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Chapter 07 - The Government Sector
Chapter 07
The Government Sector
Multiple Choice Questions
1. The role of government has grown tremendously over the last _____ decades.
A. four
B. six
C. eight
D. ten
2. Each of the following is a basic economic role of the government except

A. tax collection.
B. spending money.
C. regulation of the economy.
D. owning most of the means of production.
3. The federal budget is prepared and passed by

A. the president.
B. Congress.
C. the president and Congress.
D. neither the president nor Congress.
4. Federal spending on defense comes to about _____ per person in the United States.
A. $1,000
B. $1,900
C. $2,700
D. $3,500
7-1
5. Which statement is true?

A. State and local governments are expected to provide more and more services while their
tax bases are limited.
B. State and local governments are expected to provide less and less services while their tax
bases are relatively unlimited.
C. Public education has traditionally been the role of the federal government.
D. None of these statements is true.
6. The largest source of federal tax revenue comes from

A. individual income taxes.
B. social insurance receipts.
C. corporation income taxes.
D. excise taxes.
7. Each of the following is an indirect tax except the _____ tax.

A. gasoline
B. telephone
C. corporate income
D. excise

A. The Kemp-Roth Tax Cut of 1981 and the Tax Reform Act of 1986 both lowered federal
personal income tax receipts.
B. The Kemp-Roth Tax Cut of 1981 and the Tax Reform Act of 1986 raised federal personal
income tax receipts.
C. The Kemp-Roth Tax Cut of 1981 raised federal personal income tax receipts while the Tax
Reform Act of 1986 lowered them.
D. The Kemp-Roth Tax Cut of 1981 lowered federal personal income tax receipts while the
Tax Reform Act of 1986 raised them.
7-2
9. Most poor families pay _____ federal personal income tax.

A. no
B. a little
C. a substantial part of their incomes in
10. The fastest growing source of federal tax revenue is the _____ tax.
A. personal income
B. corporate income
C. payroll
D. excise
11. The key agency in the preparation of the president's budget is

A. the Treasury.
B. the Office of Management and Budget (OMB).
C. the Comptroller of the Currency.
D. the Department of the Defense.
12. In 2010, a person earning $300,000 would pay Social Security tax on
A. none of her income.
B. all of her income.
C. nearly all of her income.
D. less than half of her income.
13. The most important source of state tax revenue is the _____ tax.
A. property
B. income
C. excise
D. sales
7-3
14. Which statement is false?

A. About seven percent of federal government spending goes toward interest on the national
debt.
B. Over eighty percent of local taxes comes from property taxes.
C. The federal government will spend over $3.8 trillion this fiscal year.
D. None of these statements is false.

A. The Social Security tax is progressive.
B. An excise tax on cigarettes is regressive.
C. A sales tax is a direct tax.
D. None is true.
16. Which one of these is not an economic function of the federal government?
A. Redistribution of income.
B. Stabilization.
C. Economic regulation.
D. Each is an economic function of the federal government.
17. The sales tax is the most important source of _____ government revenue.
A. federal
B. state
C. local

A. The Social Security tax is an excise tax.
B. A person earning $100,000 pays a higher percentage of her income in Social Security tax
than someone earning $50,000.
C. The Social Security tax is an indirect tax.
D. None is true.
7-4
19. The maximum anyone had to pay in Social Security tax in 2009 was about ____.
A. $850
B. $6,620
C. $8,500
D. $17,000
20. Most sales taxes are ___________; most excise taxes are _________.
A. progressive, progressive
B. regressive, regressive
C. progressive, regressive
D. regressive, progressive
21. The property tax is the most important source of _____ government revenue.
A. federal
B. state
C. local
22. Under the Tax Reform Act of 1986 the maximum rate of the corporate income tax was
A. raised.
B. lowered.
C. not changed.
23. The Social Security tax is

A. direct and progressive.
B. direct and regressive.
C. indirect and progressive.
D. indirect and regressive.
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24. According to Adam Smith, each of these was an economic role of government except
A. protecting society from violence and invasion.
B. protecting individuals from oppression.
C. erecting public works which would not be in the interest of private individuals to erect.
D. redistributing some income from the rich to the poor.
25. Most excise taxes are

A. progressive.
B. proportional.
C. regressive.

A. There are now nine federal personal income tax brackets.
B. Most people pay more in Social Security tax than in personal income tax.
C. We pay more in direct than indirect taxes to the federal government.
D. None is false.
27. A wage earner making $10,000 pays

A. more in Social Security tax than in personal income tax.
B. more personal income tax than in Social Security tax.
C. about the same in Social Security tax as in personal income tax.

A. The corporate income tax now produces only thirteen percent of federal tax revenue.
B. The Tax Reform Act of 1986 took millions of poorer families off the income tax rolls.
C. The Kemp-Roth tax cut of 1981 lowered the average citizen's tax bill by 23%.
D. None is false.
7-6
29. The federal government's fiscal year is _____ months long.

A. 6
B. 9
C. 12
D. 18
E. 24

A. Most federal government revenue comes from the personal income tax.
B. The federal personal income tax puts a greater burden on the poor and middle class.
C. The United States is among the most highly taxed industrial countries.
D. None is true.
31. Compared to people earning $150,000 a year, people earning $300,000 pay _________
Social Security taxes.
A. less
B. the same
C. slightly more
D. twice as much
32. The corporate income tax is

A. direct.
B. indirect.
C. neither direct nor indirect.
D. both direct and indirect.
33. In 1980 the top marginal tax rate was

A. 28 percent.
B. 33 percent.
C. 50 percent.
D. 70 percent.
E. 90 percent.
7-7
34. The economic policy of the U.S. government could have been described as laissez-faire
until about
A. 1860.
B. 1900.
C. 1933.
D. 1945.
E. 1960.
35. Each of the following is a goal of the federal government except

A. fostering competition.
B. price stability.
C. low unemployment.
D. expanding government ownership.
36. The sales tax

A. is a direct tax.
B. is an indirect tax.
C. may be either a direct or an indirect tax.
D. is neither a direct nor an indirect tax.
37. The federal government spends

A. slightly more on defense than on Social Security.
B. slightly more on Social Security than on defense.
C. about the same on Social Security as on defense.
38. Interest payments on the national debt are about _____ percent of total federal
expenditures a year.
A. 2
B. 5
C. 7
D. 11
E. 14
7-8
39. Which of the following statements does not apply to the U.S. tax structure?
A. The individual income tax system is progressive.
B. General sales taxes are regressive.
C. Property taxes are an important source of revenue for the federal government.
D. The major sources of revenue for the federal government differ from the major sources of
revenue for state and local governments.
40. Which of the following pairs represents the chief source of income and the most important
type of expenditure of local governments?
A. Property tax and expenditures for highways
B. Property tax and expenditures for education
C. Sales and excise taxes and expenditures for public welfare
D. Sales and excise taxes and expenditures for police, fire, and general government
41. What proportion of the federal spending is available for discretionary spending?
A. 9 percent.
B. 14 percent.
C. 23 percent.
D. 46 percent.
42. A tax on _____ would be the least regressive.

A. food
B. cigarettes
C. beer
D. luxury cars
43. Mr. Bush earns $1,000,000 and pays $100,000 in taxes. Mr. Gore earns $150,000 and
pays $17,500 in taxes. The tax they pay would be considered
A. progressive.
B. proportional.
C. regressive.
7-9
44. Transfer payments to individuals amount to a little less than _____ of total government
spending.
A. three-quarters
B. two-thirds
C. half
D. one-third
E. one-quarter
45. In modern free enterprise economies, which of the following is not an economic role of
government?
A. Stabilization of national income, employment, and the price level
B. Promotion and maintenance of competitive markets
C. Altering the allocation of resources to provide for public demands efficiently
D. Providing a reasonably certain legal, social, and business environment for stable economic
growth
E. Planning the production and distribution of most economic goods
46. Which of the following accounts for the largest percentage of all federal expenditures?
A. Income security such as Social Security
B. National defense
C. Interest on the public debt
D. Veterans' services
47. In a progressive tax structure,

A. the marginal tax rate exceeds the average tax rate.
B. vertical equity exists.
C. the average tax rate rises as income falls.
D. all the choices.
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48. Which of the following is a transfer payment?

A. The president's salary
B. Veterans' benefits
C. The NASA budget
D. Schoolteachers' salaries
E. Provision of national parks
49. The money that pays Social Security benefits is raised by

A. taxes that workers pay.
B. taxes that employers pay.
C. taxes that both workers and employers pay.
D. the personal income tax.
50. Statement I: Social Security benefits are financed entirely by taxes that workers pay.
Statement II: Social Security benefits are a government transfer payment.
A. Statement I is true and statement II is false.
B. Statement II is true and statement I is false.
C. Both statements are true.
D. Both statements are false.
51. The essential difference between sales and excise taxes is that
A. sales taxes apply to a wide range of products, while excise taxes apply only to a select
group of products.
B. excise taxes apply to a wide range of products, while sales taxes apply only to a select
group of products.
C. sales taxes are consumption taxes, while excise are not.
D. excise taxes are consumption taxes, while sales are not.
7-11
52. Excise taxes are

A. really income taxes in disguise.
B. profits taxes on major corporations.
C. per-unit taxes on specific goods.
D. percentage taxes on sales revenues.
E. the second most important source of federal revenue.
53. Which of the following is NOT an example of a transfer payment?

A. The salaries received by social workers employed by the federal government.
B. Food stamps.
C. Unemployment compensation.
D. Social security payments.
E. Payments under the Aid to Families with Dependent Children program.
54. Statement I: The federal corporate income tax is a direct tax.
Statement II: The Social Security tax is a regressive tax.

55. An excise tax on cigarettes is ________ and _______.

A. regressive, direct.
B. regressive, indirect.
C. progressive, direct.
D. progressive, indirect.
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56. Statement I: Most taxes are proportional, in effect.
Statement II: The federal government gets most of its revenue from indirect taxes.
57. Which of the following statements is true?

A. New Hampshire residents pay a higher percent of their income in taxes than the people in
the province of Quebec, Canada.
B. The top marginal tax rate today is about half of the top marginal tax rate in 1960.
C. Today the overall tax burden is about the same as what it was in 1929.
D. Education in the U.S. is paid for exclusively by local taxes.
58. With respect to local finance, it is correct to say that

A. Sales and excise taxes are the major source of revenue and highway construction and
maintenance the major type of expenditure.
B. Property taxes are the basic source of revenue and education the major type of expenditure.
C. The corporate income tax is the major source of revenue and natural resource development
the major type of expenditure.
D. Estate and gift taxes are the major source of revenue and most expenditures are for
hospitals and health services.
59. During the last half of 2008 and the first half of 2009, the congress passed and the
President signed two bills totaling about _______________ in an attempt to avert the Great
Recession.
A. about $700 billion
B. about $800 billion
C. nearly $1.5 trillion
D. more than $2.0 trillion
7-13
60. Federal government spending on medicare & medicaid have increased by a factor of
_____ between 1969 and 2011.
A. 2
B. 4
C. 5
D. over 7
61. If your taxable income rises from $35,000 to $45,000, and the taxes you pay rise from
$12,000 to $15,000, your marginal tax rate is
A. 10 percent.
B. 20 percent.
C. 30 percent.
D. 40 percent.
E. Impossible to determine.
A. 15 percent.
B. 25 percent.
C. 35 percent.
D. 45 percent.
63. An example of a tax that is generally regarded to be progressive is

A. the federal income tax.
B. the excise tax on gasoline.
C. the state sales tax.
D. the payroll tax.
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64. Statement I: Most poor people have an average tax rate of 10 percent.
Statement II: In 1992 the maximum federal personal income tax rate was 31 percent.
65. Statement I: Most Americans pay more in Social Security tax than in personal income tax.
Statement II: A tax on cigarettes is more regressive than a tax on long distance phone calls.
66. Statement I: A progressive tax places a heavier burden on the rich than on the poor.
Statement II: The Social Security tax is more regressive than the federal personal income tax.
67. In 2009 the highest federal personal income tax bracket was _____ percent.
A. 28
B. 35
C. 36
D. 50
E. 70
7-15
68. If taxable income is rising and if the marginal tax rate is greater than the average tax rate,
then
A. the average tax rate must be rising.
B. the average tax rate must be falling.
C. the average tax rate may be either rising or falling.
D. the tax is regressive.
69. In 2011 when the "Bush tax cuts" expire the percentage tax rate for the rich will revert
back to the (pre-Bush) rate of ____________ percent if congress doesn't pass a new law.
A. 36.5
B. 39.6
C. 44.0
D. 70.0
70. Which of the following would not be a government transfer expenditure?

A. Contribution of employers to support the Social Security program
B. Social security payments to the aged
C. Unemployment compensation benefits
D. Payments to the widows of war veterans
71. A progressive tax is one where the percentage charged on income ______________ as
income increases.
A. increases and then decreases
B. is constant
C. decreases
D. increases
72. Which of the following federal government expenditures is the largest burden on the
budget?
A. Social security
B. Medicare and medicaid
C. Defense
D. Interest on national debt
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73. In 2010, anyone with an income in excess of $_____________ pays the marginal tax rate
of 35%.
A. 500,000
B. 372,950
C. 296,400
D. 198,200
74. Warren Buffett, the noted stock market investor, and world's second richest man has
noted:
A. his average tax rate is lower than his secretary.
B. his world ranking would increase substantially if taxes were lower $20,000
C. his taxes were so high that he was supporting the government by himself.
D. his wealth was very high because of the low tax rates enjoyed by the rich.
75. A person earning $200,000 a year pays a little over _____ in payroll taxes.
A. $6,000
B. $9,500
C. $12,000
D. $15,000
76. If you had $1,000 of taxable income you would have to pay _____ in federal income tax.
A. 0
B. $100
C. $150
D. Between $150 and $280
E. $280
7-17
77. If you had a total income of $4,000 (including wages, interest, and dividends) you would
have to pay federal personal income taxes of
A. 0.
B. Less than $600.
C. $600.
D. More than $600.
E. It is impossible to answer without more information.
78. If Mr. Perot faces a 90 percent marginal tax rate,

A. his average tax rate must be falling.
B. the next dollar he earns nets him 90 cents.
C. his total tax payments equal 90 percent of his income.
D. he has a strong incentive to work harder.
E. he has a strong incentive to work less.
79. The second largest source of federal revenue is

A. the individual income tax.
B. the corporate income tax.
C. the payroll tax.
D. sales and excise taxes.
80. Under a progressive income tax, as income increases

A. taxes increase at the same rate as income; if income increases by 10%, taxes increase by
10%.
B. taxes decreases as a share of income.
C. absolute tax payments increase, but the average tax rate declines.
D. taxes increase as a percent of income.
81. The tax rates embodied in the federal personal income tax are such that
A. a rising absolute amount, but a declining proportion, of income is paid in taxes.
B. the marginal and average tax rates are equal, making the tax progressive.
C. the average tax rate rises more rapidly than does the marginal tax rate.
D. the marginal tax rate is higher than the average tax rate, causing the average tax rate to rise.
7-18
82. Which statement is the most accurate?

A. The federal government gets much more money from tax revenues than from borrowing.
B. The federal government gets a little more money from tax revenues than from borrowing.
C. The federal government gets a little more money from borrowing than from tax revenues.
D. The federal government gets much more money from borrowing than from tax revenues.
83. Sales and excise taxes tend to be ___________ because low income people tend to spend
a _________ fraction of their income than high income people.
A. progressive; larger
B. regressive; larger
C. progressive; smaller
D. regressive; smaller
84. Statement I: Most taxes are proportional in effect.
Statement II: A tax that is nominally regressive will be regressive in effect.

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85. The tax shown in the graph above is

A. nominally progressive and regressive in effect.
B. nominally progressive and progressive in effect.
C. nominally proportional and progressive in effect.
D. nominally proportional and regressive in effect.
86. In 2009, _____________ of Americans owed no federal income taxes.

A. 60%
B. 47%
C. 38%
D. 26%
87. The Jones family has an average tax rate of 15 percent. Its marginal tax rate is
A. less than 15 percent.
B. 15 percent.
C. more than 15 percent.
D. impossible to find.
88. In 2007, the richest 400 U. S. households earned an average income of $345 million. What
was their average income tax rate?
A. 34 percent.
B. 25 percent.
C. About 17 percent.
D. Less than 12 percent.
89. For a progressive tax the

A. average tax rate exceeds the marginal tax rate as income rises.
B. marginal tax rate declines as income increases.
C. average and marginal tax rates are equal.
D. marginal tax rate exceeds the average tax rate as income rises.
7-20
90. Which of the following is the best example of a government expenditure for goods or
services?
A. Salaries of Supreme Court justices
B. Social security pensions paid to the elderly
C. Welfare payments
D. Unemployment compensation
E. The progressive income tax
91. Social Security benefits are funded by

A. special taxes on corporate profits.
B. property taxes and user taxes.
C. a payroll tax with equal contributions from employer and employees and by self-
employment taxes.
D. a special tax on corporate profits and approximately 10 percent of general sales taxes.
E. a combination of sales taxes, property taxes, corporate profit taxes and user fees.
92. Which of the following statements about the Social Security tax is not true?
A. It is a progressive tax.
B. It came into existence in 1935.
C. It is imposed on employers and employees.
D. It is a payroll tax.
93. Statement I: We have faithfully followed Adam Smith's description of the government's
economic role.
Statement II: The U.S. government's role has grown smaller over the last 70 years.
7-21
94. Statement I: The economic role of government has been growing over the last eight
decades.
Statement II: The economic role of government will definitely be reduced in the coming
years.
95. In recent years our social and economic problems have _____ and government will get
_____ involved in solving these problems.
A. increased, more
B. increased, less
C. decreased, more
D. decreased, less
96. In 2010 Mr. Huckabee paid $500 in personal income tax. His taxable income was
A. $5,000.
B. $10,000.
C. $15,000.
D. $20,000.
97. Mr. Romney paid $300 in personal income tax. His taxable income was
A. $1,000.
B. $2,000.
C. $3,000.
D. $10,000.
7-22
98. "Taxable income" is

A. total income less deductions and exemptions.
B. earned income less property income.
C. all income other than wages and salaries.
D. wage and salary income only.
99. Statement I: The two largest categories of federal spending are Social Security and
defense.
Statement II: The payroll tax is a more important source of revenue for the federal
government than the corporate income tax.
100. The marginal tax rate is calculated by dividing

A. taxes paid by taxable income.
B. taxable income by taxes paid.
C. additional taxes paid by additional taxable income.
D. additional taxable income by additional taxes paid.
101. Statement I: Federal marginal income tax brackets for the wealthy are higher today than
they were in 1980.
Statement II: The highest federal income tax bracket today is 70 percent.
7-23
102. The average tax rate is calculated by dividing

103. Which of the following schedules represent(s) a progressive tax?
A. I and III
B. I
C. II
D. I and II
E. III
104. Under a proportional income tax, the average tax rate

A. decreases as income increases.
B. increases as income increases.
C. remains constant at all levels of income.
D. initially decreases, then increases, as income increases.
The Joneses have a taxable income of $18,000, all in the form of wages. They have three
children, and they take the standard deduction.

A. The Joneses pay more in Social Security tax than in personal income tax
B. The Joneses pay more in personal income tax than in Social Security tax
C. The Joneses pay about the same amount in Social Security tax and personal income tax
D. It is impossible to determine if the Joneses pay more in Social Security tax than in personal
income tax
7-24
106. The Joneses pay no more than _____ in personal income tax.
A. $5,000
B. $3,000
C. $1,800
D. $750
E. $0
107. Defense is the largest single component of federal government taking ________ cents
our of every government dollar spent.
A. 13
B. 16
C. 20
D. 24
108. Under a progressive income tax, the average tax rate

B. remains constant at all levels of income.
C. increases as income increases.
109. The tax represented here is

A. progressive.
B. proportional.
C. regressive.
D. none of the choices.
7-25
110. If your taxable income is $50,000, your average tax rate is

A. 8 percent.
B. 12 percent.
C. 16 percent.
D. 20 percent.
E. 25 percent.
111. If your taxable income increases from $30,000 to $40,000, your marginal tax rate is
A. 10 percent
B. 20 percent
C. 30 percent
D. 40 percent
E. 50 percent
112. When taxable income rises from $40,000 to $50,000,

A. your average tax rate is greater than your marginal tax rate.
B. your marginal tax rate is greater than your average tax rate.
C. your marginal and average tax rates are equal.
D. it is impossible to determine if your average or marginal tax rate is higher.

A. progressive.
B. proportional.
C. regressive.
7-26
A. 5 percent.
B. 7.5 percent.
C. 10 percent.
D. 12.5 percent.
E. 15 percent.
115. If your taxable income is $30,000, how much tax would you owe?
A. $500
B. $1,000
C. $1500
D. $2,000

A. Your average tax rate is greater than your marginal tax rate.
B. Your marginal tax rate is greater than your average tax rate.
C. Your marginal and average tax rates are equal.
D. It is impossible to determine if your average or marginal tax rate is higher.
117. Statement I: A tax on cigarettes is regressive.
Statement II: The federal personal income tax is more progressive today than it was in 1980.
118. A progressive tax is such that

A. tax rates are higher the smaller one's income.
B. the same tax rate applies to all income receivers, so that the rich pay a greater amount of
taxes than the poor.
C. the greatest burden is on low-income workers.
D. none of the above holds true.
7-27
119. Most U.S. government spending is financed by

A. an expansion of the money supply.
B. taxes.
C. government securities.
D. transfer payments.
E. loans from foreign countries.
120. Ralph earns $40,000 per year. According to the income tax schedule, he must pay $4,000
in income taxes this year. If he had earned $50,000 his tax liability would have been $6,000.
What marginal tax rate does Ralph face?
A. 10 percent
B. 12 percent
C. 20 percent
D. 66 percent
121. Statement I: Foreign aid is the fourth largest federal spending program.
Statement II: Most Americans pay more in Social Security taxes than in federal personal
income taxes.
122. According to the IRS, the average large corporation in the United States paid just less
than _______ percent in 2006.
A. 34
B. 27
C. 24
D. 13
7-28
123. In 2010 the highest marginal tax rate for the federal personal income tax was _____
percent.
A. 28
B. 33
C. 35
D. 50
E. 70
124. Which one of these is the largest?

A. Federal tax receipts
B. Federal transfer payments
C. Federal borrowing
D. Federal purchases of goods and services
125. The federal government gets _____ of its tax revenue from direct taxes.
A. all.
B. nearly all
C. about half
D. less than half
E. none
126. Groucho earns $5 million and pays $2 million in taxes; Harpo earns $300,000 and pays
$80,000 in taxes; Chico earns $25,000 and pays $1,000 in taxes. The tax they pay would be
considered
A. progressive.
B. proportional.
C. regressive.
127. The rich pay a _____ proportion of their income and a _____ dollar amount of federal
income tax than the middle class.
A. higher, higher
B. lower, lower
C. higher, lower
7-29
128. Who, from among the following, said this "In this world nothing can be said to be
certain, except death and taxes."
A. Thomas Jefferson
B. Adam Smith
C. Benjamin Franklin
D. Sir William Petty
E. John Stuart Mill

A. Direct taxes cannot be regressive.
B. Progressive taxes are always direct.
C. The federal personal income tax is more progressive than the Social Security tax.
D. None is true.
130. Government purchases of goods and services do NOT include

A. government input costs.
B. the military payroll.
C. purchases of final products.
D. purchases by state governments.
E. welfare payments.
131. Statement I: Taxes for the rich were raised substantially in 1990 and 1993.
Statement II: Personal income tax rates are much lower today than they were in 1980.
7-30
132. Statement I: Two major personal income tax cuts were passed during the administration
of President Ronald Reagan.
Statement II: The top marginal tax rate for the federal personal income tax was 70 percent in
1980.
133. During the Clinton administration, the marginal tax rate on the rich was:
A. Decreased
B. Stayed the same
C. Increased by about 2 percent
D. Increased by over 7 percent

A. The federal, state, and local governments collect a combined total of over 40 percent of our
GDP in the form of taxes.
B. A rich person has a much lower marginal tax rate on their personal income taxes today
than she did in 1980.
C. The federal government spends more on foreign aid than it does on Medicare.
D. Most Americans pay more in federal personal income tax than they do in payroll tax.
135. Most state revenue comes from the _____ tax and most local revenue comes from the
_____ tax.
A. property, property
B. sales, sales
C. sales, property
D. property, sales
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136. In the United States, federal government tax receipts are somewhat less than _____
percent of GDP.
A. 10
B. 20
C. 30
D. 40
E. 50
137. Which country from the following provides its government with the same percent of its
GDP in taxes as the U.S.?
A. Germany
B. Britain
C. Italy
D. France
E. None of the choices

A. Social Security taxes must be paid on all income.
B. Social Security taxes must be paid on all wages and salaries.
C. Social Security taxes must be paid on interest income unless it is tax-exempt.
D. None is true.

A. A poor person who smokes pays a higher percentage of her income in cigarette excise tax
than a rich person.
B. The cigarette excise tax is a regressive tax.
C. The cigarette excise tax is a direct tax.
D. None is false.
140. Which of the following is a true statement concerning federal transfer payments?
A. Transfer payments ultimately must be repaid to the government by recipients.
B. Transfer payments are included in the imports category of GDP.
C. Transfer payments are included in the net exports category of GDP.
D. Transfer payments are payments made by the government for which no good or service is
currently received in return.
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141. An example of a transfer payment is

A. old-age pensions.
B. a private firm's payments of dividends to stockholders.
C. military expenditures.
D. military aid to a foreign country.
142. The first year of the New Deal was

A. 1929.
B. 1933.
C. 1945.
D. 1952.
E. 1960.

A. The government sector of GDP is larger than the consumption sector.
B. The federal government spends about five percent of our GDP on foreign aid.
C. The federal government spends less on Social Security than it does on defense.
D. None is true.

A. The federal government collects more in Social Security taxes than in personal income tax.
B. The federal government collects more in Social Security taxes than in corporate income
tax.
C. The federal government collects more in personal income tax than in corporate income tax.
D. None is false.
145. Transfer payments are paid mainly to

A. individuals.
B. business firms.
C. foreign countries.
D. government bondholders.
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146. Which one of these people said this? "The art of taxation consists in so plucking the
goose as to obtain the largest possible amount of feathers with the smallest amount of
hissing."
A. John Stuart Mill
B. John Maynard Keynes
C. Milton Friedman
D. Karl Marx
E. Jean Baptiste Colbert

A. The federal government's fiscal year 2006 started on January 1, 2006.
B. The federal government gets most of its tax revenue from the federal personal income tax.
C. Net interest on the national debt is about 15 percent of the federal budget.
D. None is true.
148. After the major income tax decrease for the high income earners in 1981, the federal
deficit _______ by 1990.
A. had not changed
B. tripled
C. cut by half
D. doubled
149. The federal personal income tax is

A. direct and regressive.
B. direct and progressive.
C. indirect and regressive.
D. indirect and progressive.
150. The federal tax on cigarettes is

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A. Our foreign aid to our friends, allies, and many of the poorer countries of the world comes
to nearly five percent of our GDP.
B. Total federal government spending (purchases plus transfer payments) totals almost $1
trillion.
C. Defense spending accounts for about one out of every three dollars the federal government
spends.
D. Our foreign aid to our friends, allies, and many of the poorer countries of the world comes
(according to the Author) to "chump change".
152. A couple with two dependent children with a taxable income of $12,000 will
A. definitely pay some personal income tax.
B. probably pay some personal income tax.
C. pay no personal income tax.
D. There is not enough information to make any of these statements.

A. The federal personal income tax is a proportional tax.
B. The cigarette tax is an excise tax.
C. The tax on gasoline is a direct tax.
D. None is true.
154. Statement I: The primary income sources of the rich are dividends, interest, and profit,
none of which is subject to the Social Security tax.
Statement II: The payroll tax is the federal government's fastest-growing source of revenue.
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155. In 2010, a married couple with one child earning $32,000 would pay $2,448.00 in
payroll tax and $__________ in federal income taxes.
A. more than $2,000
B. about $1,000
C. more than $750
D. 0

A. The federal government collects much more in direct taxes than in indirect taxes.
B. The federal government collects much more in indirect taxes than in direct taxes.
C. The federal government collects about the same amount in direct taxes as in indirect taxes.

B. The federal government spends about five percent of our GDP on interest on the debt.
C. The federal government spends more on Social Security and Medicare (combined) than it
does on defense.
D. None is true.
158. Who said this? "The government is best which governs least".
A. Thomas Jefferson
B. Sir William Petty
C. John Stuart Mill
D. Benjamin Franklin
E. John Maynard Keynes
159. Who, among the following, said this? "It is generally allowed by all, that men should
contribute to the public charge but according to the share and interest they have in the public
peace; that is, according to their estates or riches".
A. Benjamin Franklin
C. Jean Baptiste Colbert
D. Adam Smith
E. John Stuart Mill
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160. Who said this? ". . . the sovereign has only three duties to attend to. . . . first, the duty of
protecting the society from violence and invasion . . .; secondly, the duty of protecting . . .
every member of the society from the injustice or oppression of every other member of it all;
and thirdly, the duty of erecting and maintaining certain public works and public institutions,
which it can never be for the interest of any individual . . . to erect and maintain. . . "
A. Adam Smith
B. John Stuart Mill
C. Sir William Petty
D. Franklin Roosevelt
E. Thomas Jefferson
161. Statement I: We could make the Social Security tax less regressive by lowering the
wage-base limitation to $25,000.
Statement II: The highest marginal tax rate on the federal personal income tax is 31 percent.
162. An average tax rate of 1% on the poor and 20% on the rich would be
A. progressive.
B. proportional.
C. regressive.
163. An average tax rate of 20 percent on the poor and 1 percent on the rich would be
A. progressive.
B. proportional.
C. regressive.
164. Which is the most accurate statement?

A. The cigarette tax is progressive.
B. Gasoline taxes in the U.S. are higher than in most other industrial countries.
C. The taxes on cigarettes and gasoline are excise taxes.
D. The corporate income tax is the federal government's largest source of tax revenue.
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165. The tax on cigarettes is

A. regressive and indirect.
B. regressive and direct.
C. progressive and indirect.
D. progressive and direct.
166. In the Netherlands and Germany a gallon of gasoline costs a little over
A. $7.00.
B. $4.
C. $3.
D. $2.

A. Americans pay higher taxes on gasoline than do the people in most other industrial
countries.
B. In general, excise taxes tend to be regressive.
C. The projected 2011 total federal tax revenue is more than federal government spending.
D. The new tax rates in the tax cut of 2003 are permanent.

A. The tax burden of Americans is about the lowest of the industrial countries.
B. Americans pay more in state and local taxes than they do in federal taxes.
C. The federal government takes in more revenue from indirect taxes than from direct taxes.
D. State and local tax receipts have declined as a percentage of GDP since 1945.
169. From the mid-1970s to the mid-1990s, the federal government ran a _____ and the state
and local governments ran a ____.
A. deficit, deficit
B. deficit, surplus
C. surplus, surplus
D. surplus, deficit
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A. The federal government gets most of its tax receipts from the corporate income tax.
B. Nearly one third of all federal expenditures go toward paying interest on the national debt.
C. The largest two federal spending categories are defense and Social Security.
D. About 3 percent of federal government spending is on defense.
171. The top federal personal income tax bracket is now _______ percent.
A. 25
B. 35
C. 55
D. 70
E. 85

A. State and local government spending is almost half the level of federal spending.
B. Defense spending is much higher today than it was in 1990.
C. Most members of Congress have agreed to vote to cut Social Security benefits to bring
down the federal budget deficit.
D. Direct benefit payments to individuals now account for 25 percent of all federal
government spending.

A. Defense spending as a percent of the federal budget has steadily fallen since 1990.
B. Today we spend as more on defense than the rest of the world combined.
C. The largest federal government purchase is education.
D. State and local government spending has been declining since the mid-1980s.
174. Mr. and Mrs. Jones have three children, earn $22,000 at their jobs, and have no other
income. We may conclude that they
A. probably pay more payroll tax than federal personal income tax.
B. definitely pay more payroll tax than federal personal income tax.
C. probably pay more federal personal income tax than payroll tax.
D. definitely pay more federal personal income tax than payroll tax.
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175. Ms. Rockefeller has an income of $200 million. If her income is in the form of wages
and salary, then most of her income is taxed at __________ percent.
A. 15 percent
B. 27 percent
C. 30 percent
D. 35 percent
E. 38.6 percent
176. Statement I: Compared to citizens of other leading industrial countries, Americans are
overtaxed.
Statement II: We could make the payroll tax less regressive by raising the wage-base
limitation to $200,000.
177. Services the federal government provides include

A. building and maintaining the interstate highway system.
B. bank inspections.
C. environmental protection.
D. the carrying out of scientific research.
E. all the choices.
178. K – 12 public education in the U.S. is paid for mainly by the _____ tax.
A. income
B. sales
C. excise
D. property
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A. Most public goods and services could be provided more profitably by private companies.
B. Nearly all of the money that the federal government redistributes goes from the rich and
the middle class to the poor.
C. One of the ways the federal government stabilizes our economy is by placing a floor under
our economy's purchasing power.
D. The total federal budget today is less than 5 percent of GDP.
180. Pei Chen has a federal personal income marginal tax rate of 28 percent. His average tax
rate
A. is more than 28%.
B. is also 28%.
C. is less than 28%.
D. is zero.
181. Mr. and Mrs. Nakama were paying $6,000 taxes on a combined taxable income of
$40,000. When they both received pay increases, they found themselves in a higher tax
bracket-28 percent. Their average tax rate
A. fell.
B. rose to 15%.
C. rose to between 15% and 28%.
D. rose to 28%.
E. rose above 28%.
182. Claire Quinn has a marginal tax rate of 33 percent on her federal personal income tax.
Her average tax rate is
A. more than 33%.
B. also 33%.
C. less than 33%.
D. zero.
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A. Foreign aid is the fourth largest spending item in the federal budget.
B. Nearly half of federal government spending goes for direct payments to individuals.
C. Over half of all federal tax receipts comes from the personal income tax.
D. Defense spending per capita is less than most other industrial countries.

A. Most taxes are proportional taxes.
B. Poor people bear most of the burden of progressive taxes.
C. John Stuart Mill was the first to make the distinction between direct and indirect taxes.
D. President Reagan was largely responsible for raising personal income tax rates.

A. A person earning $100,000 pays $10,000 in payroll tax.
B. Most taxpayers pay more in payroll tax than in personal income tax.
C. The Medicare tax rate is 6.2%.
D. There is no such thing as a regressive tax.
186. In the 1950s the top marginal federal personal income tax rate was
A. 91%.
B. 70%.
C. 50%.
D. 31%.
E. 28%.
187. Statement I: The top marginal rate of the federal personal income tax is much lower
today than it was in the 1950s.
Statement II: The Social Security system will run out of money by the year 2013.
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188. Statement I: The average tax rate is found by dividing taxable income by taxes paid.
Statement II: Rich people generally pay a higher marginal tax rate than their average tax rate.
189. Statement I: The highest marginal federal personal income tax rate is 30 percent.
Statement II: The marginal tax rate is found by dividing additional taxes paid by additional
taxable income.
190. The excise tax on gasoline is

A. a direct tax.
B. an indirect tax.
C. a direct tax and an indirect tax.
D. neither a direct tax nor an indirect tax.

A. a direct tax.
B. an indirect tax.
C. both a direct tax and an indirect tax.
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192. The Tea party in the United States in 2009-2010 unlike the Boston Tea party is not
demonstrating against taxation without representation but
A. taxation with representation
B. the unwarranted increase in the economic role of the federal government.
C. the election of a President who they do not believe was a born citizen of the U. S.
D. the use of Keynesian economics to avoid a depression $0.
193. Which of the following is true?

A. The role of government grew most rapidly from 1920 to 1933.
B. The role of government grew most rapidly during Franklin Roosevelt's Administration
from 1960 to 1975.
C. The seeds of the expansion of the federal government's economic role were sown during
the Nixon Administration from 1933-1945.
D. The seeds of the expansion of the federal government's economic role were sown during
the Roosevelt Administration from 1933-1945.
194. Compared to state and local spending, federal spending is

A. twice as large.
B. about the same.
C. half as large.
D. one-quarter as large.
195. Which of the following is false?

A. The federal government's fiscal year begins on October 1.
B. The largest federal government purchase of final goods and services is Social Security.
C. The corporate income tax is a direct tax.
D. The federal government planned to spend over $3.9 trillion in 2010.
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196. Suppose Bartles earns $10,000 and James earns $200,000. Which of the following
statements is false concerning their Social Security taxes?
A. Both will pay a Social Security tax.
B. Bartles will pay Social Security tax on all of his income.
C. James will pay Social Security tax on the majority of her income.
D. James will pay Social Security tax at a higher average rate than will Bartles.
197. Which is true?

A. The federal personal income tax is a regressive tax.
B. The poor are hurt more than the rich by progressive taxes.
C. The most important source of federal tax revenue is the payroll tax.
D. Until 1981 the maximum marginal tax rate on the federal income tax was 70 percent.
198. Statement I: The most important source of state tax revenue is the property tax while the
most important source of local tax revenue is the sales tax.
Statement II: As a share of federal spending, Social Security and Medicare will continue to
grow.
A. Statement I is true and Statement II is false.
B. Statement II is true and Statement I is false.

A. Compared with citizens of other industrial countries, Americans are not as heavily taxed.
B. Public goods are usually not provided by private enterprise because they would not be
profitable.
C. Public education is traditionally funded largely by local property taxes.
D. In 1990 and in 1993 taxes for the rich were increased substantially.
E. All the choices.
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200. Statement I: The payroll tax and the Social Security tax are not identical.
Statement II: The wage base for the Social Security tax is raised each year to keep pace with
inflation.

A. The poor pay most of the federal personal income tax.
B. The top marginal tax rate today is less than it was in 2001.
C. Today the top marginal tax rate is about the same as what it was in 1960.
D. The lowest marginal tax rate is 15 percent.
202. If one person earns $20,000 per year and another person earns $80,000 per year, they
both will pay the Social Security tax ______________________.
A. at the same average tax rate
B. but the poorer person will pay at a higher average tax rate
C. but the richer person will pay at a higher average tax rate
D. but it is impossible to calculate their individual average tax rates
203. Which statement is FALSE with respect to the size and role of the U.S. government?
A. Two major crises, the Great Depression and World War II, led to a much greater economic
role for the federal government.
B. Since 1945, the role of government at the federal, state, and local level has expanded.
C. The economic role of the federal government has steadily expanded ever since the Civil
War.
the Roosevelt administration from 1933-1945.
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A. Government spending on defense declined between 2001 and 2008.
B. The United States spends more on defense than all other nations combined.
C. Social Security benefits are not indexed for inflation.
D. The national debt is twice what it was in 1980.

A. The United States spends more as a percentage of GDP than any other nation on foreign
aid.
B. The largest federal government purchase of goods and services is Social Security.
C. Government purchases, but not transfer payments, are counted in Gross Domestic Product
(GDP).
D. Net interest on the national debt is only one percent of total federal government spending.
206. Suppose Stockton earns $30,000 per year and Malone earns $60,000 per year. Which of
the following statements is FALSE concerning their Social Security taxes?
B. Stockton will pay Social Security tax on all of his income.
C. Malone will pay Social Security tax on the majority of his income.
D. Stockton and Malone will pay the same Social Security tax rate on their incomes.
207. Which is true?

A. The federal personal income tax is a progressive tax.
B. More than 75 percent of all taxpayers pay more in payroll taxes than personal income
taxes.
C. The rich bear a greater burden than the poor by progressive taxes.
D. The most important source of federal tax revenue is the personal income tax.
E. All the choices.
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208. Statement 1: The first President George Bush and President Bill Clinton will go down in
history as two of our greatest tax cutters.
Statement 2: Presidents Ronald Reagan and the second President Bush will go down in
A. Statement 1 is true and Statement 2 is false.
B. Statement 2 is true and Statement 1 is false.

A. Compared with citizens of other industrial countries, Americans are more heavily taxed.
B. Anyone with a taxable income of over $60,000 pays a marginal tax rate of 35%.
C. A greater percentage of Americans pay more in personal income taxes than in payroll
taxes.
D. The 2001 recession, the events of 9/11, and the recent federal government spending
mandates drove many state governments into serious financial difficulty.
210. Statement 1: In 2002 and 2003, state after state slashed services and raised taxes.
Statement 2: Through the 1970s, the 1980s, and the 1990s, state governments ran substantial
budget deficits.
211. Excise taxes

A. are aimed at a specific good or service.
B. are aimed at a wide range of products.
C. are direct taxes.
D. are generally progressive in nature.
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212. An individual taxpayer with a taxable income of $6,000

A. has a higher marginal than average tax rate.
B. has a higher average than marginal tax rate.
C. has the same marginal and average tax rate.
D. may have a higher marginal tax rate or a higher average tax rate.
A. It is a regressive tax.
B. It is imposed on employees only.
C. It is a payroll tax.
D. It came into existence in 1935.
214. The Social Security

A. tax is capped at $43,000.
B. system is currently accumulating surpluses.
C. trust fund, by current estimates, will be empty by 2099.
D. is a progressive tax.
215. Which of the following years was there NOT a federal income tax cut?
A. 1981
B. 1986
C. 1993
D. 2001
E. 2003
216. Which of the following tax cuts lowered the top marginal tax rate to 28 percent?
A. The Kemp-Roth Tax Cut of 1981
B. The Tax Reform Act of 1986
C. The Tax Cut of 1993
D. The Tax Cut of 2001
E. The Tax Cut of 2003
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217. The Tax Cut of 2001

A. permanently eliminated the inheritance tax.
B. lowered the minimum marginal tax rate from 15 percent to 10 percent.
C. will lower the top marginal tax rate to 23 percent by the end of the decade.
D. expires in 2006.
218. Critics of the tax cut of 2001 made all of the following arguments EXCEPT
A. It would push up the federal budget deficit.
B. Most of the benefits would go to the rich.
C. The last time massive tax cuts were enacted in the 1980s, budget deficits increased
dramatically.
D. The tax cut will discourage people from working.
219. The Tax Cut of 2003 includes all of the following provisions EXCEPT
A. The child income tax credit was raised from $600 to $1,000.
B. The lowest minimum tax rate was lowered from 15 percent to 10 percent.
C. The highest income tax bracket was reduced from 38.6 percent to 35 percent.
D. The top personal income tax rate paid by stockholders on corporate dividends and on
capital gains was lowered to 15 percent.
220. Statement I: The federal government has given state and local governments unfunded
mandates, which are new obligations without providing enough money to pay for the
programs.
Statement II: The No Child Left Behind Act of 2001 was fully paid for by the federal
government.
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221. Which of the following could be called an unfunded mandate imposed by the federal
government to be carried out by state and local governments, without enough funds to cover
the cost of the program?
A. The No Child Left Behind Act of 2001.
B. The requirement that states and localities hire new police officers by the Department of
Homeland Security.
C. The requirement that states carry out election reform, as a result of voting irregularities in
the 2000 election.
D. All the choices.
Fill in the Blank Questions
222. A family with a taxable income of $10,000 has to pay ______ in federal income tax.
________________________________________
________________________________________
224. The highest marginal tax bracket today for the federal personal income tax is _____
percent.
________________________________________
225. If your marginal tax rate is higher than your average tax rate on the federal personal
income tax, that means that your marginal tax rate must be at least _____ percent.
________________________________________
226. Fiscal year 1998 ended on (month/day/year).

________________________________________
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227. Before the Great Recession of 2007-2008, Social Security taxes _________ Social
Security benefits by $_______ billion.
________________________________________
228. Well over half of all state and local government expenditures goes towards (1) ______;
(2) ______; and (3) ____.
________________________________________
229. The average tax rate is calculated by dividing _____ by ______; the marginal tax rate is
calculated by dividing _____ by ____.
________________________________________
230. A direct tax is on a ____, while an indirect tax is on a ____.

________________________________________
231. A progressive tax is a tax that ____, while a regressive tax is one that ____.
________________________________________
232. In 2010, the upper middle class is taxed at a marginal rate of _____ percent, while the
working class and lower middle class is taxed at a marginal rate of _____ percent.
________________________________________
233. The three duties of government, according to Adam Smith, are (1) ____, (2) _____ and
(3) ____.
________________________________________
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234. Most U.S. residents are taxed at marginal rates of _____ percent and _____ percent.
________________________________________
235. If you earned $10,000 in 2010 working for yourself, how much did the federal
government collect in payroll tax? ____.
________________________________________
236. The federal government has several economic roles; name three: (1) ____, (2) _____ and
(3) ____.
________________________________________
237. A(n) _____ tax has your name written on it.

________________________________________
238. Fiscal year 2008 started on (give month, day and year) ____ / _____ / _____.
________________________________________
239. An example of a direct regressive tax would be the _____ tax.

________________________________________
240. Between 1980 and 1988 the top marginal tax rate on federal personal income tax fell
from _____ percent to _____ percent; in 1990 it rose to _____ percent.
________________________________________
241. Interest payments on the national debt are projected to be about _____% by 2046.
________________________________________
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242. We spend _____ of our GDP on foreign aid.

________________________________________
243. The two largest sources of federal tax revenue are the _____ and the _____ tax.
________________________________________
244. Individuals with taxable incomes of between $0 and $8,350 are in the _____ percent tax
bracket.
________________________________________
245. The highest personal income tax bracket in 1992 was _____ percent.
________________________________________
246. A family with an average tax rate of 10% would have a marginal tax rate of _____
percent.
________________________________________
247. The economic role of government has been growing for _____ decades.
________________________________________
248. To find your family's taxable income, you need to subtract your _____ and your ____.
________________________________________
249. Transfer payments to individuals are about _____ percent of total government spending.
________________________________________
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250. About _____ percent of all Americans pay more in social security tax than in personal
income tax.
________________________________________
251. The federal personal income tax is _____ progressive than it was in 1980.
________________________________________
252. A good not produced by private enterprise because no profit can be made on it that is
produced by the government is a _____ good.
________________________________________
253. In the U.S. tax receipts are almost _____ percent of our GDP.
________________________________________
254. _____ said that "The government is best which governs least".
________________________________________
255. The federal government is estimated to spend almost _______ on defense in fiscal year
2011.
________________________________________
256. Of federal government spending, less than _____ percent goes to foreign aid and about
_____ percent pays the interest on the federal debt.
________________________________________
257. Today the United States spends as much on defense as _____ of the nations combined.
________________________________________
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258. In 2003 the top marginal federal income tax rate was reduced from 38.6 percent to
______.
________________________________________
259. Through the 1970s, 1980s and 1990s, the states ran substantial budget ___________.
________________________________________
260. Every state but ____________ is legally obligated to balance its budget.
________________________________________
261. The Internet Tax Freedom Act resulted in a loss of approximately ________ in state and
local income tax collections in 2006.
________________________________________
262. Of federal government spending, about _____ percent is spent on defense and about
_____ percent is spent on Social Security, Medicare and Medicaid.
________________________________________
263. Of all federal receipts (tax receipts and borrowing) about _____ percent comes from the
payroll tax.
________________________________________
individual income tax.
________________________________________
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265. Federal government spending was fairly constant for more than a decade until the year
____, when it rose sharply; then it rose sharply again in the year ____.
________________________________________
266. A tax of $1,000 per person would make the federal income tax more ____.
________________________________________
267. The federal government spending estimate for 2009 is a combined total of about ____.
________________________________________
Short Answer Questions
268. If a person earned $40,000 in 2008, how much Social Security tax did she pay?
269. If a person earned $20,000 in 2008, how much Social Security tax did he pay?
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270. If your taxable income was $40,000 and you paid $3,000 in federal income tax, what was
your average tax rate?
271. If you had a marginal tax rate of 15 percent and earned an extra $10,000, how much tax
would you pay?
272. If you earned an additional $1,000 of taxable income and paid $220 in taxes on that
income, what would your marginal tax rate be?
273. If your taxable income was $50,000 and you had an average tax rate of 20 percent, how
much tax did you pay?
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274. If you earned an extra $2,000 and paid $400 in taxes on that income, what would your
marginal tax rate be?
275. If Mr. S. Hussein had a taxable income of $100,000 and earned an additional $100,000
interest on tax-exempt government bonds, if he paid $27,000 in taxes, how much would his
average tax rate be?
276. A single mother with two children earns wages of $10,000. (a) How much federal
personal income tax does she pay? (b) How much payroll tax does she pay?
277. A couple with three children earns $14,000 in wages. (a) How much payroll tax do they
pay? (b) How much federal personal income tax do they pay?
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278. If you employ 100 people, each of whom earns $10,000, you have to pay payroll taxes
totaling how much?
279. If the Johnson family has an average tax rate of 10 percent, how much is its marginal tax
rate?
280. If Ms. Helmsley has an average tax rate of 33 percent, how much is her marginal tax
rate?
281. The Ace Plumbing Company employs 10 plumbers, each of whom earns $50,000 a year.
How much does the company have to pay the federal government in payroll taxes?
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282. How much is the marginal tax rate of each of these individuals?
A) Ms. Smith paid $2,133,000 in personal income tax.
B) The Green family paid $280 in personal income tax.
C) The Johnsons, a couple with four children, had an income of $12,000.
283. The Noriega family pays $1,400 taxes on a taxable income of $14,000. How much is its
marginal tax rate?
284. Raul Castro has a taxable income of $4,500,000. What is his marginal tax rate?
285. What is the marginal tax rate of the chief executive officer of Exxon-Mobil?
7-61
286. The No Child Left Behind Act of 2001 was a federal mandate which is estimated to cost
the states and local governments in excess of _________ a year.
287. The Dupont family paid $28,750,000 in federal income tax. How much is their average
tax rate and their marginal tax rate?
288. The Smiths, a married couple with four children, had an income of $14,000 before taxes.
What is their average tax rate and their marginal tax rate?
289. If a woman whose average tax rate were 25 percent had a taxable income of $40,000,
how much tax would she pay?
7-62
290. If you had a salary of $1,000,000, (a) how much Social Security tax would you have to
pay and (b) How much Medicare tax would you have to pay?
291. Mary Jones has $50,000 of taxable income. If her average tax rate is 20 percent and her
marginal tax rate is 31 percent, how much tax (in dollars) does she pay?
292. Max Smith has $60,000 of taxable income. If his average tax rate is 20 percent and his
marginal tax rate is 31 percent, how much tax (in dollars) does he pay?
293. Sue Hawkins earns $100,000. How much Social Security tax does she pay?
7-63
294. Mr. McCain pays $1,000,000 in federal income tax. How much is his marginal tax rate?
295. Mr. Forbes pays $35,000,000 in federal income tax. How much is his marginal tax rate?
296. A single person pays $200 in federal income tax. How much is her marginal tax rate and
her average tax rate?
297. A married couple pays $500 in federal income tax. How much is their marginal tax rate
and their average tax rate?
7-64
298. During the 1980s and 1990s, the fastest growing federal expenditures was the
___________________.
________________________________________
299. Presidents _____________ and _____________ will go down in history as the two
greatest tax cutters.
________________________________________
300. A flat or "fair" tax would increase the tax burden on the ___________ and
_______________ and decrease the tax burden on the _________.
________________________________________
301. Because of the Great Recession of 2007-2008, we are currently collecting _________ per
year in social security funds than we are distributing to recipients.
________________________________________
7-65
Chapter 07 The Government Sector Answer Key
Multiple Choice Questions
1. The role of government has grown tremendously over the last _____ decades.
A. four
B. six
C. eight
D. ten
AACSB: Reflective Thinking

Bloom's: Remember
Difficulty: Medium
Learning Objective: 07-08 Explain and discuss the economic role of government.
2. Each of the following is a basic economic role of the government except

A. tax collection.
B. spending money.
C. regulation of the economy.
D. owning most of the means of production.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
3. The federal budget is prepared and passed by

A. the president.
B. Congress.
C. the president and Congress.
D. neither the president nor Congress.

Bloom's: Remember
Difficulty: Easy
7-66
4. Federal spending on defense comes to about _____ per person in the United States.
A. $1,000
B. $1,900
C. $2,700
D. $3,500
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
Learning Objective: 07-01 Define and discuss federal; state; and local government spending.

A. State and local governments are expected to provide more and more services while their
tax bases are limited.
B. State and local governments are expected to provide less and less services while their tax
bases are relatively unlimited.
C. Public education has traditionally been the role of the federal government.
D. None of these statements is true.

Bloom's: Remember
Difficulty: Medium
6. The largest source of federal tax revenue comes from

A. individual income taxes.
B. social insurance receipts.
C. corporation income taxes.
D. excise taxes.
AACSB: Analytic
Bloom's: Analyze
Difficulty: Easy
Learning Objective: 07-05 List and discuss the sources of federal government revenue.
7-67
7. Each of the following is an indirect tax except the _____ tax.

A. gasoline
B. telephone
C. corporate income
D. excise

Bloom's: Remember
Difficulty: Medium
Learning Objective: 07-04 Identify and discuss the types of taxes.

A. The Kemp-Roth Tax Cut of 1981 and the Tax Reform Act of 1986 both lowered federal
personal income tax receipts.
B. The Kemp-Roth Tax Cut of 1981 and the Tax Reform Act of 1986 raised federal personal
income tax receipts.
C. The Kemp-Roth Tax Cut of 1981 raised federal personal income tax receipts while the Tax
Reform Act of 1986 lowered them.
D. The Kemp-Roth Tax Cut of 1981 lowered federal personal income tax receipts while the
Tax Reform Act of 1986 raised them.

Bloom's: Understand
Difficulty: Medium
Learning Objective: 07-06 Summarize recent federal tax legislation.
9. Most poor families pay _____ federal personal income tax.

A. no
B. a little
C. a substantial part of their incomes in
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
7-68
10. The fastest growing source of federal tax revenue is the _____ tax.
A. personal income
B. corporate income
C. payroll
D. excise
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
11. The key agency in the preparation of the president's budget is

A. the Treasury.
B. the Office of Management and Budget (OMB).
C. the Comptroller of the Currency.
D. the Department of the Defense.

Bloom's: Remember
Difficulty: Medium
12. In 2010, a person earning $300,000 would pay Social Security tax on
A. none of her income.
B. all of her income.
C. nearly all of her income.
D. less than half of her income.

Bloom's: Understand
Difficulty: Medium
7-69
13. The most important source of state tax revenue is the _____ tax.
A. property
B. income
C. excise
D. sales
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 07-07 List and discuss the sources of state and local government revenue.

A. About seven percent of federal government spending goes toward interest on the national
debt.
B. Over eighty percent of local taxes comes from property taxes.
C. The federal government will spend over $3.8 trillion this fiscal year.
D. None of these statements is false.

Bloom's: Remember
Difficulty: Medium

A. The Social Security tax is progressive.
B. An excise tax on cigarettes is regressive.
C. A sales tax is a direct tax.
D. None is true.

Bloom's: Understand
Difficulty: Medium
7-70
16. Which one of these is not an economic function of the federal government?
A. Redistribution of income.
B. Stabilization.
C. Economic regulation.
D. Each is an economic function of the federal government.

Bloom's: Remember
Difficulty: Easy
17. The sales tax is the most important source of _____ government revenue.
A. federal
B. state
C. local
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy

A. The Social Security tax is an excise tax.
B. A person earning $100,000 pays a higher percentage of her income in Social Security tax
than someone earning $50,000.
C. The Social Security tax is an indirect tax.
D. None is true.

Bloom's: Remember
Difficulty: Hard
7-71
19. The maximum anyone had to pay in Social Security tax in 2009 was about ____.
A. $850
B. $6,620
C. $8,500
D. $17,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
20. Most sales taxes are ___________; most excise taxes are _________.
A. progressive, progressive
B. regressive, regressive
C. progressive, regressive
D. regressive, progressive

Bloom's: Understand
Difficulty: Hard
21. The property tax is the most important source of _____ government revenue.
A. federal
B. state
C. local
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
7-72
22. Under the Tax Reform Act of 1986 the maximum rate of the corporate income tax was
A. raised.
B. lowered.
C. not changed.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
23. The Social Security tax is

A. direct and progressive.
B. direct and regressive.
C. indirect and progressive.
D. indirect and regressive.

Bloom's: Remember
Difficulty: Medium
24. According to Adam Smith, each of these was an economic role of government except
A. protecting society from violence and invasion.
B. protecting individuals from oppression.
C. erecting public works which would not be in the interest of private individuals to erect.
D. redistributing some income from the rich to the poor.

Bloom's: Remember
Difficulty: Hard
7-73
25. Most excise taxes are

A. progressive.
B. proportional.
C. regressive.

Bloom's: Understand
Difficulty: Easy

A. There are now nine federal personal income tax brackets.
B. Most people pay more in Social Security tax than in personal income tax.
C. We pay more in direct than indirect taxes to the federal government.
D. None is false.

Bloom's: Remember
Difficulty: Medium
Learning Objective: 07-03 Define and compute the average and marginal tax rates.
27. A wage earner making $10,000 pays

A. more in Social Security tax than in personal income tax.
B. more personal income tax than in Social Security tax.
C. about the same in Social Security tax as in personal income tax.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-74

A. The corporate income tax now produces only thirteen percent of federal tax revenue.
B. The Tax Reform Act of 1986 took millions of poorer families off the income tax rolls.
C. The Kemp-Roth tax cut of 1981 lowered the average citizen's tax bill by 23%.
D. None is false.

Bloom's: Remember
Difficulty: Medium
29. The federal government's fiscal year is _____ months long.

A. 6
B. 9
C. 12
D. 18
E. 24
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy

A. Most federal government revenue comes from the personal income tax.
B. The federal personal income tax puts a greater burden on the poor and middle class.
C. The United States is among the most highly taxed industrial countries.
D. None is true.

Bloom's: Remember
Difficulty: Hard
7-75
31. Compared to people earning $150,000 a year, people earning $300,000 pay _________
Social Security taxes.
A. less
B. the same
C. slightly more
D. twice as much
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
32. The corporate income tax is

A. direct.
B. indirect.
C. neither direct nor indirect.
D. both direct and indirect.

Bloom's: Remember
Difficulty: Easy
33. In 1980 the top marginal tax rate was

A. 28 percent.
B. 33 percent.
C. 50 percent.
D. 70 percent.
E. 90 percent.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-76
34. The economic policy of the U.S. government could have been described as laissez-faire
until about
A. 1860.
B. 1900.
C. 1933.
D. 1945.
E. 1960.

Bloom's: Remember
Difficulty: Hard
35. Each of the following is a goal of the federal government except

A. fostering competition.
B. price stability.
C. low unemployment.
D. expanding government ownership.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
36. The sales tax

A. is a direct tax.
B. is an indirect tax.
C. may be either a direct or an indirect tax.
D. is neither a direct nor an indirect tax.

Bloom's: Remember
Difficulty: Easy
7-77
37. The federal government spends

A. slightly more on defense than on Social Security.
B. slightly more on Social Security than on defense.
C. about the same on Social Security as on defense.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
38. Interest payments on the national debt are about _____ percent of total federal
expenditures a year.
A. 2
B. 5
C. 7
D. 11
E. 14

Bloom's: Analyze
Difficulty: Medium
39. Which of the following statements does not apply to the U.S. tax structure?
A. The individual income tax system is progressive.
B. General sales taxes are regressive.
C. Property taxes are an important source of revenue for the federal government.
D. The major sources of revenue for the federal government differ from the major sources of
revenue for state and local governments.

Bloom's: Remember
Difficulty: Hard
7-78
40. Which of the following pairs represents the chief source of income and the most important
type of expenditure of local governments?
A. Property tax and expenditures for highways
B. Property tax and expenditures for education
C. Sales and excise taxes and expenditures for public welfare
D. Sales and excise taxes and expenditures for police, fire, and general government

Bloom's: Understand
Difficulty: Hard
41. What proportion of the federal spending is available for discretionary spending?
A. 9 percent.
B. 14 percent.
C. 23 percent.
D. 46 percent.

Bloom's: Remember
Difficulty: Easy
42. A tax on _____ would be the least regressive.

A. food
B. cigarettes
C. beer
D. luxury cars

Bloom's: Understand
Difficulty: Easy
7-79
43. Mr. Bush earns $1,000,000 and pays $100,000 in taxes. Mr. Gore earns $150,000 and
pays $17,500 in taxes. The tax they pay would be considered
A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
44. Transfer payments to individuals amount to a little less than _____ of total government
spending.
A. three-quarters
B. two-thirds
C. half
D. one-third
E. one-quarter
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
45. In modern free enterprise economies, which of the following is not an economic role of
government?
A. Stabilization of national income, employment, and the price level
B. Promotion and maintenance of competitive markets
C. Altering the allocation of resources to provide for public demands efficiently
D. Providing a reasonably certain legal, social, and business environment for stable economic
growth
E. Planning the production and distribution of most economic goods

Bloom's: Remember
Difficulty: Medium
7-80
46. Which of the following accounts for the largest percentage of all federal expenditures?
A. Income security such as Social Security
B. National defense
C. Interest on the public debt
D. Veterans' services
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
47. In a progressive tax structure,

A. the marginal tax rate exceeds the average tax rate.
B. vertical equity exists.
C. the average tax rate rises as income falls.
D. all the choices.

Bloom's: Understand
Difficulty: Hard
48. Which of the following is a transfer payment?

A. The president's salary
B. Veterans' benefits
C. The NASA budget
D. Schoolteachers' salaries
E. Provision of national parks
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-81
49. The money that pays Social Security benefits is raised by

A. taxes that workers pay.
B. taxes that employers pay.
C. taxes that both workers and employers pay.
D. the personal income tax.

Bloom's: Remember
Difficulty: Medium
50. Statement I: Social Security benefits are financed entirely by taxes that workers pay.
Statement II: Social Security benefits are a government transfer payment.

Bloom's: Remember
Difficulty: Medium
51. The essential difference between sales and excise taxes is that
A. sales taxes apply to a wide range of products, while excise taxes apply only to a select
group of products.
B. excise taxes apply to a wide range of products, while sales taxes apply only to a select
group of products.
C. sales taxes are consumption taxes, while excise are not.
D. excise taxes are consumption taxes, while sales are not.

Bloom's: Understand
Difficulty: Easy
7-82
52. Excise taxes are

A. really income taxes in disguise.
B. profits taxes on major corporations.
C. per-unit taxes on specific goods.
D. percentage taxes on sales revenues.
E. the second most important source of federal revenue.

Bloom's: Remember
Difficulty: Medium
53. Which of the following is NOT an example of a transfer payment?

A. The salaries received by social workers employed by the federal government.
B. Food stamps.
C. Unemployment compensation.
D. Social security payments.
E. Payments under the Aid to Families with Dependent Children program.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
54. Statement I: The federal corporate income tax is a direct tax.
Statement II: The Social Security tax is a regressive tax.


Bloom's: Remember
Difficulty: Medium
7-83
55. An excise tax on cigarettes is ________ and _______.

A. regressive, direct.
B. regressive, indirect.
C. progressive, direct.
D. progressive, indirect.

Bloom's: Understand
Difficulty: Medium
56. Statement I: Most taxes are proportional, in effect.
Statement II: The federal government gets most of its revenue from indirect taxes.

Bloom's: Understand
Difficulty: Medium

A. New Hampshire residents pay a higher percent of their income in taxes than the people in
the province of Quebec, Canada.
B. The top marginal tax rate today is about half of the top marginal tax rate in 1960.
C. Today the overall tax burden is about the same as what it was in 1929.
D. Education in the U.S. is paid for exclusively by local taxes.

Bloom's: Remember
Difficulty: Medium
7-84
58. With respect to local finance, it is correct to say that

A. Sales and excise taxes are the major source of revenue and highway construction and
maintenance the major type of expenditure.
B. Property taxes are the basic source of revenue and education the major type of expenditure.
C. The corporate income tax is the major source of revenue and natural resource development
the major type of expenditure.
D. Estate and gift taxes are the major source of revenue and most expenditures are for
hospitals and health services.

Bloom's: Understand
Difficulty: Hard
59. During the last half of 2008 and the first half of 2009, the congress passed and the
President signed two bills totaling about _______________ in an attempt to avert the Great
Recession.
A. about $700 billion
B. about $800 billion
C. nearly $1.5 trillion
D. more than $2.0 trillion

Bloom's: Understand
Difficulty: Medium
60. Federal government spending on medicare & medicaid have increased by a factor of
_____ between 1969 and 2011.
A. 2
B. 4
C. 5
D. over 7
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-85
A. 10 percent.
B. 20 percent.
C. 30 percent.
D. 40 percent.
E. Impossible to determine.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
A. 15 percent.
B. 25 percent.
C. 35 percent.
D. 45 percent.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
63. An example of a tax that is generally regarded to be progressive is

A. the federal income tax.
B. the excise tax on gasoline.
C. the state sales tax.
D. the payroll tax.

Bloom's: Remember
Difficulty: Medium
7-86
64. Statement I: Most poor people have an average tax rate of 10 percent.
Statement II: In 1992 the maximum federal personal income tax rate was 31 percent.

Bloom's: Remember
Difficulty: Hard
65. Statement I: Most Americans pay more in Social Security tax than in personal income tax.
Statement II: A tax on cigarettes is more regressive than a tax on long distance phone calls.

Bloom's: Understand
Difficulty: Medium
66. Statement I: A progressive tax places a heavier burden on the rich than on the poor.
Statement II: The Social Security tax is more regressive than the federal personal income tax.

Bloom's: Understand
Difficulty: Medium
7-87
67. In 2009 the highest federal personal income tax bracket was _____ percent.
A. 28
B. 35
C. 36
D. 50
E. 70
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
68. If taxable income is rising and if the marginal tax rate is greater than the average tax rate,
then
A. the average tax rate must be rising.
B. the average tax rate must be falling.
C. the average tax rate may be either rising or falling.
D. the tax is regressive.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
69. In 2011 when the "Bush tax cuts" expire the percentage tax rate for the rich will revert
back to the (pre-Bush) rate of ____________ percent if congress doesn't pass a new law.
A. 36.5
B. 39.6
C. 44.0
D. 70.0

Bloom's: Remember
Difficulty: Easy
7-88
70. Which of the following would not be a government transfer expenditure?

A. Contribution of employers to support the Social Security program
B. Social security payments to the aged
C. Unemployment compensation benefits
D. Payments to the widows of war veterans

Bloom's: Understand
Difficulty: Medium
71. A progressive tax is one where the percentage charged on income ______________ as
income increases.
A. increases and then decreases
B. is constant
C. decreases
D. increases
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
72. Which of the following federal government expenditures is the largest burden on the
budget?
A. Social security
B. Medicare and medicaid
C. Defense
D. Interest on national debt
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
7-89
73. In 2010, anyone with an income in excess of $_____________ pays the marginal tax rate
of 35%.
A. 500,000
B. 372,950
C. 296,400
D. 198,200
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
74. Warren Buffett, the noted stock market investor, and world's second richest man has
noted:
A. his average tax rate is lower than his secretary.
B. his world ranking would increase substantially if taxes were lower $20,000
C. his taxes were so high that he was supporting the government by himself.
D. his wealth was very high because of the low tax rates enjoyed by the rich.

Bloom's: Remember
Difficulty: Medium
75. A person earning $200,000 a year pays a little over _____ in payroll taxes.
A. $6,000
B. $9,500
C. $12,000
D. $15,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
7-90
76. If you had $1,000 of taxable income you would have to pay _____ in federal income tax.
A. 0
B. $100
C. $150
D. Between $150 and $280
E. $280
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
77. If you had a total income of $4,000 (including wages, interest, and dividends) you would
have to pay federal personal income taxes of
A. 0.
B. Less than $600.
C. $600.
D. More than $600.
E. It is impossible to answer without more information.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
78. If Mr. Perot faces a 90 percent marginal tax rate,

A. his average tax rate must be falling.
B. the next dollar he earns nets him 90 cents.
C. his total tax payments equal 90 percent of his income.
D. he has a strong incentive to work harder.
E. he has a strong incentive to work less.

Bloom's: Understand
Difficulty: Medium
7-91
79. The second largest source of federal revenue is

A. the individual income tax.
B. the corporate income tax.
C. the payroll tax.
D. sales and excise taxes.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
80. Under a progressive income tax, as income increases

A. taxes increase at the same rate as income; if income increases by 10%, taxes increase by
10%.
B. taxes decreases as a share of income.
C. absolute tax payments increase, but the average tax rate declines.
D. taxes increase as a percent of income.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
81. The tax rates embodied in the federal personal income tax are such that
A. a rising absolute amount, but a declining proportion, of income is paid in taxes.
B. the marginal and average tax rates are equal, making the tax progressive.
C. the average tax rate rises more rapidly than does the marginal tax rate.
D. the marginal tax rate is higher than the average tax rate, causing the average tax rate to rise.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-92

A. The federal government gets much more money from tax revenues than from borrowing.
B. The federal government gets a little more money from tax revenues than from borrowing.
C. The federal government gets a little more money from borrowing than from tax revenues.
D. The federal government gets much more money from borrowing than from tax revenues.

Bloom's: Understand
Difficulty: Medium
83. Sales and excise taxes tend to be ___________ because low income people tend to spend
a _________ fraction of their income than high income people.
A. progressive; larger
B. regressive; larger
C. progressive; smaller
D. regressive; smaller

Bloom's: Understand
Difficulty: Medium
84. Statement I: Most taxes are proportional in effect.
Statement II: A tax that is nominally regressive will be regressive in effect.


Bloom's: Understand
Difficulty: Hard
7-93
85. The tax shown in the graph above is

A. nominally progressive and regressive in effect.
B. nominally progressive and progressive in effect.
C. nominally proportional and progressive in effect.
D. nominally proportional and regressive in effect.

Bloom's: Understand
Difficulty: Hard
86. In 2009, _____________ of Americans owed no federal income taxes.

A. 60%
B. 47%
C. 38%
D. 26%

Bloom's: Understand
Difficulty: Medium
7-94
87. The Jones family has an average tax rate of 15 percent. Its marginal tax rate is
A. less than 15 percent.
B. 15 percent.
C. more than 15 percent.
D. impossible to find.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
88. In 2007, the richest 400 U. S. households earned an average income of $345 million. What
was their average income tax rate?
A. 34 percent.
B. 25 percent.
C. About 17 percent.
D. Less than 12 percent.

Bloom's: Remember
Difficulty: Hard
89. For a progressive tax the

A. average tax rate exceeds the marginal tax rate as income rises.
B. marginal tax rate declines as income increases.
C. average and marginal tax rates are equal.
D. marginal tax rate exceeds the average tax rate as income rises.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
7-95
90. Which of the following is the best example of a government expenditure for goods or
services?
A. Salaries of Supreme Court justices
B. Social security pensions paid to the elderly
C. Welfare payments
D. Unemployment compensation
E. The progressive income tax

Bloom's: Remember
Difficulty: Medium
91. Social Security benefits are funded by

A. special taxes on corporate profits.
B. property taxes and user taxes.
C. a payroll tax with equal contributions from employer and employees and by self-
employment taxes.
D. a special tax on corporate profits and approximately 10 percent of general sales taxes.
E. a combination of sales taxes, property taxes, corporate profit taxes and user fees.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
A. It is a progressive tax.
B. It came into existence in 1935.
C. It is imposed on employers and employees.
D. It is a payroll tax.

Bloom's: Understand
Difficulty: Easy
7-96
93. Statement I: We have faithfully followed Adam Smith's description of the government's
economic role.
Statement II: The U.S. government's role has grown smaller over the last 70 years.

Bloom's: Understand
Difficulty: Hard
94. Statement I: The economic role of government has been growing over the last eight
decades.
Statement II: The economic role of government will definitely be reduced in the coming
years.

Bloom's: Understand
Difficulty: Medium
95. In recent years our social and economic problems have _____ and government will get
_____ involved in solving these problems.
A. increased, more
B. increased, less
C. decreased, more
D. decreased, less

Bloom's: Understand
Difficulty: Medium
7-97
96. In 2010 Mr. Huckabee paid $500 in personal income tax. His taxable income was
A. $5,000.
B. $10,000.
C. $15,000.
D. $20,000.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
97. Mr. Romney paid $300 in personal income tax. His taxable income was
A. $1,000.
B. $2,000.
C. $3,000.
D. $10,000.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
98. "Taxable income" is

A. total income less deductions and exemptions.
B. earned income less property income.
C. all income other than wages and salaries.
D. wage and salary income only.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-98
99. Statement I: The two largest categories of federal spending are Social Security and
defense.
Statement II: The payroll tax is a more important source of revenue for the federal
government than the corporate income tax.

Bloom's: Understand
Difficulty: Medium
100. The marginal tax rate is calculated by dividing

AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
101. Statement I: Federal marginal income tax brackets for the wealthy are higher today than
they were in 1980.
Statement II: The highest federal income tax bracket today is 70 percent.

Bloom's: Understand
Difficulty: Hard
7-99
102. The average tax rate is calculated by dividing

AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
103. Which of the following schedules represent(s) a progressive tax?
A. I and III
B. I
C. II
D. I and II
E. III
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
104. Under a proportional income tax, the average tax rate

B. increases as income increases.
C. remains constant at all levels of income.

Bloom's: Understand
Difficulty: Hard
7-100
The Joneses have a taxable income of $18,000, all in the form of wages. They have three
children, and they take the standard deduction.

A. The Joneses pay more in Social Security tax than in personal income tax
B. The Joneses pay more in personal income tax than in Social Security tax
C. The Joneses pay about the same amount in Social Security tax and personal income tax
D. It is impossible to determine if the Joneses pay more in Social Security tax than in personal
income tax
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
106. The Joneses pay no more than _____ in personal income tax.
A. $5,000
B. $3,000
C. $1,800
D. $750
E. $0
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
107. Defense is the largest single component of federal government taking ________ cents
our of every government dollar spent.
A. 13
B. 16
C. 20
D. 24

Bloom's: Remember
Difficulty: Medium
7-101
108. Under a progressive income tax, the average tax rate

B. remains constant at all levels of income.
C. increases as income increases.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard

A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-102
110. If your taxable income is $50,000, your average tax rate is

A. 8 percent.
B. 12 percent.
C. 16 percent.
D. 20 percent.
E. 25 percent.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
A. 10 percent
B. 20 percent
C. 30 percent
D. 40 percent
E. 50 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium

A. your average tax rate is greater than your marginal tax rate.
B. your marginal tax rate is greater than your average tax rate.
C. your marginal and average tax rates are equal.
D. it is impossible to determine if your average or marginal tax rate is higher.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-103

A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
A. 5 percent.
B. 7.5 percent.
C. 10 percent.
D. 12.5 percent.
E. 15 percent.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-104
115. If your taxable income is $30,000, how much tax would you owe?
A. $500
B. $1,000
C. $1500
D. $2,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium

A. Your average tax rate is greater than your marginal tax rate.
B. Your marginal tax rate is greater than your average tax rate.
C. Your marginal and average tax rates are equal.
D. It is impossible to determine if your average or marginal tax rate is higher.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
117. Statement I: A tax on cigarettes is regressive.
Statement II: The federal personal income tax is more progressive today than it was in 1980.

Bloom's: Understand
Difficulty: Medium
7-105
118. A progressive tax is such that

A. tax rates are higher the smaller one's income.
B. the same tax rate applies to all income receivers, so that the rich pay a greater amount of
taxes than the poor.
C. the greatest burden is on low-income workers.
D. none of the above holds true.

Bloom's: Understand
Difficulty: Medium
119. Most U.S. government spending is financed by

A. an expansion of the money supply.
B. taxes.
C. government securities.
D. transfer payments.
E. loans from foreign countries.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
120. Ralph earns $40,000 per year. According to the income tax schedule, he must pay $4,000
in income taxes this year. If he had earned $50,000 his tax liability would have been $6,000.
What marginal tax rate does Ralph face?
A. 10 percent
B. 12 percent
C. 20 percent
D. 66 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-106
121. Statement I: Foreign aid is the fourth largest federal spending program.
Statement II: Most Americans pay more in Social Security taxes than in federal personal
income taxes.

Bloom's: Remember
Difficulty: Medium
122. According to the IRS, the average large corporation in the United States paid just less
than _______ percent in 2006.
A. 34
B. 27
C. 24
D. 13
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
123. In 2010 the highest marginal tax rate for the federal personal income tax was _____
percent.
A. 28
B. 33
C. 35
D. 50
E. 70
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-107
124. Which one of these is the largest?

A. Federal tax receipts
B. Federal transfer payments
C. Federal borrowing
D. Federal purchases of goods and services
AACSB: Analytic
Bloom's: Analyze
Difficulty: Medium
125. The federal government gets _____ of its tax revenue from direct taxes.
A. all.
B. nearly all
C. about half
D. less than half
E. none
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
126. Groucho earns $5 million and pays $2 million in taxes; Harpo earns $300,000 and pays
$80,000 in taxes; Chico earns $25,000 and pays $1,000 in taxes. The tax they pay would be
considered
A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
7-108
127. The rich pay a _____ proportion of their income and a _____ dollar amount of federal
income tax than the middle class.
A. higher, higher
B. lower, lower
C. higher, lower

Bloom's: Understand
Difficulty: Medium
128. Who, from among the following, said this "In this world nothing can be said to be
certain, except death and taxes."
A. Thomas Jefferson
B. Adam Smith
C. Benjamin Franklin
D. Sir William Petty
E. John Stuart Mill

Bloom's: Remember
Difficulty: Medium

A. Direct taxes cannot be regressive.
B. Progressive taxes are always direct.
C. The federal personal income tax is more progressive than the Social Security tax.
D. None is true.

Bloom's: Analyze
Difficulty: Medium
7-109
130. Government purchases of goods and services do NOT include

A. government input costs.
B. the military payroll.
C. purchases of final products.
D. purchases by state governments.
E. welfare payments.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
131. Statement I: Taxes for the rich were raised substantially in 1990 and 1993.
Statement II: Personal income tax rates are much lower today than they were in 1980.

Bloom's: Understand
Difficulty: Hard
132. Statement I: Two major personal income tax cuts were passed during the administration
of President Ronald Reagan.
Statement II: The top marginal tax rate for the federal personal income tax was 70 percent in
1980.

Bloom's: Remember
Difficulty: Hard
7-110
133. During the Clinton administration, the marginal tax rate on the rich was:
A. Decreased
B. Stayed the same
C. Increased by about 2 percent
D. Increased by over 7 percent
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard

A. The federal, state, and local governments collect a combined total of over 40 percent of our
GDP in the form of taxes.
B. A rich person has a much lower marginal tax rate on their personal income taxes today
than she did in 1980.
C. The federal government spends more on foreign aid than it does on Medicare.
D. Most Americans pay more in federal personal income tax than they do in payroll tax.

Bloom's: Analyze
Difficulty: Medium
135. Most state revenue comes from the _____ tax and most local revenue comes from the
_____ tax.
A. property, property
B. sales, sales
C. sales, property
D. property, sales
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-111
136. In the United States, federal government tax receipts are somewhat less than _____
percent of GDP.
A. 10
B. 20
C. 30
D. 40
E. 50
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
137. Which country from the following provides its government with the same percent of its
GDP in taxes as the U.S.?
A. Germany
B. Britain
C. Italy
D. France
E. None of the choices

Bloom's: Remember
Difficulty: Hard

A. Social Security taxes must be paid on all income.
B. Social Security taxes must be paid on all wages and salaries.
C. Social Security taxes must be paid on interest income unless it is tax-exempt.
D. None is true.

Bloom's: Remember
Difficulty: Medium
7-112

A. A poor person who smokes pays a higher percentage of her income in cigarette excise tax
than a rich person.
B. The cigarette excise tax is a regressive tax.
C. The cigarette excise tax is a direct tax.
D. None is false.

Bloom's: Understand
Difficulty: Medium
140. Which of the following is a true statement concerning federal transfer payments?
A. Transfer payments ultimately must be repaid to the government by recipients.
B. Transfer payments are included in the imports category of GDP.
C. Transfer payments are included in the net exports category of GDP.
D. Transfer payments are payments made by the government for which no good or service is
currently received in return.

Bloom's: Remember
Difficulty: Medium
141. An example of a transfer payment is

A. old-age pensions.
B. a private firm's payments of dividends to stockholders.
C. military expenditures.
D. military aid to a foreign country.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
7-113
142. The first year of the New Deal was

A. 1929.
B. 1933.
C. 1945.
D. 1952.
E. 1960.

Bloom's: Remember
Difficulty: Easy

B. The federal government spends about five percent of our GDP on foreign aid.
C. The federal government spends less on Social Security than it does on defense.
D. None is true.

Bloom's: Remember
Difficulty: Medium

A. The federal government collects more in Social Security taxes than in personal income tax.
B. The federal government collects more in Social Security taxes than in corporate income
tax.
C. The federal government collects more in personal income tax than in corporate income tax.
D. None is false.

Bloom's: Remember
Difficulty: Medium
7-114
145. Transfer payments are paid mainly to

A. individuals.
B. business firms.
C. foreign countries.
D. government bondholders.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
146. Which one of these people said this? "The art of taxation consists in so plucking the
goose as to obtain the largest possible amount of feathers with the smallest amount of
hissing."
A. John Stuart Mill
B. John Maynard Keynes
C. Milton Friedman
D. Karl Marx
E. Jean Baptiste Colbert

Bloom's: Remember
Difficulty: Hard

A. The federal government's fiscal year 2006 started on January 1, 2006.
B. The federal government gets most of its tax revenue from the federal personal income tax.
C. Net interest on the national debt is about 15 percent of the federal budget.
D. None is true.

Bloom's: Remember
Difficulty: Medium
7-115
148. After the major income tax decrease for the high income earners in 1981, the federal
deficit _______ by 1990.
A. had not changed
B. tripled
C. cut by half
D. doubled

Bloom's: Remember
Difficulty: Hard


Bloom's: Understand
Difficulty: Medium
150. The federal tax on cigarettes is

AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-116

A. Our foreign aid to our friends, allies, and many of the poorer countries of the world comes
to nearly five percent of our GDP.
B. Total federal government spending (purchases plus transfer payments) totals almost $1
trillion.
C. Defense spending accounts for about one out of every three dollars the federal government
spends.
D. Our foreign aid to our friends, allies, and many of the poorer countries of the world comes
(according to the Author) to "chump change".

Bloom's: Remember
Difficulty: Medium
152. A couple with two dependent children with a taxable income of $12,000 will
A. definitely pay some personal income tax.
B. probably pay some personal income tax.
C. pay no personal income tax.
D. There is not enough information to make any of these statements.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium

A. The federal personal income tax is a proportional tax.
B. The cigarette tax is an excise tax.
C. The tax on gasoline is a direct tax.
D. None is true.

Bloom's: Understand
Difficulty: Medium
7-117
154. Statement I: The primary income sources of the rich are dividends, interest, and profit,
none of which is subject to the Social Security tax.
Statement II: The payroll tax is the federal government's fastest-growing source of revenue.

Bloom's: Remember
Difficulty: Medium
155. In 2010, a married couple with one child earning $32,000 would pay $2,448.00 in
payroll tax and $__________ in federal income taxes.
A. more than $2,000
B. about $1,000
C. more than $750
D. 0
AACSB: Analytic
Bloom's: Analyze
Difficulty: Easy

A. The federal government collects much more in direct taxes than in indirect taxes.
B. The federal government collects much more in indirect taxes than in direct taxes.
C. The federal government collects about the same amount in direct taxes as in indirect taxes.

Bloom's: Remember
Difficulty: Easy
7-118

B. The federal government spends about five percent of our GDP on interest on the debt.
C. The federal government spends more on Social Security and Medicare (combined) than it
does on defense.
D. None is true.

Bloom's: Remember
Difficulty: Medium
158. Who said this? "The government is best which governs least".
A. Thomas Jefferson
C. John Stuart Mill
D. Benjamin Franklin
E. John Maynard Keynes

Bloom's: Remember
Difficulty: Medium
159. Who, among the following, said this? "It is generally allowed by all, that men should
contribute to the public charge but according to the share and interest they have in the public
peace; that is, according to their estates or riches".
A. Benjamin Franklin
C. Jean Baptiste Colbert
D. Adam Smith
E. John Stuart Mill

Bloom's: Remember
Difficulty: Hard
7-119
160. Who said this? ". . . the sovereign has only three duties to attend to. . . . first, the duty of
protecting the society from violence and invasion . . .; secondly, the duty of protecting . . .
every member of the society from the injustice or oppression of every other member of it all;
and thirdly, the duty of erecting and maintaining certain public works and public institutions,
which it can never be for the interest of any individual . . . to erect and maintain. . . "
A. Adam Smith
B. John Stuart Mill
C. Sir William Petty
D. Franklin Roosevelt
E. Thomas Jefferson

Bloom's: Remember
Difficulty: Medium
161. Statement I: We could make the Social Security tax less regressive by lowering the
wage-base limitation to $25,000.
Statement II: The highest marginal tax rate on the federal personal income tax is 31 percent.

Bloom's: Understand
Difficulty: Hard
162. An average tax rate of 1% on the poor and 20% on the rich would be
A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
7-120
163. An average tax rate of 20 percent on the poor and 1 percent on the rich would be
A. progressive.
B. proportional.
C. regressive.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy

A. The cigarette tax is progressive.
B. Gasoline taxes in the U.S. are higher than in most other industrial countries.
C. The taxes on cigarettes and gasoline are excise taxes.
D. The corporate income tax is the federal government's largest source of tax revenue.

Bloom's: Understand
Difficulty: Medium
165. The tax on cigarettes is

A. regressive and indirect.
B. regressive and direct.
C. progressive and indirect.
D. progressive and direct.

Bloom's: Understand
Difficulty: Medium
7-121
166. In the Netherlands and Germany a gallon of gasoline costs a little over
A. $7.00.
B. $4.
C. $3.
D. $2.
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard

A. Americans pay higher taxes on gasoline than do the people in most other industrial
countries.
B. In general, excise taxes tend to be regressive.
C. The projected 2011 total federal tax revenue is more than federal government spending.
D. The new tax rates in the tax cut of 2003 are permanent.

Bloom's: Understand
Difficulty: Hard

A. The tax burden of Americans is about the lowest of the industrial countries.
B. Americans pay more in state and local taxes than they do in federal taxes.
C. The federal government takes in more revenue from indirect taxes than from direct taxes.
D. State and local tax receipts have declined as a percentage of GDP since 1945.

Bloom's: Remember
Difficulty: Medium
7-122
169. From the mid-1970s to the mid-1990s, the federal government ran a _____ and the state
and local governments ran a ____.
A. deficit, deficit
B. deficit, surplus
C. surplus, surplus
D. surplus, deficit

Bloom's: Remember
Difficulty: Medium

A. The federal government gets most of its tax receipts from the corporate income tax.
B. Nearly one third of all federal expenditures go toward paying interest on the national debt.
C. The largest two federal spending categories are defense and Social Security.
D. About 3 percent of federal government spending is on defense.

Bloom's: Remember
Difficulty: Hard
171. The top federal personal income tax bracket is now _______ percent.
A. 25
B. 35
C. 55
D. 70
E. 85
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-123

A. State and local government spending is almost half the level of federal spending.
B. Defense spending is much higher today than it was in 1990.
C. Most members of Congress have agreed to vote to cut Social Security benefits to bring
down the federal budget deficit.
D. Direct benefit payments to individuals now account for 25 percent of all federal
government spending.

Bloom's: Remember
Difficulty: Medium

A. Defense spending as a percent of the federal budget has steadily fallen since 1990.
B. Today we spend as more on defense than the rest of the world combined.
C. The largest federal government purchase is education.
D. State and local government spending has been declining since the mid-1980s.

Bloom's: Remember
Difficulty: Medium
174. Mr. and Mrs. Jones have three children, earn $22,000 at their jobs, and have no other
income. We may conclude that they
A. probably pay more payroll tax than federal personal income tax.
B. definitely pay more payroll tax than federal personal income tax.
C. probably pay more federal personal income tax than payroll tax.
D. definitely pay more federal personal income tax than payroll tax.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-124
175. Ms. Rockefeller has an income of $200 million. If her income is in the form of wages
and salary, then most of her income is taxed at __________ percent.
A. 15 percent
B. 27 percent
C. 30 percent
D. 35 percent
E. 38.6 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
176. Statement I: Compared to citizens of other leading industrial countries, Americans are
overtaxed.
Statement II: We could make the payroll tax less regressive by raising the wage-base
limitation to $200,000.

Bloom's: Understand
Difficulty: Hard
177. Services the federal government provides include

A. building and maintaining the interstate highway system.
B. bank inspections.
C. environmental protection.
D. the carrying out of scientific research.
E. all the choices.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
7-125
178. K – 12 public education in the U.S. is paid for mainly by the _____ tax.
A. income
B. sales
C. excise
D. property

Bloom's: Remember
Difficulty: Easy

A. Most public goods and services could be provided more profitably by private companies.
B. Nearly all of the money that the federal government redistributes goes from the rich and
the middle class to the poor.
C. One of the ways the federal government stabilizes our economy is by placing a floor under
our economy's purchasing power.
D. The total federal budget today is less than 5 percent of GDP.

Bloom's: Remember
Difficulty: Medium
180. Pei Chen has a federal personal income marginal tax rate of 28 percent. His average tax
rate
A. is more than 28%.
B. is also 28%.
C. is less than 28%.
D. is zero.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-126
181. Mr. and Mrs. Nakama were paying $6,000 taxes on a combined taxable income of
$40,000. When they both received pay increases, they found themselves in a higher tax
bracket-28 percent. Their average tax rate
A. fell.
B. rose to 15%.
C. rose to between 15% and 28%.
D. rose to 28%.
E. rose above 28%.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
182. Claire Quinn has a marginal tax rate of 33 percent on her federal personal income tax.
Her average tax rate is
A. more than 33%.
B. also 33%.
C. less than 33%.
D. zero.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard

A. Foreign aid is the fourth largest spending item in the federal budget.
B. Nearly half of federal government spending goes for direct payments to individuals.
C. Over half of all federal tax receipts comes from the personal income tax.
D. Defense spending per capita is less than most other industrial countries.

Bloom's: Remember
Difficulty: Medium
7-127

A. Most taxes are proportional taxes.
B. Poor people bear most of the burden of progressive taxes.
C. John Stuart Mill was the first to make the distinction between direct and indirect taxes.
D. President Reagan was largely responsible for raising personal income tax rates.

Bloom's: Remember
Difficulty: Hard

A. A person earning $100,000 pays $10,000 in payroll tax.
B. Most taxpayers pay more in payroll tax than in personal income tax.
C. The Medicare tax rate is 6.2%.
D. There is no such thing as a regressive tax.

Bloom's: Understand
Difficulty: Hard
186. In the 1950s the top marginal federal personal income tax rate was
A. 91%.
B. 70%.
C. 50%.
D. 31%.
E. 28%.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-128
187. Statement I: The top marginal rate of the federal personal income tax is much lower
today than it was in the 1950s.
Statement II: The Social Security system will run out of money by the year 2013.

Bloom's: Understand
Difficulty: Hard
188. Statement I: The average tax rate is found by dividing taxable income by taxes paid.
Statement II: Rich people generally pay a higher marginal tax rate than their average tax rate.

Bloom's: Remember
Difficulty: Hard
189. Statement I: The highest marginal federal personal income tax rate is 30 percent.
Statement II: The marginal tax rate is found by dividing additional taxes paid by additional
taxable income.

Bloom's: Remember
Difficulty: Hard
7-129
190. The excise tax on gasoline is

A. a direct tax.
B. an indirect tax.
C. a direct tax and an indirect tax.

Bloom's: Remember
Difficulty: Easy

A. a direct tax.
B. an indirect tax.
C. both a direct tax and an indirect tax.

Bloom's: Remember
Difficulty: Easy
192. The Tea party in the United States in 2009-2010 unlike the Boston Tea party is not
demonstrating against taxation without representation but
A. taxation with representation
B. the unwarranted increase in the economic role of the federal government.
C. the election of a President who they do not believe was a born citizen of the U. S.
D. the use of Keynesian economics to avoid a depression $0.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-130

A. The role of government grew most rapidly from 1920 to 1933.
B. The role of government grew most rapidly during Franklin Roosevelt's Administration
from 1960 to 1975.
C. The seeds of the expansion of the federal government's economic role were sown during
the Nixon Administration from 1933-1945.
the Roosevelt Administration from 1933-1945.

Bloom's: Remember
Difficulty: Easy
194. Compared to state and local spending, federal spending is

A. twice as large.
B. about the same.
C. half as large.
D. one-quarter as large.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
195. Which of the following is false?

A. The federal government's fiscal year begins on October 1.
B. The largest federal government purchase of final goods and services is Social Security.
C. The corporate income tax is a direct tax.
D. The federal government planned to spend over $3.9 trillion in 2010.

Bloom's: Remember
Difficulty: Medium
7-131
196. Suppose Bartles earns $10,000 and James earns $200,000. Which of the following
statements is false concerning their Social Security taxes?
B. Bartles will pay Social Security tax on all of his income.
C. James will pay Social Security tax on the majority of her income.
D. James will pay Social Security tax at a higher average rate than will Bartles.

Bloom's: Understand
Difficulty: Medium
197. Which is true?

A. The federal personal income tax is a regressive tax.
B. The poor are hurt more than the rich by progressive taxes.
C. The most important source of federal tax revenue is the payroll tax.
D. Until 1981 the maximum marginal tax rate on the federal income tax was 70 percent.

Bloom's: Remember
Difficulty: Medium
198. Statement I: The most important source of state tax revenue is the property tax while the
most important source of local tax revenue is the sales tax.
Statement II: As a share of federal spending, Social Security and Medicare will continue to
grow.
A. Statement I is true and Statement II is false.
B. Statement II is true and Statement I is false.

Bloom's: Remember
Difficulty: Easy
7-132

A. Compared with citizens of other industrial countries, Americans are not as heavily taxed.
B. Public goods are usually not provided by private enterprise because they would not be
profitable.
C. Public education is traditionally funded largely by local property taxes.
D. In 1990 and in 1993 taxes for the rich were increased substantially.
E. All the choices.

Bloom's: Remember
Difficulty: Medium
200. Statement I: The payroll tax and the Social Security tax are not identical.
Statement II: The wage base for the Social Security tax is raised each year to keep pace with
inflation.

Bloom's: Remember
Difficulty: Medium

A. The poor pay most of the federal personal income tax.
B. The top marginal tax rate today is less than it was in 2001.
C. Today the top marginal tax rate is about the same as what it was in 1960.
D. The lowest marginal tax rate is 15 percent.

Bloom's: Remember
Difficulty: Hard
7-133
202. If one person earns $20,000 per year and another person earns $80,000 per year, they
both will pay the Social Security tax ______________________.
A. at the same average tax rate
B. but the poorer person will pay at a higher average tax rate
C. but the richer person will pay at a higher average tax rate
D. but it is impossible to calculate their individual average tax rates
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
203. Which statement is FALSE with respect to the size and role of the U.S. government?
A. Two major crises, the Great Depression and World War II, led to a much greater economic
role for the federal government.
B. Since 1945, the role of government at the federal, state, and local level has expanded.
C. The economic role of the federal government has steadily expanded ever since the Civil
War.
the Roosevelt administration from 1933-1945.

Bloom's: Remember
Difficulty: Easy

A. Government spending on defense declined between 2001 and 2008.
B. The United States spends more on defense than all other nations combined.
C. Social Security benefits are not indexed for inflation.
D. The national debt is twice what it was in 1980.

Bloom's: Remember
Difficulty: Medium
7-134

A. The United States spends more as a percentage of GDP than any other nation on foreign
aid.
B. The largest federal government purchase of goods and services is Social Security.
C. Government purchases, but not transfer payments, are counted in Gross Domestic Product
(GDP).
D. Net interest on the national debt is only one percent of total federal government spending.

Bloom's: Understand
Difficulty: Medium
206. Suppose Stockton earns $30,000 per year and Malone earns $60,000 per year. Which of
the following statements is FALSE concerning their Social Security taxes?
B. Stockton will pay Social Security tax on all of his income.
C. Malone will pay Social Security tax on the majority of his income.
D. Stockton and Malone will pay the same Social Security tax rate on their incomes.

Bloom's: Remember
Difficulty: Medium
207. Which is true?

A. The federal personal income tax is a progressive tax.
B. More than 75 percent of all taxpayers pay more in payroll taxes than personal income
taxes.
C. The rich bear a greater burden than the poor by progressive taxes.
D. The most important source of federal tax revenue is the personal income tax.
E. All the choices.

Bloom's: Remember
Difficulty: Medium
7-135
208. Statement 1: The first President George Bush and President Bill Clinton will go down in
Statement 2: Presidents Ronald Reagan and the second President Bush will go down in
A. Statement 1 is true and Statement 2 is false.
B. Statement 2 is true and Statement 1 is false.

Bloom's: Understand
Difficulty: Easy

A. Compared with citizens of other industrial countries, Americans are more heavily taxed.
B. Anyone with a taxable income of over $60,000 pays a marginal tax rate of 35%.
C. A greater percentage of Americans pay more in personal income taxes than in payroll
taxes.
D. The 2001 recession, the events of 9/11, and the recent federal government spending
mandates drove many state governments into serious financial difficulty.

Bloom's: Remember
Difficulty: Medium
210. Statement 1: In 2002 and 2003, state after state slashed services and raised taxes.
Statement 2: Through the 1970s, the 1980s, and the 1990s, state governments ran substantial
budget deficits.

Bloom's: Remember
Difficulty: Easy
7-136
211. Excise taxes

A. are aimed at a specific good or service.
B. are aimed at a wide range of products.
C. are direct taxes.
D. are generally progressive in nature.

Bloom's: Remember
Difficulty: Easy
212. An individual taxpayer with a taxable income of $6,000

A. has a higher marginal than average tax rate.
B. has a higher average than marginal tax rate.
C. has the same marginal and average tax rate.
D. may have a higher marginal tax rate or a higher average tax rate.
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
A. It is a regressive tax.
B. It is imposed on employees only.
C. It is a payroll tax.
D. It came into existence in 1935.

Bloom's: Remember
Difficulty: Medium
7-137
214. The Social Security

A. tax is capped at $43,000.
B. system is currently accumulating surpluses.
C. trust fund, by current estimates, will be empty by 2099.
D. is a progressive tax.

Bloom's: Remember
Difficulty: Medium
215. Which of the following years was there NOT a federal income tax cut?
A. 1981
B. 1986
C. 1993
D. 2001
E. 2003

Bloom's: Remember
Difficulty: Medium
216. Which of the following tax cuts lowered the top marginal tax rate to 28 percent?
A. The Kemp-Roth Tax Cut of 1981
B. The Tax Reform Act of 1986
C. The Tax Cut of 1993
D. The Tax Cut of 2001
E. The Tax Cut of 2003

Bloom's: Remember
Difficulty: Hard
7-138
217. The Tax Cut of 2001

A. permanently eliminated the inheritance tax.
B. lowered the minimum marginal tax rate from 15 percent to 10 percent.
C. will lower the top marginal tax rate to 23 percent by the end of the decade.
D. expires in 2006.

Bloom's: Remember
Difficulty: Hard
218. Critics of the tax cut of 2001 made all of the following arguments EXCEPT
A. It would push up the federal budget deficit.
B. Most of the benefits would go to the rich.
C. The last time massive tax cuts were enacted in the 1980s, budget deficits increased
dramatically.
D. The tax cut will discourage people from working.

Bloom's: Remember
Difficulty: Easy
219. The Tax Cut of 2003 includes all of the following provisions EXCEPT
A. The child income tax credit was raised from $600 to $1,000.
B. The lowest minimum tax rate was lowered from 15 percent to 10 percent.
C. The highest income tax bracket was reduced from 38.6 percent to 35 percent.
D. The top personal income tax rate paid by stockholders on corporate dividends and on
capital gains was lowered to 15 percent.
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
7-139
220. Statement I: The federal government has given state and local governments unfunded
mandates, which are new obligations without providing enough money to pay for the
programs.
Statement II: The No Child Left Behind Act of 2001 was fully paid for by the federal
government.

Bloom's: Understand
Difficulty: Medium
221. Which of the following could be called an unfunded mandate imposed by the federal
government to be carried out by state and local governments, without enough funds to cover
the cost of the program?
A. The No Child Left Behind Act of 2001.
B. The requirement that states and localities hire new police officers by the Department of
Homeland Security.
C. The requirement that states carry out election reform, as a result of voting irregularities in
the 2000 election.
D. All the choices.

Bloom's: Remember
Difficulty: Medium
7-140
$1,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
$500
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
224. The highest marginal tax bracket today for the federal personal income tax is _____
percent.
35
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
225. If your marginal tax rate is higher than your average tax rate on the federal personal
income tax, that means that your marginal tax rate must be at least _____ percent.
15
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
7-141
226. Fiscal year 1998 ended on (month/day/year).

September 30, 1998

Bloom's: Remember
Difficulty: Medium
227. Before the Great Recession of 2007-2008, Social Security taxes _________ Social
Security benefits by $_______ billion.
exceed, 150
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
228. Well over half of all state and local government expenditures goes towards (1) ______;
(2) ______; and (3) ____.
education, health and welfare
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
229. The average tax rate is calculated by dividing _____ by ______; the marginal tax rate is
calculated by dividing _____ by ____.
taxes paid, taxable income; additional taxes paid, additional taxable income
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
7-142
230. A direct tax is on a ____, while an indirect tax is on a ____.

person, thing

Bloom's: Understand
Difficulty: Medium
231. A progressive tax is a tax that ____, while a regressive tax is one that ____.
falls more heavily on the rich; falls more heavily on the poor

Bloom's: Understand
Difficulty: Medium
232. In 2010, the upper middle class is taxed at a marginal rate of _____ percent, while the
working class and lower middle class is taxed at a marginal rate of _____ percent.
28; 15
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
233. The three duties of government, according to Adam Smith, are (1) ____, (2) _____ and
(3) ____.
(1) protecting the society from the violence of invasion (i.e., defense); (2) protecting
individuals from injustice and oppression; and (3) setting up public works that are not
profitable for individuals

Bloom's: Remember
Difficulty: Medium
7-143
234. Most U.S. residents are taxed at marginal rates of _____ percent and _____ percent.
10 and 15
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
235. If you earned $10,000 in 2010 working for yourself, how much did the federal
government collect in payroll tax? ____.
$1,530
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
236. The federal government has several economic roles; name three: (1) ____, (2) _____ and
(3) ____.
income redistribution; stabilization; economic regulation, spend and tax

Bloom's: Understand
Difficulty: Medium
237. A(n) _____ tax has your name written on it.

direct

Bloom's: Remember
Difficulty: Medium
7-144
238. Fiscal year 2008 started on (give month, day and year) ____ / _____ / _____.
10/1/08
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
239. An example of a direct regressive tax would be the _____ tax.

Social Security

Bloom's: Remember
Difficulty: Medium
240. Between 1980 and 1988 the top marginal tax rate on federal personal income tax fell
from _____ percent to _____ percent; in 1990 it rose to _____ percent.
70 to 28; 31
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
241. Interest payments on the national debt are projected to be about _____% by 2046.
26

Bloom's: Remember
Difficulty: Medium
7-145
242. We spend _____ of our GDP on foreign aid.

chump change
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
243. The two largest sources of federal tax revenue are the _____ and the _____ tax.
personal income, payroll (Social Security)
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
244. Individuals with taxable incomes of between $0 and $8,350 are in the _____ percent tax
bracket.
10
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
245. The highest personal income tax bracket in 1992 was _____ percent.
31
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
7-146
246. A family with an average tax rate of 10% would have a marginal tax rate of _____
percent.
10
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
247. The economic role of government has been growing for _____ decades.
eight

Bloom's: Remember
Difficulty: Medium
248. To find your family's taxable income, you need to subtract your _____ and your ____.
exemptions, deductions
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
249. Transfer payments to individuals are about _____ percent of total government spending.
50
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-147
250. About _____ percent of all Americans pay more in social security tax than in personal
income tax.
75
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
251. The federal personal income tax is _____ progressive than it was in 1980.
less

Bloom's: Understand
Difficulty: Medium
252. A good not produced by private enterprise because no profit can be made on it that is
produced by the government is a _____ good.
public

Bloom's: Remember
Difficulty: Medium
253. In the U.S. tax receipts are almost _____ percent of our GDP.
20
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-148
254. _____ said that "The government is best which governs least".
Thomas Jefferson

Bloom's: Remember
Difficulty: Medium
255. The federal government is estimated to spend almost _______ on defense in fiscal year
2011.
$730 billion [from Slavin's changes on p. 144]
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
256. Of federal government spending, less than _____ percent goes to foreign aid and about
_____ percent pays the interest on the federal debt.
1, 8 [see Figure 1, p. 144]
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
257. Today the United States spends as much on defense as _____ of the nations combined.
all

Bloom's: Remember
Difficulty: Medium
7-149
258. In 2003 the top marginal federal income tax rate was reduced from 38.6 percent to
______.
35.0%
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
259. Through the 1970s, 1980s and 1990s, the states ran substantial budget ___________.
surpluses

Bloom's: Understand
Difficulty: Medium
260. Every state but ____________ is legally obligated to balance its budget.
Vermont

Bloom's: Remember
Difficulty: Medium
261. The Internet Tax Freedom Act resulted in a loss of approximately ________ in state and
local income tax collections in 2006.
$20 billion
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-150
262. Of federal government spending, about _____ percent is spent on defense and about
_____ percent is spent on Social Security, Medicare and Medicaid.
23 percent, 39 percent [updates to Figure 1]
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
payroll tax.
35 percent [Figure 1]
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
individual income tax.
46 percent [Figure 1]
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
265. Federal government spending was fairly constant for more than a decade until the year
____, when it rose sharply; then it rose sharply again in the year ____.
1933, 1941 (or 1942)

Bloom's: Remember
Difficulty: Hard
7-151
266. A tax of $1,000 per person would make the federal income tax more ____.
regressive

Bloom's: Remember
Difficulty: Medium
267. The federal government spending estimate for 2009 is a combined total of about ____.
$3,200 billion

Bloom's: Remember
Difficulty: Hard
Short Answer Questions
268. If a person earned $40,000 in 2008, how much Social Security tax did she pay?
$2,480 (6.2 percent of $40,000)
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
269. If a person earned $20,000 in 2008, how much Social Security tax did he pay?
$1,240
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-152
270. If your taxable income was $40,000 and you paid $3,000 in federal income tax, what was
your average tax rate?
ATR = taxes paid/taxable income = $3,000/$40,000 = 7.5 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
271. If you had a marginal tax rate of 15 percent and earned an extra $10,000, how much tax
would you pay?
$1,500
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
272. If you earned an additional $1,000 of taxable income and paid $220 in taxes on that
income, what would your marginal tax rate be?
22 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
273. If your taxable income was $50,000 and you had an average tax rate of 20 percent, how
much tax did you pay?
$10,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-153
274. If you earned an extra $2,000 and paid $400 in taxes on that income, what would your
marginal tax rate be?
Marginal tax rate = additional taxes paid/additional taxable income = $400/$2,000 = 20

percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
275. If Mr. S. Hussein had a taxable income of $100,000 and earned an additional $100,000
interest on tax-exempt government bonds, if he paid $27,000 in taxes, how much would his
average tax rate be?
ATR = taxes paid/taxable income = $27,000/$100,000 = 27 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
276. A single mother with two children earns wages of $10,000. (a) How much federal
personal income tax does she pay? (b) How much payroll tax does she pay?
a. 0; b. $765
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-154
277. A couple with three children earns $14,000 in wages. (a) How much payroll tax do they
pay? (b) How much federal personal income tax do they pay?
a. $14,000  .0765 = $1,071; b. 0
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
278. If you employ 100 people, each of whom earns $10,000, you have to pay payroll taxes
totaling how much?
100  $765 = $76,500
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
279. If the Johnson family has an average tax rate of 10 percent, how much is its marginal tax
rate?
10 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-155
280. If Ms. Helmsley has an average tax rate of 33 percent, how much is her marginal tax
rate?
35 percent
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
281. The Ace Plumbing Company employs 10 plumbers, each of whom earns $50,000 a year.
How much does the company have to pay the federal government in payroll taxes?
$3,825  10 = $38,250
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
282. How much is the marginal tax rate of each of these individuals?
A) Ms. Smith paid $2,133,000 in personal income tax.
B) The Green family paid $280 in personal income tax.
C) The Johnsons, a couple with four children, had an income of $12,000.
A. 35% B. 10% C. 0%
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-156
283. The Noriega family pays $1,400 taxes on a taxable income of $14,000. How much is its
marginal tax rate?
10%
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
284. Raul Castro has a taxable income of $4,500,000. What is his marginal tax rate?
35%
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
285. What is the marginal tax rate of the chief executive officer of Exxon-Mobil?
35%
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
286. The No Child Left Behind Act of 2001 was a federal mandate which is estimated to cost
the states and local governments in excess of _________ a year.
$35 billion
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
7-157
287. The Dupont family paid $28,750,000 in federal income tax. How much is their average
tax rate and their marginal tax rate?
ATR = almost 35%; MTR = 35%
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
288. The Smiths, a married couple with four children, had an income of $14,000 before taxes.
What is their average tax rate and their marginal tax rate?
ATR = 0%; MTR = 0%
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
289. If a woman whose average tax rate were 25 percent had a taxable income of $40,000,
how much tax would she pay?
$40,000  .25 = $10,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-158
290. If you had a salary of $1,000,000, (a) how much Social Security tax would you have to
pay and (b) How much Medicare tax would you have to pay?
(a) $102,000  .062 = $6324.00

(b) $1,000,000  .0145 = $14,500
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
291. Mary Jones has $50,000 of taxable income. If her average tax rate is 20 percent and her
marginal tax rate is 31 percent, how much tax (in dollars) does she pay?
$50,000  .2 = $10,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
292. Max Smith has $60,000 of taxable income. If his average tax rate is 20 percent and his
marginal tax rate is 31 percent, how much tax (in dollars) does he pay?
$60,000  .2 = $12,000
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
7-159
293. Sue Hawkins earns $100,000. How much Social Security tax does she pay?
$100,000  .062 = $6,200
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
294. Mr. McCain pays $1,000,000 in federal income tax. How much is his marginal tax rate?
35%
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
295. Mr. Forbes pays $35,000,000 in federal income tax. How much is his marginal tax rate?
35%
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
296. A single person pays $200 in federal income tax. How much is her marginal tax rate and
her average tax rate?
10%; 10%
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-160
297. A married couple pays $500 in federal income tax. How much is their marginal tax rate
and their average tax rate?
10%; 10%
AACSB: Analytic
Bloom's: Apply
Difficulty: Hard
7-161
298. During the 1980s and 1990s, the fastest growing federal expenditures was the
___________________.
Interest on national debt
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
299. Presidents _____________ and _____________ will go down in history as the two
greatest tax cutters.
Ronald Reagan and George W. Bush

Bloom's: Remember
Difficulty: Medium
300. A flat or "fair" tax would increase the tax burden on the ___________ and
_______________ and decrease the tax burden on the _________.
poor, working class, rich

Bloom's: Remember
Difficulty: Medium
301. Because of the Great Recession of 2007-2008, we are currently collecting _________ per
year in social security funds than we are distributing to recipients.
Less
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
7-162
Another random document with
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warning it may have to be told about, for the sake of the young; but, against
that, we may find, for Dinah's sake, that it might not be convenient to make
it a public affair. And now we'll put this away for the Lord to work on, Joe.
Be sure it won't slumber nor sleep, but take the shape He wills in our hands.
We'll talk of the wedding now for ten minutes afore I be off. How would
you like a triumphant arch over the lichgate to church? It can very easy be
done."
"No," said Mr. Stockman. "I'm going through with it as a father should,
Arthur, and we're to have a very fine meal, with a pastry-cook from
Ashburton to prepare it and serve it. I'm doing my part, and I'm giving
Susan away in church, and I've asked all the neighbours, including five
outlying friends of Palk's. But, between you and me and without
unkindness, I feel no temptation to lose my head about what's going to
happen. I don't hunger for large diversions, nor yet triumphant arches over
the lichgate, nor anywhere else. I want for it to be over and them back
home, so as I may see how it's going on and what measure of peace and
comfort I can count upon in the future. The time for triumphant arches be
when a pair have stood each other ten years, and can still go on with it."
"Keep your nerve and give 'em every fair chance and trust God," said
Mr. Chaffe.
"Be sure of that," answered Joe. "I only wish I felt so sure that, hunting
in a couple, they'll do their duty to me so well as I shall do mine to them."
CHAPTER XXXVI
THE WEDDING DAY
A kindly spirit might have been moved somewhat to observe Soosie-

Toosie's wonder and delight when wedding presents began to appear before
her marriage. She could hardly remember being the recipient of any gift in
her life, and she felt amazed, almost prostrate, under the sense of obligation
awakened by a tea-set from Green Hayes, a metal teapot and milk jug from
Melinda, a "History of Palestine," with coloured pictures from Mr. Chaffe,
and other presents only less handsome. Thomas, too, was remembered by
former friends, and the kinsmen of the Stockmans, who dwelt at Barnstaple,
sent Susan an eider-down quilt of fiery scarlet and green, which she secretly
determined should comfort the couch of her father when winter returned.
This gift inspired Mr. Palk.
They had not yet decided where the fortnight's holiday should be spent,
and he suggested that Barnstaple would serve the purpose.
"Then I could be introduced to your relations," he said.
"And so could I," added Susan, "because I've never seen 'em in my life,
and father haven't seen 'em for twenty years—have you, father?"
Joe admitted that he had not, but the eider-down quilt impressed him
and he held it desirable that the families might be better acquainted. He was
not in the least proud of Mr. Palk; yet, upon the whole, he thought it well
that his daughter should come within reach of her relatives. The honeymoon
was therefore fixed for Barnstaple.
Lawrence Maynard's gift took a practical form. He did not design to

carry anything from England but his money and a few clothes. The
remainder of his property, including a small chest of good tools, a tin trunk,
and a pair of leggings, some old clothes and some boots, he gave to
Thomas, who accepted them gladly.
"Us wish you very well, though Joe do not," said Mr. Palk, "and I hope
some day, when you've got time, you'll write to me and tell about Australia
—especially how hosses be out there."
The wedding was well attended and Melinda, who came over in the
morning to help Soosie-Toosie with her new dress, declared that the bride,
in a steel-blue gown and a large white hat with a white feather in it, had
never looked so well. Mr. Palk was also clad in blue, of another shade. His
wedding garment was of ultramarine shot with a yellow thread, and he wore
a yellow tie with a green shamrock sprigged upon it. The best man came
from Newton Abbot. He was older by many years than the bridegroom, but
he had merry eyes and a merry face and declared a score of times that he
had known Mr. Palk from childhood, and that an honester man didn't walk.
From Buckland Court came Susan's bridal bouquet of orchids and white
roses, which Mr. Ford carried up the evening before and himself immersed
in a jug of water for the night. A pair of distinguished candlesticks and a
clock came from the Court also, greatly to the gratification of Mr.
Stockman; while his landlord sent Susan a cheque for ten pounds.
At the wedding were the family of Withycombes (the sailor had given
Susan two amazing shells from the other end of the world); while from
Green Hayes came John and Jane Bamsey and their mother. Dinah was with
them at church, but did not attend the wedding breakfast, asking rather to
return to her foster-father at home. Those who understood were not
surprised to learn her wish to do so. Mr. Chaffe was present and also
enjoyed the banquet. No less than fifteen sat down, and they openly
declared in each other's ears that Joe had "spread himself" in a very
handsome manner.
One speech only was made, and Arthur proposed the health of bride and
bridegroom in an oration which made Soosie-Toosie shed a few tears
despite herself. Then Thomas was held back, as he rose with the rest to
drink his own everlasting happiness; and his wife cut the cake, declaring it
was a terrible pity to spoil such a pretty thing.
They drove off in their blue attire presently, and the last seen of them
was Mr. Palk waving his new grey wide-awake from one window of the
wedding chariot and Susan fluttering a handkerchief from the other.
Many curious eyes rested on Maynard during the course of the meal, but
he was innocent of the fact and preserved a cheerful demeanour. Those who
watched him mused, according to the measure of their intelligence, as to
what was proceeding in his mind; but none guessed; all the conspirators
rather found in his brown face and dark eyes evidences of a devious and
lawless spirit hiding itself for its own purposes. He was in reality
considering how far different would his own doubtful nuptials be in a
strange land amid strange faces.
When the entertainment was at an end and most of the wedding guests
had gone, with expressions of their gratitude, certain men, by arrangement,
drifted away together. Maynard, in the farmyard milking the cows, saw Mr.
Stockman with Mr. Chaffe and a few others saunter over the autumnal moor
and sit presently together upon a flat ledge of rocks under the Beacon.
And there it was that Arthur learned the last news concerning Maynard,
the date of his departure and the hour at which, upon the day following, he
would meet Dinah at their last tryst. He himself had come primed with an
inspiration as to what should be done.
"Jane's thankful to God she haven't got to do no more hateful spying,"

said Jerry Withycombe. "But there it is. He meets her at Shepherd's Cross
somewhere after six o'clock on the morning after he goes off from here."
"And at the cross the man must face his outraged fellow creatures,"
declared Mr. Chaffe. "And when Dinah comes, she shall see and hear the
bitter truth. All be clear in my mind's eye now and I see a very high and
solemn deed, which must be done in the spirit of justice only—else it will
fail. We be the instruments, and if any man have any hate or ill will towards
the evil doer rather than the evil deed, then he'd better stand down and let
another take his place. For Maynard have got to be handled, and when he
fights against us, as he will, with the whole force of his baffled wickedness,
we must act without passion and feel no more rage in our hearts than the
Saviour did when he cast the devil out of a poor, suffering creature. We
must be patient under Maynard's wrath."
"'Tis a young man's job," said Joe, after Arthur had described his
dramatic purpose, "and we can very well leave it to them. Us older blades
needn't be called to be there at all, I reckon."
"I wouldn't say there was any cause for you to be," answered Arthur,
"but I shall certainly be there. It's my duty; I be the voice that will reach his
heart and his conscience, I hope, when the rough work's done and the blow
has fallen. And there's the woman to be thought upon also. One has to
consider this matter from every point of view. I shall take Orphan Dinah
back to her home, when all is over, and she understands how the Lord has
looked after her."
"'Tis a matter of the man's fighting powers," said Robert Withycombe.

"No doubt I could manage him with Jerry's help; but I reckon we don't want
a scrap and a lot of blood about, or broken heads. Be we three men—Jerry
and John and me—strong enough to make him yield without a dust up?"
"And why not a dust up?" asked Johnny; but Arthur admonished him.
"If you feel like that, you'd best not to come, Bamsey," he said. "I tell
you again that all's spoiled if we don't carry this thing out in a proper
manner. Robert be perfectly right. The man had far better feel he is up
against a force beyond his strength to oppose. We don't want no painful
scene to spoil the dignity. And if you three ban't equal to it, we must get in
somebody else. But not police; I'm very wishful to keep professional people
out of this."
"All depends on him," said Mr. Stockman. "If he was to put up a fight,
then there'd be temper and hard knocks and fur flying, no doubt. You want
to drop on the man like a flap of lightning; but if it's going to be a rough and
tumble first, and him perhaps escaping after all, then I say get another pair
of hands, so as he will see it's no good opposing you, even if he wants to.
He must be faced with such force as will make him throw up the sponge at
once and take what you mean to give him. He must feel 'tis just as vain to
make a fuss about it as a man feels when he makes up and knows he's going
to be hanged inside the hour."
"I wish we was going to hang him," whispered John to Jerry.
They decided that it would be wise to add a powerful member to their

number, in order that Maynard would be prevented from making any
unseemly effort to evade his punishment.
"Abel Callicott will do very nice," said John. "He's a prize-fighter and
he's to Ashburton now. If I tell him we're out to punish a rogue, and Robert
here tells him too, he'll understand there's no cowardice meant, or nothing
like that, and he'll help. The man wouldn't waste his time trying to fight or
trying to run away then."
"They prize-fighters are generally good-tempered creatures and often

religious," admitted Mr. Chaffe. "If he'll come in the right frame of mind,
well and good. But don't let there be no mistake. We must all be on the spot
and out of sight before they arrive. In fact, to be safe, us will do wisely to
get up over the night before. I pray it may be fine weather, else it will be as
painful to our bodies as our minds. We'll foregather at Shepherd's Cross and
we must leave a good margin of time for fear of accidents."
They talked thoughtfully and seriously. Arthur Chaffe lifted the minds
of them to the high issue involved and the gravity of what they purposed.
They worked objectively with the facts and had no subjective glimmering
of the reasons that lay behind the facts in the lives of those about to commit
this deed. Here was a married man deceiving a single woman—a frank
situation, that left no place in the argument for any extenuations. Dinah they
knew, and they believed their knowledge precluded the possibility of such a
character consenting to live in sin under any possible circumstances. The
man they did not know; but it was enough that he had planned this
wickedness. One who could plot thus had put himself beyond the pale.
Their attitude was entirely to be commended, and each felt worthy of

the occasion. Joe Stockman and John Bamsey alone might have been
accused of mixed motives, and certainly the master of Falcon Farm would
not have admitted them. As for John, in the atmosphere of the conference,
even he abated something of his fire—at least openly. In secret he trusted
that Maynard would fight, and that it might be his privilege to administer a
quietus. But, indeed, no great possibility in this direction offered, since
there must be four men to one in any case. Johnny abandoned much thought
of the man, therefore, and centred on the future of the woman.
For the rest, Robert and Jerry merely proposed to do what now appeared
a duty; while as for Mr. Chaffe, no more placable spirit ever planned how to
chasten a sinner for his own good. He was much pleased with what he had
arranged, yet desired no credit afterwards.
"We must be silent, neighbours, when all is done," he said. "Each man
will take his part, and when it is over, we will keep our mouths shut and put
it behind us. 'Unto God be the praise'; we don't want none."
CHAPTER XXXVII
SHEPHERD'S CROSS
The new cowman came on the day before Maynard left Falcon Farm
and Mr. Stockman was satisfied with his ability and intelligence. And then
came the moment when Joe shook hands and bade Lawrence farewell. All
animosity had died, for the elder was not vindictive. He pictured the
experiences that awaited his old servant and found it in his heart to be sorry
for him. Only thought of the enormity of the deed he had so deliberately
planned steeled Mr. Stockman.
"I shall hear tell of you, no doubt," were the last words that he said at
parting.
To Holne went Maynard, put up with an acquaintance for that night,

and, at five o'clock on the following morning, set out to meet Dinah at
Shepherd's Cross, a mediæval monument that marked a forgotten monkish
way of old. There Dinah, whose departure was designed to be secret, would
meet him, and together they would descend to Brent, where neither was
known, and so reach Plymouth, whence their steamer sailed that night.
The morning dawned fine and touched with frost. The wind blew gently
from the east. There was no sting in it, but it created an inevitable haze, and
distance quickly faded under its blue-grey mantle, while at hand all shone
clear and bright in the sunrise fires. The heavy dew of a cloudless night was
not yet dried off the herbage, and the grass, nibbled to a close and springy
velvet by sheep and rabbits, spread emerald green between the masses of
heather and furze, where the lover climbed Dene Moor. Still the autumn
heath shone with passages of colour; but into the rich pink of a month
earlier had crept a russet warmth, where innumerable heather bells passed
to death with a redness that drowned the purple. As yet this new colour was
genial in tone, shone in the sunlight and glowed along the reaches of the
fading fern; but a time approached when from ruddy to sere the countless
blossoms must sink. Then the light would fade and the flowers wither, till
winter winds tinkled in their grey inflorescence and sang the song of
another dying year. Now only the splendour of their passing and the pale
gold, where brake died in patches amid the standing fern, prophesied
changes to come. A few raddled sheep browsed their morning meal and
made harmony with the bright colours of the dawn, while Maynard,
stooping, picked up the wing feather of a carrion crow and reflected that
this was the last black plume he would ever find to clean his pipe on
Dartmoor. He was sorry to leave it, but had found no time for regret until
this moment. Life had passed so swiftly and demanded so much thought
and contrivance of late, that only now he spared a few minutes to consider
all that he was leaving, and how much had been good and precious to him.
He had formed a hazy and nebulous picture of his future environment, but
knew that it could in no way resemble this. He guessed that he must often
look back, and doubted whether his future scene of life would entirely take
the place of the one he was about to leave. But he remembered Dinah's
attitude and her expressed joy that the Vale should be left behind them and
all things become new.
Now he centred upon her and again thin shadows crept through his
mind. For good or evil they had listened to their own hearts alone; but he
still found questions asking themselves and doubts limning deep in his soul
when he thought of her; he still felt a smoulder of indignation in himself
that this cup should be forced upon them. There was an ingredient of
bitterness, a dumb question why fate should have called him and Dinah to
do a thing against which he rebelled, and the doing of which was an outrage
upon her love of truth and directness. She might make light of the burden,
but he resented the fact that she was called to bear it. Such is the force of
inherited conviction and tradition that he could not, as she had done,
discredit and dismiss his past as an empty dream. She honestly so regarded
Maynard's story; otherwise he knew she would never have come to him; but
it was only for his sake that she made the sacrifice, and he felt it a cruel fact
that any sacrifice should be called for from her. His past was real enough,
and the shadow must fall on her and the children to be born of her. That the
world would never see the shadow, or know of its existence, did not matter.
For him and his wife it could never vanish. Even yet he did not perceive
that no shadow whatever existed for Dinah. The thing that still haunted him
like a fog, like the robe of the east wind hanging on the skirts of the moor,
must, he felt, be appreciated by her also, and might, indeed, grow more
solid and real for her in the future. Regret for the inevitable thus found a
place in his mind despite his reason, because it sprang from foundations
other than his reason.
Swinging forward with an ash sapling in his right hand and a leathern
portmanteau in his left, Lawrence presently saw his goal ahead. Sunshine
played over the blue hazes and touched the grey summit of Shepherd's
Cross, where the ancient stone stood erect and solitary on the heath. It
reared not far distant from rough, broken ground, where Tudor miners had
streamed the hillside for tin in Elizabethan days. The relic glimmered with
lichens, black and gold and ash colour. Upon its shaft stuck red hairs, where
roaming cattle had rubbed themselves. It stood the height of a tall man
above the water worn trough at its foot, and the cross was still perfect, with
its short, squat arms unbroken, though weathered in all its chamfering by
centuries of storm.
Here he sat down, knit his brows to scan the northern slope of the hill,
whereon Dinah must presently appear, and wondered how far she might
have already tramped upon her way. He had found his own climb from
Holne shorter than he imagined and was at their place of meeting before the
time.
Then, suddenly, behind him he heard feet shuffling and turned to see
five men spring up from their hiding-places at hand. They were familiar
faces that he saw, and for a moment no suspicion that they were here upon
his account entered the mind of Maynard. It occurred to him that Shepherd's
Cross might be a meeting-place for hounds at this early hour. Yet he did not
know that cub-hunting was yet begun. And then he marked behind the four
now beside him, the tall, thin figure of Arthur Chaffe—one who would
certainly attend no meet of hounds.
He was not left long in doubt. The men brought ropes. They closed
round him, as he rose to confront them, caught his arms, dragged him to the
cross and, with the celerity of executioners, quickly had him fast bound by
ankles and wrists against the granite—crucified thereto with his arms
extended upon the arms of the cross and a dozen coils of rope about his
shoulders, trunk and legs. John Bamsey handled one wrist and saw that his
cords bit.
Here was Mr. Chaffe's inspiration; that the erring man should be lifted
on the Christian emblem of salvation, for his heart to be taken by storm, and
for Dinah to behold the great event. He apprehended a wondrous
purification in Maynard as the result of this punishment and he hoped thai
he himself might have time to say the necessary words and utter a trumpet
note in the sinner's ear before his victim reached Shepherd's Cross.
The men had come by night and hidden as near the tryst as possible.
Now they completed their work and stood off, some grinning, some
scowling, at the prisoner. His hat had fallen and his ash sapling and his
leather bag lay together where he had sat. The light of day shone upon his
bare head and he stared at the faces round him, still dazed and silent before
the terrific surprise of their attack. But though he said nothing, others spoke
freely enough and some chaffed and some derided.
"You didn't think you was going to get chained up this morning, you
dirty, runaway dog!" said John Bamsey, while Robert Withycombe laughed.
"You ban't the first thief as have found yourself on a cross—eh, my bold
hero? Not but what a cross be almost too holy a sign to rope such a scamp
upon."
"You—you that thought you could fox an honest woman and turn her
away from an honest man! You wicked lying trash, as ought to have the
skin tanned off your bones!" roared John.
But the thunder did not make Maynard shrink. He turned his head to the
veteran and spoke.
"What does this mean, Mr. Chaffe?" he asked.
Jerry Withycombe began to answer him, but John took the words out of
his mouth. Jerry was too mild for this occasion.
"It means that I happened to find the wrens' nest, and I told about it, and
John's sister found 'twas you plotting against Orphan Dinah and——"
"It means that all the world knows you're a married man, you blasted
wretch," stormed Johnny. "It means you kindiddled the woman away from
me with lies and cunning and thought to get her out of England and ruin
her, and then, no doubt, fling her off, like you flung off your lawful wife. It
means you're found out for what you are—the scum of the earth. And she's
going to know it, and see you where you stand, and hear where your filthy
plots and wickedness was going to land her. And if she don't sclow down
your face for you when she knows and tear your damned eyes out, she
ought to!"
Maynard looked at the furious man, but did not answer. Then Mr.
Chaffe intervened.
"That'll do, John Bamsey," he said. "Us have carried out our work in a
high spirit so far and we don't want no crooked language."
"Crooked language be the right sort for crooked deeds I reckon,"

declared Mr. Callicott, the prize-fighter—a sturdy and snake-headed youth
who had assisted the others. "If it's true this bloke's married and was going
to run away and do bigamy with an innocent girl, then you can't talk too
coarse to him, I reckon."
"You're right to be angered, but righteous wrath must keep its temper,
Callicott," explained Arthur. "Now hear me talk to the man and show him
how it is with him. He be dazed, as you see, and stares through us and looks
beyond, as if we was ghosts."
"He knows very well we ban't ghosts," said Jerry.
"You see him," continued Mr. Chaffe, as though he were lecturing on a

specimen—"you see him in the first flush of his surprise—gazing out at the
risen sun and too much knocked over even to make a case."
"What sort of case should he make—a man that meant to seduce another
chap's sweetheart?" asked John Bamsey.
"If he haven't already," suggested Mr. Callicott.
"Hear me, and let him hear me," answered Arthur; and then he turned to
Maynard.
"You ask why we have laid in wait for you and done this," he said. "But
you know why we have done it only too well, you bad man, and the true
wonder in your mind is to guess how we found out. For well you knew that
when honest God-fearers were led by Providence to discover what you was
up to, they'd stop it in the name of the Lord. Don't stare into the sky, nor yet
over the hill for that poor woman, as you meant to destroy body and soul.
Just you turn your wits to me, Lawrence Maynard, and listen; and then tell
me before God, if you've got any just quarrel with any man among us. And
this is what you done—you knowing you was married and had a wife you'd
thrown over. You come here and make a woman care for you; but since
your watchful Maker has already opened your mouth, so that your master
heard you was married, you know you couldn't pretend to wed her honest
before men, but must hatch lies for her and make a plot. And her love was
quick, no doubt, to think nothing you could do or say was wrong, so she
consented to follow you to foreign parts, where her shame might be hid and
where she'd be in your power—to cherish or to desert according as your
fancy took you. For well you understood that she could never be no more
than your leman and at your mercy. That's what you planned, poor man; but
God in His might chose different, and willed to give you up to your fellow
creatures and led this young Jerry Withycombe to find your secret, so we
learned what you was going to do. And it is my work and ordinance that
you stand here now tied to the Cross of your Redeemer, Lawrence
Maynard. And may the cross enter into your heart and save your soul alive
yet. And then you'll see we five Christians be the willing instruments of
Heaven, and have put ourselves to this hard task for love of humanity and in
the spirit of our Master. We be here, not only to save Dinah, but to save
you; and you can say 'Amen' to that, and I hope your Father in Heaven will
touch your hard heart to bend and see what we've saved you from."
"In fact you're getting out of it a damned sight softer than you deserve,
and a damned sight softer than you would if I had my way," growled
Bamsey; but the sailor stopped him.
"Shut up, John, and let Mr. Chaffe talk," he said. "What he tells be very
fine, and us must follow his lead and take a high hand with the man."
"We're all sinners," continued Arthur, "and nobody more so than you,
John Bamsey, so I'll beg you hold in and let me do my part."
Then he droned on to the roped cowman.
"Evils must come, but woe be to them that bring them, and you've
shown me in the past that you're a thinking creature with all your intellects,
and now you see where your doubtful thoughts and lawless opinions have
brought you. And I hope it will be a case of 'Go and sin no more,' in the
words of the Saviour of us all, Maynard. All things go round and round, you
must know. The worm gnaws the nettle that the butterfly may rise up into
the sunshine; and the butterfly rises up into the sunshine that the worm may
gnaw the nettle; but we, as have immortal souls, be called to deny and defy
nature, and lead captivity captive, and trample on the adder and the basilisk.
All which things you knew very well, yet set your face to add to the evil of
the world to please your own base passions. And you didn't care that a
young and harmless woman, who was God's business quite as much as you
yourself—you didn't care where you dragged her down, so long as you got
what you wanted, and defied principalities and powers, and lied to your
own better nature just the same as you lied to her."
"The woman be coming," said Robert Withycombe. His sailor's eyes

had seen Dinah still far distant. She was clad in a brick-red gown—her best
—and carried a basket of yellow, woven cane that made a bright spot on the
heath.
"Yes," said Arthur Chaffe. "Like a lamb to the slaughter the virgin
cometh, Lawrence Maynard; and I hope 'tis your voice she will hear, telling
how God hath watched over her, and how right and religion have won
another victory on this glad morning."
But the prisoner preserved an obstinate silence. He seemed to be rapt

away out of sight or sound of Mr. Chaffe and the rest. His eyes rested on
Dinah; his ears appeared to be sealed for any attention he paid to his
captors. Arthur drew his wind and the others spoke.
"He's waiting for her to come," said Mr. Callicott. "He be going to say
his say afore the woman and don't care a damn for you, master."
"He'm in a dream," murmured Jerry. "I don't believe he's hearing what
Mr. Chaffe be pouring at him."
Then Dinah, who had long seen the group, made haste and dropped her
basket and hastened to Maynard, ignoring the rest.
Her face was scarlet and she could hardly speak for the throbbing of her
heart.
"Lawrence—Lawrence—what's this?" she asked. "What have they

done?"
She had left her home before dawn, unknowing that another was
awaking also at Green Hayes and had heard her go. Her last act was to slip
into Benjamin Bamsey's room, where he slept alone, and kiss the
unconscious old man upon his temple. Then she had gone; and Jane had
heard her do so and seen the vague shadow of her descend the garden path
and vanish into the farm yard. Mrs. Bamsey was kept in ignorance of
Dinah's plans, but when morning came and they sat at breakfast, her
daughter informed her of all that had happened and told her that she might
expect to see her father's foster-daughter return with Mr. Chaffe in an hour
or two. Faith Bamsey took the revelation calmly enough and showed no
great emotion; while Jane roamed restlessly through the morning and
desired to see Jerry and hear of what had happened on the moor.
Now, in answer to Dinah, Maynard, who was suffering physical pain
from his position and his bonds, answered very quietly, while the men
round the pair listened to him.
"They have done what they thought was right, Dinah. They found out
that we were going to leave England together, and they heard from Mr.
Stockman that I was married. And they took a natural view and thought I
was deceiving you as to that. So they laid in wait and tied me here, until
you heard the truth."
"I know the truth," she said. "I know a deeper truth than any they can
know. I know that in God's sight——"
"Stop!" cried Arthur Chaffe. "Listen to me, Orphan Dinah, and thank
Heaven on your knees that your fellow creatures have saved you from the
evil to come."
She looked at all of them with a flaming indignation.
"Did you set 'em to this dirty task—old as you are? Did you think so
badly of this man that you supposed he would try to do me harm? Did you
think there was no other side? Did you plot behind his back, when you'd
found out our simple secrets? Did you plan this cruel insult and disgrace for
one that never harmed you or anybody?"
"He harmed us all, Dinah, and I beg you'll keep your temper," answered
Arthur. "You're talking far ways short of sense and you don't know what we
saved you from."
"Be you shadows, or real people, you grinning men?" she asked, turning
upon the others. "Do you know what you've done in your clumsy, brutal
strength? Do you know you've wronged and tortured a man whose boots
you ain't worthy to black?"
"Hear the truth and don't be an idiot!" answered John Bamsey.
"'Truth'! What do you know of the truth? You—shallow, know-naught

creatures, that go by spoken words and make words stand for truth? It's a lie
to say he's wedded. Is every man wedded that's married? Have none of you
ever seen married people that never felt or knew the meaning of marriage?
'Tis for pity to the likes of you, beyond the power of understanding, that we
took these pains; and now we shan't run away behind your backs, but go
before your faces—a parcel of zanies, that think because a thing be said it
must be true."
"Let the man speak," said Mr. Chaffe. "I command that you speak,
Lawrence Maynard. The woman's beside herself and dead to reason. 'Tis
your bounden duty to speak for yourself."
"Loose him then and he'll speak fast enough," cried Dinah. "Who be
you—a cowardly, hulking pack of ignorant clods to lay fingers on him! If
you had sense and decency and any proper Christianity in you, you'd have
gone to work very different and spared me this wicked outrage, and him
too. You'd have come to us and bid us speak. What do you make us? Loose
him, I tell you—ban't one among you man enough to understand that I
know all there is to know about this—that it's my work we're going, my
work—me that loves him and worships him, and knows the big-hearted,
patient, honourable chap he is. God! If you could see yourselves as I see
you—meddling, nasty-minded bullies, you'd sink in the earth. Loose him
and then listen to him. You're not worth the second thought of a man like
him."
Lawrence spoke quietly to Robert Withycombe.
"You see how it is. Don't keep me trussed here no longer. I'm in pain
and no good can come of it. If you care to listen, then I'll speak. I'm very
glad to let you know how things are, for you've got a credit for sense; so has
Mr. Chaffe."
"It's a free country," said Mr. Callicott, "You chaps seem as if you'd
made trouble where there isn't none. Pity you didn't look into this first and
play your games after."
He opened a knife to sever the ropes that held Maynard. None attempted
to stop him save John, and then the sailor came between.
"Cut him loose, Callicott."
Mr. Chaffe was deeply dismayed and made an effort to save the
position.
"Orphan Dinah," he said, "for the love of your Saviour, and your foster-
father, and right and religion, come home with me this minute. I can't
believe what you say, for you know not what you say. Does the man deny
he's married? That's all I want to know; and if he is, then do you mean to
tell me you're going to live with him? There it is in brutal words and——"
"The brutal words are yours, because you're bound up in words and
know naught about the truth of what this means, Arthur Chaffe," answered
Maynard, who now stood free. "Do you think two people who have set out
to share their lives for evermore, didn't count the cost every way? Believe
me, we did, so understand that what seems wicked to you, ban't wicked to
us. I don't count, but Dinah does. She knows every single word of the truth,
and may I die on this stone if she doesn't."
"Come," said Dinah. "We're not called to lay our hearts bare for these
men. Let 'em know there's as good and honourable and Christian people in
the world as themselves; and if I, knowing far, far deeper than they know,
am content and proud to be your wife in God's sight for ever and ever, who
else matters, and who else shall judge? You be no more than the buzzing of
gnats to us, and there's no power in one of you to sting this man, or me."
"Think, think what you're doing, Dinah," pleaded Mr. Chaffe.
"And haven't I thought, and don't I know a million times more than you
can, or ever will? Understand before we go. This man was never false to
any woman—never—never. He don't know the meaning of falseness. He
never looked at me, John Bamsey, till I'd left you, and I never thought of
him till long, long after I was free. And when I loved him, he told me he
could not marry me—and why—and I saw that it was moonshine and only a
pair of weak, worthless creatures would be frightened and part for that—
only cowards feared of their neighbour and the laws—laws that selfish
Christians bleat about and want kept, because to torture other people won't
hurt their comfort, or cloud their homes. What do you know of marriage—
one of you? What do you know of the dark, deadly things that may come
between people and separate 'em far as heaven from hell, while parsons and
lawyers and old bachelors and old women want 'em chained together to rot
—for Christ's sake! Look deeper—look deeper!"
While the men stood silent, Maynard picked up his stick and bag and
Dinah's basket.
Mr. Chaffe had sunk upon a stone and was wiping his eyes with a red
pocket handkerchief.
"You!" he said. "You brought up in a Christian home by God-fearing

people, Dinah!"
"And fear God I always shall; but not man," she answered scornfully.
"Did these chaps do this because they feared God? Ask them!"
She took her package from Maynard and he spoke.
"Have no fear that any harm be done to righteousness," he said. "No

woman knows her duty to her Maker better than this woman, or her duty to
her neighbour. If ever I was in doubt, and I have been, my doubts be cleared
afore what you men have done to-day, and I thank you for that. You've
shown how paltry it was to doubt, I reckon, and I doubt no more. I be the
better and stronger for seeing your minds, you well-meaning chaps! My life
and thought and worship belong to Dinah; and where no secrets are hid,
there's no blame counted against us, and never will be, I hope."
They turned their backs upon the listeners and went away side by side;
they moved among the stones and bushes until they sank out of sight and
vanished for ever from that company.
"To hell with them!" said John, "and curse all women for the sake of
that blasted woman!"
But the rest did not share his passion. Only Mr. Chaffe mourned; the
others were impressed at what they had heard and the prize-fighter was
amused.
"A pretty parcel we look," said Callicott, "bested by that calm man and
quick-tongued woman. And be damned if I ban't their side. We don't know
naught about it, and if we did very like we'd praise 'em for a bit of pluck.
Anyway she knows what she's doing all right."
"If the Lord can read their hearts, it evidently don't much matter to them
that we can't," declared Robert Withycombe; "and be it as it will, if he was a
Turk, or Indian, the man could have two wives and no harm done. And if
there's only one Almighty, Mr. Chaffe, why for should He hold it a parlous
crime for us to do what a chap across the water can do every day of the
week?"
But Arthur Chaffe was too stricken to argue. He stared in great grief
after the vanished man and woman.
"My God, why hast Thou forsaken them?" he moaned.
They parted presently and went their different ways, leaving Shepherd's
Cross with the sunlight on its face and the severed ropes about its foot.
CHAPTER XXXVIII
RETURN FROM THE HONEYMOON
Though, before the event, Mr. Chaffe had enjoined secrecy in the matter
of Lawrence Maynard, yet, since the affair fell out so contrary, none obeyed
him. It made a good story, and though many who heard it shared Arthur's
concern, none sank into such a deep dejection as he over this trial and
failure of faith. Jane Bamsey shared John's indignation that both parties had
won their way; while her mother mourned with Mr. Chaffe over Dinah's
downfall. For the rest Robert Withycombe and Callicott, the boxer, related
their experience in many ears, and more laughed than frowned who heard
them.
The attitude of Joe Stockman was defined in a conversation held a week

later with Melinda.
She came to Falcon Farm in a condition somewhat nervous, for she had
great news for Joe and felt doubtful how he would take it. She had accepted
the hand of Harry Ford in marriage and acknowledged to herself that
propriety demanded Mr. Stockman should be the first to know her decision.
She brought a bouquet for Susan, who was returning that evening with
her husband.
"Everybody's beginning a new life seemingly," said Mrs. Honeysett.

"And I was wishful to know your view touching Orphan Dinah, because as
you think in that matter, so shall I."
But this diplomacy was wasted.
"No, no—you don't think like what I do—let's have no pretences,

Melinda. And as to my late cowman, if the new one ain't so clever with
women, he's quite so clever with cows. Chaffe have been up here wringing
his hands, and your brother, the sailor, have told me the tale also; and on the
whole I dare say it will be all right for Dinah. She come out very clear, so
Robert says. They was both in deadly earnest and now they are gone
beyond reach of prayers or cusses alike, and I don't wish 'em no harm. If the
time had to come again, I'd keep my mouth shut about it. Anyway they'll be
married as far as words can marry 'em, when they get to Australia; and if
the world thinks you're married, that's all that matters."
"So Mr. Ford says. He's took a pretty large-minded view. In fact nobody
don't wish 'em any harm, except Jane Bamsey and her brother."
"And you be going to marry the gardener, Melinda?"
She started.

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Multiple Choice Questions

2. Each of the following is a basic economic role of the government except

3. The federal budget is prepared and passed by

5. Which statement is true?

6. The largest source of federal tax revenue comes from

7. Each of the following is an indirect tax except the _____ tax.

8. Which statement is true?

9. Most poor families pay _____ federal personal income tax.

11. The key agency in the preparation of the president's budget is

14. Which statement is false?

15. Which statement is true?

18. Which statement is true?

23. The Social Security tax is

25. Most excise taxes are

26. Which statement is false?

27. A wage earner making $10,000 pays

28. Which statement is false?

29. The federal government's fiscal year is _____ months long.

30. Which statement is true?

32. The corporate income tax is

33. In 1980 the top marginal tax rate was

35. Each of the following is a goal of the federal government except

36. The sales tax

37. The federal government spends

42. A tax on _____ would be the least regressive.

47. In a progressive tax structure,

48. Which of the following is a transfer payment?

49. The money that pays Social Security benefits is raised by

52. Excise taxes are

53. Which of the following is NOT an example of a transfer payment?

54. Statement I: The federal corporate income tax is a direct tax.

Statement II: The Social Security tax is a regressive tax.

55. An excise tax on cigarettes is ________ and _______.

56. Statement I: Most taxes are proportional, in effect.

57. Which of the following statements is true?

58. With respect to local finance, it is correct to say that

63. An example of a tax that is generally regarded to be progressive is

70. Which of the following would not be a government transfer expenditure?

78. If Mr. Perot faces a 90 percent marginal tax rate,

79. The second largest source of federal revenue is

80. Under a progressive income tax, as income increases

82. Which statement is the most accurate?

84. Statement I: Most taxes are proportional in effect.

Statement II: A tax that is nominally regressive will be regressive in effect.

85. The tax shown in the graph above is

86. In 2009, _____________ of Americans owed no federal income taxes.

89. For a progressive tax the

91. Social Security benefits are funded by

98. "Taxable income" is

100. The marginal tax rate is calculated by dividing

102. The average tax rate is calculated by dividing

103. Which of the following schedules represent(s) a progressive tax?

104. Under a proportional income tax, the average tax rate

105. Which statement is true?

55. An excise tax on cigarettes is __ and _.

230. A direct tax is on a , while an indirect tax is on a .