Name:     ID: 
 
Email: 

Ch. 14 Exam

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 
 
Part 1: Main Idea
 

 1. 
What is a tax base?
a.
the lowest tax bracket in a tax table
b.
the value of designated goods or services at time of sale
c.
a form of wealth that is subject to taxes
d.
the formula for calculating income taxes
 

 2. 
With what kind of tax does the tax rate increase as income increases?
a.
flat tax
b.
progressive tax
c.
proportional tax
d.
regressive tax
 

 3. 
What does the government use to try to influence economic behavior?
a.
incidence of tax
b.
progressive tax
c.
regressive tax
d.
tax incentive
 

 4. 
What are tax exemptions?
a.
the amount that taxpayers can subtract from income for each family member
b.
the amount that taxpayers can subtract from income for mortgage interest
c.
the amount that taxpayers can subtract from income for charitable contributions
d.
the amount that taxpayers can subtract from income for medical expenses
 

 5. 
What is the term used to describe the money taken out of a paycheck before the worker receives it?
a.
exemption
b.
deduction
c.
mortgage
d.
withholding
 

 6. 
What payroll tax is taken out to cover Medicare and Social Security?
a.
FDIC
b.
federal withholding
c.
FICA
d.
state withholding
 

 7. 
Which statement is true of discretionary spending?
a.
The government can choose whether or not to fund it.
b.
The government is required by law to fund it.
c.
The government must use payroll taxes to fund it.
d.
The government must use user fees to fund it.
 

 8. 
Which statement is true of mandatory spending?
a.
Most of it is used to fund defense.
b.
Most of it is used to fund education.
c.
Most of it is used to fund entitlements.
d.
Most of it is used to fund highways.
 

 9. 
What is the main effect of transfer payments on the economy?
a.
economic efficiency
b.
economic incentive
c.
income redistribution
d.
resource allocation
 

 10. 
What is the major source of funding for most public schools?
a.
corporate income taxes
b.
individual income taxes
c.
property taxes
d.
sales taxes
 

 11. 
On what principle is the idea of the progressive tax based?
a.
ability-to-pay
b.
benefits-received
c.
efficiency
d.
simplicity
 

 12. 
Which can be taken as an itemized deduction?
a.
automobile payments
b.
clothing expenses
c.
grocery bills
d.
medical expenses
 

 13. 
What are unemployment taxes used for?
a.
to give unemployed workers a government job
b.
to pay employers compensation when workers quit
c.
to give unemployed workers some income
d.
to help employers get through labor stoppages
 

 14. 
Which is part of discretionary spending?
a.
Federal Bureau of Investigation
b.
federal pension plans
c.
Food Stamps
d.
veterans' benefits
 

 15. 
Who sets up the federal budget?
a.
the President
b.
the Congress
c.
the President and Congress
d.
the President and the Cabinet
 

 16. 
The government halts funding to school music programs and funds alternative energy research instead. What does this illustrate?
a.
economic efficiency
b.
economic incentive
c.
income redistribution
d.
resource allocation
 

 17. 
A congressional representative comes from a district with many people living in poverty. To gain more votes in the next election, which tax will the representative most likely support?
a.
progressive income tax
b.
proportional income tax
c.
property tax
d.
sales tax
 

 18. 
Why does the government allow charitable donations as an itemized deduction?
a.
to allocate production resources to charitable organizations
b.
to help undo the negative effects of regressive taxes
c.
to encourage charitable organizations to grow larger
d.
to provide an incentive for people to contribute to charities
 

 19. 
Who contributes the funds to pay for Social Security?
a.
employees only
b.
employers only
c.
both employers and employees
d.
both employers and the government
 

 20. 
What is the cigarette tax an example of?
a.
customs duty
b.
excise tax
c.
gift tax
d.
user fee
 

 21. 
What problem do Social Security and Medicare have in common?
a.
rising costs of health care
b.
growing population of retired people
c.
lack of congressional support
d.
high cost-of-living increases
 

 22. 
Which is a recent reform to an entitlement program?
a.
stricter Homeland Security regulations
b.
disqualifying high-income people from Social Security
c.
allowing private companies to take over Medicare
d.
raising the qualifying age for Social Security
 

 23. 
The state of Illinois has a flat, 3 percent individual income tax. What criterion does this tax meet?
a.
ability to pay
b.
benefits-received
c.
equity
d.
simplicity
 

Essay
 
 
Part 3: Extended Response
Answer the following questions on the back of this paper or on a separate sheet of paper.
 

 24. 
What do you think the fairest type of tax system is? Explain how your choice meets the taxation principles and taxation criteria described in this chapter.
 



 
         Start Over