
balanced budget
b.
tax return
h.
discretionary spending
c.
tax incentive
i.
mandatory spending
d.
tax exempt
j.
Medicare
e.
tax assessor
k.
tariff
f.
tax base
l.
personal property
 

 34. 

 a tax on imported goods
 

 35. 

 a national health insurance program that helps pay for health care for people over age 65 or with certain disabilities
 

 36. 

 budget in which revenues are equal to spending
 

 37. 

 form used to file income taxes
 

 38. 

 an official who determines the value of a property
 

 39. 

 spending on certain programs that is required by existing law
 

 40. 

 not subject to taxes
 

 41. 

 income, property, good, or service that is subject to a tax
 

 42. 

 spending category about which government planners can make choices
 

 43. 

 the use of taxation to encourage or discourage certain types of behavior
 



 
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