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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.
7-5
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.
7-12
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.
7-14
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
7-16
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.

7-19
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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cache! But the snag is . . . Holy Habbakuk . . . they’ll be waiting for
me.” She stared. “They know I’ll invite myself, bless it!”
“Why?”
“Because they know I’m wise to this Old House joke. I let on, like a
fool. That was a poisonous bad bloomer! I was ragging old Bloem
about Fernando, just seeing how much breeze I could put up him,
and I mentioned the Old House. They’ll think I knew exactly what
and where it was. Oh, crumbs and crutches! D’you mind kicking me
as hard as you can?”
She was as distressed as he was. It was in no half-hearted
manner that she had enlisted in the army of adventurers. A setback
stung her as much as anybody. She bit her lip.
“But they’re coming in,” she insisted.
“Yes—forewarned and forearmed to the teeth. If I happen to have
been a bit slow on the uptake, well and good. If I haven’t, and think
I’ll butt in, they’ll be ready for me. Maybe the Tiger’s patting himself
on the back right now, bucked to death with his dandy little scheme
for getting away with the oof and me too. Well, it’s up to me to hand
him the jar of his life. Sit tight a shake while I think.”
He dropped into a chair and lighted a cigarette, his brain reeling
and humming to encompass this new twist to the problem.
Undoubtedly he had sized it up right—the Tiger was giving himself a
double chance. And that move had got to be baulked somehow. But
how? The Saint had only to breathe a word to Carn, and the Tiger
was dished. But then so was the Saint. That put that out of bounds.
He was fully prepared to swim out to the Old House that night, with
Anna strapped to his arm, and trust to the inspiration of the moment
to show him a way of beating the gang, even if they were watching
and waiting for him. That was an honest toss-up with sudden death,
and Simon took risks of that stamp without turning a hair. But on the
other hand he liked to have at least a shadowy loop-hole for
emergencies—there was no point in chucking the game away for
lack of a little forethought. And how to provide that loop-hole? The
Tiger’s forces were large: the Saint could reckon on only Orace and
the girl, besides himself. And he didn’t want to push a slip of a girl
into the front line, however keen she might be to go. How to make
three people—or nearer two and a half—do the work of a platoon
was a poser worthy of the undivided attention of a great general.
Manifestly, it could not be done by any ordinary means. Therefore,
there must be subtlety.
And the Tiger had the added advantage of being the attacker.
Simon’s cigarette began to smoulder down in his fingers unnoticed.
That was a point! The Tiger was sitting high and dry in his den,
hatching plots and making raids and forays when the spirit moved
him; while the Saint had to sit on the fence with his eyes skinned,
just parrying the Tiger’s thrusts. And it became clear to the Saint that
there was something unfair about that arrangement. True, the Saint
had made one attack—but why let the offensive stop there? The
enemy had an idea that he would come lunging in again that night:
well, so he might, if it looked like a good tussle and he felt in the
mood. But that didn’t imply an armistice until zero hour, by any
manner of means. Quite a lot of skirmishing could take place before
the big battle—and every blow of it would bother the Tiger and help
harrass his organisation for the last rounds. There really was no
earthly reason why the Tiger should have it all his own way.
Where to launch the attack? The other Old House sprang to his
mind at once. They might be expecting him to turn up there, but they
would hardly anticipate his arrival in broad daylight. Which was just
the way he might catch them on the hop. Or the dilapidated inn might
be a false scent—in which case there was nothing but the state of
his own nerves to stop him paying a call on Bloem. The prospects
began to look brighter, and suddenly the Saint sat up with a broad
grin illuminating his face.
“I’ve very nearly got it,” he announced.
“Do let’s hear!”
She was flushed and eager, eyes sparkling, lips slightly parted,
like a splendid young Diana. She made a picture that in the abstract
would have delighted the pagan Saint, but in the concrete it brought
him up with a jerk. Next thing he knew, she’d be demanding to be
allowed to accompany him on the whole tour.
“Simply the germ of an idea to wallop the Tiger Cubs when they
come in for the spondulicks,” he lied, thinking furiously. “You see,
gold’s shocking weighty stuff, so they’ll have to ferry it to the ship in
small doses. That’ll mean they’ll have about three of the ship’s boats
running in relays—if they tried to take too big a load at once it’d
simply drop through the bottom. And the crew’ll be pretty small. A
motor ship doesn’t take much running, and they’d want to keep the
numbers down in any case, because the seaman who can be relied
on not to gossip in port is a rare bird. If we’re lucky, the skipper’ll be
ashore getting his orders from the Tiger, and that’ll make one less to
tackle. Otherwise, the Tiger’ll go aboard himself, and that’ll be one
more to pip—though the fish’ll be worth the extra trouble of landing.
In any event, the general idea is this: we’re going to have a stab at
pinching that hooker!”
The Saint was capable of surprising himself. That plan of
campaign, rigged out on the spur of the moment to put the girl off the
main trail, caught hold of his imagination even as he improvised it.
He ended on a note of genuine enthusiasm, and found that she was
wringing his hands joyfully.
“That’s really brilliant,” she bubbled. “Oh, Saint, it’s going to be the
most fearfully thrilling thing that ever happened—if we can only bring
it off!”
He gazed sadly down at her. There it was—a tank of mulligatawny
big enough to drown a brontosaurus, and he’d fallen right in before
he knew what was happening. He shook his head.
“Kid,” he said, “piracy on the low seas isn’t part of the curriculum at
Mayfield, is it?”
“I can swim a couple of miles any day of the week.”
“Can you climb eighteen feet of anchor chain at the end of it?”
objected the Saint. “Can you back yourself to put a man to sleep
before he can loose a yell? Can you make yourself unpleasant with a
belaying-pin if it comes to a riot? I hate to have to damp your ardour,
Pat, but a woman can’t be expected to play that game.”
She was up in arms at once.
“Saint, you’re trying to elbow me out again!” she accused.
“Possibly you’ve never met anybody like me before—I flatter myself
I’m a bit out of the ruck in some ways. And I won’t be packed up in
cotton-wool! Whatever you go into, I’m going with you.”
Then he let her have it from the shoulder.
“Finally,” he said in a level voice, “how d’you fancy yourself as a
prisoner on that tub, at the mercy of a bunch like the Tiger’s, if we
happen to lose? We might, you know. Think it over.”
“You needn’t worry,” she said. “I shall carry a gun—and save one
cartridge.”
The Saint’s fists clenched. His mouth had set in a hard line, and
his eyes were blazing. The Saintly pose had dropped from him like
the flimsy mask it was, and for the first and last-but-one time she
saw Simon Templar in a savage fury.
“And—you think—you, my girl, you——” The words dropped from
his tense lips like chips of white-hot steel. “You think I shall let you—
take—that chance?”
“Is there any logical reason, my man, why you shouldn’t?”
“Yes, there is!” he stormed. “And if you aren’t damned careful you’ll
hear it—and I don’t care how you take it!”
She tossed her head.
“Well, what is it?”
“This,” said Simon deliberately—“I love you.”
“But, you dear priceless idiot,” said Patricia, “hasn’t it occurred to
you that the only reason I’m in this at all is because I love you?”
For a space he stared. Then——
“Burn it,” said the Saint shakily, “why couldn’t you say so before?”
But after that there was only one thing to do. For a man so
unversed in the ways of women he did it exceedingly well.
Chapter X.
The Old House
It was Orace, that stern disciplinarian, who ruthlessly interrupted
the seance in order to lay the table for lunch. That was half an hour
later, though Simon and Pat would both have sworn that the
interlude had lasted no more than a short half-minute. The Saint
moved away to an embrasure and gazed out at the rippling blue sea,
self-conscious for the first time in his life. The girl began to tidy her
hair. But Orace, after one disapproving glance round, brazenly
continued with his task, as though no amount of objections to his
intrusion could stop him enforcing punctuality.
“Lunch narf a minnit,” warned Orace, and returned to the kitchen.
The Saint continued to admire the horizon with mixed feelings. He
was sufficiently hardened in his lawless career to appreciate the
practical disadvantages of Romance with a big R horning in at that
stage of the proceedings. Why in the name of Noah couldn’t the love
and kisses have waited their turn and popped up at the conventional
time, when the ungodly had been duly routed and the scene was all
set for a fade-out on the inevitable embrace? But they hadn’t, and
there it was. The Saint was ready to sing and curse simultaneously.
That the too marvellous Patricia should be in love with him was all
but too good to be true—but the fact that she was, and that he knew
it, quadrupled his responsibility and his anxieties.
It was not until Orace had served lunch and departed again that
they could speak naturally, and by then a difficult obstacle of
shyness had grown up between them to impose a fresh restraint.
“So you see,” remarked Patricia at last, “you can’t leave me out of
it now.”
“If you cared anything about my feelings,” returned the Saint,
somewhat brusquely, “you’d respect them—and give way.”
She shook her head.
“In anything else in the world,” she said, “but not in this.”
So that was that. Simon had used up all his arguments, and
further effort to combat her resolution would only be tedious. She
won. Short of an appeal to brute strength, he hadn’t a thing left to do
except grin and bear it and do his best to make the going as safe as
ingenuity could. And like many strong men the Saint shrank from
applying cave-man measures.
At that moment he would even have considered throwing up the
sponge, tipping the wink to Carn, and sliding out of the picture. What
stopped him from taking that desperate way out was a shrewd
understanding of the girl’s character. Somehow, out of a normal
education and a simple life in a forgotten country village, she had
acquired the standards of a qualified adventuress—in the clean
sense. And she had a ramrod will to back her up. She felt that it was
only the game to stand by her man in any and every kind of trouble,
and she meant to play the game according to her lights. She would
only despise him if he refused to carry on on her account: she was
determined to prove to him by deeds as well as words that she
wasn’t a clinging vine who was going to cramp his style either before
or after the wedding bells. And it was quite hopeless for the Saint to
try and point out to her that she would only hamper him—as
hopeless as it would have been ungracious, bearing in mind the
uniqueness of a girl of her calibre.
But for one thing Simon could and did thank his stars: he had
successfully put her off the track of the first string of his bow—the
disused inn behind the village. He would be able to tackle the
proposition from that angle without her knowledge before nightfall,
and if the Fates played into his hands he might manage to get a
stranglehold on the Tiger before it was her turn to bat.
“If the mountain won’t budge, Mahomet’ll have to leave it where it
is,” said the Saint disarmingly. “But there are one or two knots that
ought to be untied in the course of the afternoon, and that’s where
you can help. One—it might be a sound plot to see if we can’t get
this Aunt Aggie palaver cleared up a bit.”
“She wouldn’t tell me anything last night.”
“You were hardly on form then, with me loose in the menagerie.
This afternoon you can go back full of beans, with a parting hug from
me to pep you up, and lam into Auntie two-fisted. If you can only
carry it, you’ve got her cold. After all, she admits having tapped your
treasure chest to save herself. It isn’t too stiff a return to ask her to
get a bit off her own chest for your satisfaction. I know she’s a hefty
handful, but she isn’t half the size of some of the things you’ll have to
wire into during the next twenty-four hours, and it’ll limber you up. If
she tries to bully you, remember that there isn’t a bully swaggering
the earth that can’t be bullied himself by someone with the guts to
take on the job. And if she finds she can’t treat you high-handed, and
bursts into tears—don’t let ’em dissolve you. I can’t take her on
myself, so I’ve got to rely on you.”
She nodded.
“If you say so, Saint, I shan’t funk it.”
“Good Scout!” he approved. “The other item is old Lapping. He’s
been lying doggo since the beginning of the piece, but there are so
darn few possible winning numbers in this lottery that I think we
ought to get a line on Lapping. On the face of it, he’s right out of the
running—but then, so’s everyone else in Baycombe. And I’m just
wondering about a lad called Harry the Duke.”
“ ‘Harry the Duke’?” she repeated, mystified. “Whoever’s he?”
“A swell mobsman that Lapping sent down for seven years when
he was a judge. It was a nasty piece of work—I’ll spare you the
details—but Harry escaped six years ago, and he never was a
forgiving man, from all accounts. In fact, knowing what’s said about
Harry at the Yard, I’m surprised he hasn’t taken it out of Lapping
before now. There’s a story that Harry followed the first magistrate
who convicted him half-way round the world—and got him. Since
when there was no other, Harry being miles and miles above the
common run of crooks in brains, until Lapping. It’s a long shot, I
know, but bad men run pretty much to pattern, and the Tiger’s
acknowledged to be an Englishman. And the hunch got me recently
—suppose Harry the Duke is the Tiger?”
“Wouldn’t he have been recognised?”
“Harry’s face is pure plasticine, and he’s forgotten more about
make-up than most actors ever learn. And Harry’s one of the few
men I’d credit with brains enough to wear the Tiger’s hat. . . . It’s all
speculation, and long odds against it on probability, but it’s worth a
flutter. You see, if the Tiger did happen to be Harry the Duke—and
the Tiger started operations not so long after Harry broke gaol—it
accounts for Lapping’s continued health. The Tiger’ll just be waiting
till he’s ready to skedaddle with the swag, since Lapping’s right
where he can lay his hands on him any time, and then he’ll pay off
the old score and sail away.”
She was still puzzled.
“But what do you want me to do?” she asked.
“If you’ve got time and energy left after pasting Auntie, go over and
be sweet and winsome to Sir Mike,” replied Simon. “You know him
quite well—lay it on with a spade. Ask him to advise you about me.
That’s sound! If he happened to be in with the Tiger, it might put you
on safer ground, if you can kid them you’re not in my confidence
after all. If he’s harmless, it can’t hurt us. Talk to him as the old friend
and honorary uncle. Tell him about l’affaire Bittle—noting how he
reacts—and lead from that to my eccentric self. You might say that
you felt attracted, and wondered if it was wise to let it go any further.
The blushing ingenuous maiden act.”
“I’ll do it,” she said, and he leaned across the table and touched
her hand.
“You’re a partner in a million, old Pat.”
After lunch Orace served coffee outside, and they sat and smoked
while they discussed the final arrangements.
“I’ll send Orace over to fetch you after dinner,” he said. “I think it’d
be better if I didn’t appear. Put a bathing costume on under your
frock; and when the time comes I’ll give you a belt and the neatest
waterproof holster, that’ll just carry your fit in guns. But I’ll give you
the shooter now.”
He took a little automatic from his pocket, slipped the jacket to
bring a cartridge into the chamber, and clicked over the safety catch.
“And it’s not for ornament,” he added. “If the occasion calls for it,
let fly, and apologise to the body. Have you ever handled this sort of
gadget?”
“Often. I used to go and shoot in revolver ranges on piers.”
“Then that’s all to the good. Put it away in your pocket—but don’t
flourish it about unnecessarily, because it belongs to Bloem. I picked
his pocket when I was showing him out last night, thinking it might be
handy to have around the house.”
She rose.
“I’d better be getting along,” she said. “I shall have a lot to do this
afternoon. And we assemble after dinner?”
“Eightish,” he said. “Don’t take any risks till then. I just hate having
to let you out of my sight even for as long as that. You never know
what Tigers are up to. All the help I can give you is, distrust
everybody and everything, keep your head and use it, and don’t go
and walk into the first trap that’s set for you like any fool heroine in a
novel.”
Her arms went round his neck, and he held her close to him for a
while. And then she drew back her head and looked up at him with a
smile, though her eyes were brimming.
“Oh, I’m silly,” she said. “But love’s like that, old boy. What about
me letting you out of my sight for so long?”
“I’m safer than the Bank of England,” he reassured her. “The gipsy
told me I’d die in my bed at the ripe old age of ninety-nine. And d’you
think I’m going to let the Tiger or anyone else book me to Kingdom
Come when I’ve got you waiting for me here? I am not!”
And then there had to be a further delay, which need not be
reported. For those who have lost their hearts know all about these
things, and those who haven’t don’t deserve to be told. . . .
But at last he had to let her go, so he kissed her again and then
took her hand and kissed that. And afterwards he took her shoulders
and squared them up, and drew himself up in front of her.
“Soldier’s wives, Pat!” he commanded. “Cheerio—and the best of
luck!”
“Cheerio, Saint!” she answered. “God bless you. . . .”
She flung him a brave smile, and turned and walked off down the
hill with Orace ambling behind like a faithful dog. Just before the path
led her round a bend and out of sight she stopped and waved her
handkerchief, and the Saint waved back. Then she was gone, and
he wondered if he would ever see her again.
He went back into the Pill Box, took off his coat, rolled up his left
sleeve, and strapped Anna securely to his forearm. That was for
emergencies; but now that the Tiger knew all about Anna the Saint
had to rummage in his bag for her twin sister, and this dangerous
woman he fixed to his left calf in a similar manner, where it would be
quite likely to be overlooked if he were caught and searched. He
made sure that he had his first-aid cigarette case in his hip pocket,
and as an afterthought added to the kit a telescopic rod of the finest
steel with a claw at one end.
As a final precaution, he sat down and scribbled a note:
If I don’t turn up by seven-thirty look for me at the Old House

—the place behind the village that used to be an inn. Failing
that, try Bloem’s or Bittle’s. Don’t go to Carn till you’ve drawn
blank at all those three places. And BE CAREFUL. If they get
me they’ll be on the look out for you.
This he folded, addressed to Orace, and left in a conspicuous

position in the kitchen, where his man would be sure to find it when
he returned.
Then the Saint went swinging down the track towards the village.
It was a ticklish job he was embarking on. In broad daylight stealth
was out of the question. It would mean walking boldly up to the
enemy fortress and trying to get as far as he wanted in one dash,
before the opposition could collect their wits. And then there would
be ructions—but that would have to take care of itself.
The Saint did not remember the Old House very distinctly, and he
paused at the edge of a spinney lower down the hill to survey the
land. And then he gave thanks once again for the continuance of his
phenomenal luck. There it was—the blessing out of the blue that
he’d never dared to hope or pray for—a long low wall that sprang
from one corner of the Old House and ran north towards the straggly
outskirts of the village, losing itself behind a couple of sheds
belonging to a small farm. Hardly believing his good fortune, the
Saint hurried down the slope and passed through the village. He
worked round the farm outbuildings, and found that he was not
deceived. The wall started there, and it was just high enough to
screen his advance if he bent almost double.
That was not a very difficult feat, and Simon plunged straight on
into his adventure. Stooping down, he trotted rapidly along under
cover of the wall till he had nearly reached the nearest corner of the
Old House. At that point he slowed up and proceeded with more
caution, travelling on his toes and finger-tips, in case there should be
a watcher posted at an upper window. When he actually came to the
Old House itself he flattened down on his stomach and lay prone for
a moment while he planned his entrance.
He could see one wall of the Old House—a dead flat facade of
chipped and mouldering brick, broken only by four symmetrically
placed windows and a door. The door was a godsend. The windows
themselves were roughly boarded up, and to prise off those boards,
though it could be done in a brace of shakes, would be rather too
audible for the Saint’s taste; whereas a mere door could probably be
dealt with, by an expert, almost noiselessly.
The Saint wormed his way forwards, fitting himself as snugly as he
could into the angle between the wall and the ground and taking
infinite pains to make no sound that might betray his approach to a
keen ear within. From the moment he left the shelter of the wall,
however, he was in danger of discovery, for if any sentinel had
elected to peer out of a window the Saint would be lucky to be
overlooked. The watcher would probably scrutinise the nearest
cover, in which case his gaze would pass right above the Saint; but
on the other hand the enemy might be well aware of the possibilities
of that too convenient wall, and in that case anyone who was taking
a peek round would certainly cast an eye downwards, and then the
Saint wouldn’t have an earthly. That salutary realisation made him
wriggle along as fast as he could with safety, and it must be admitted
that his spine was tingling and the short hairs on the scruff of his
neck bristling throughout that dozen yards’ crawl. It is not pleasant to
have visions of a man sticking a gun out of an upper window and
plugging a chunk of lead down into your back.
But his head came on a level with the door at last, and nothing so
disastrous had happened. The Saint crept up into a squatting
position and, tentatively, began to breathe again, while he inspected
the door at close quarters.
He found that the handle had snapped off short—in fact, he
discovered the tarnished brass ball lying under a bush a few yards
away. The lock was rusty, and the door sagged on its hinges. The
Saint scratched his head. Either the Old House was not the goods at
all, or the Tiger Cubs were banking a lot on its reputation of being
haunted. He looked again and more closely at the broken end of the
handle lever protruding from the door, and caught his breath. The
jagged metal was shining—not a trace of the rust that flaked over the
rest of the metal dulled its brilliance. That was a new break! Even in
forty-eight hours the exposed steel would have lost some of that
sheen. Therefore, someone had been there recently. And unless the
village children were less superstitious than their elders, that meant
that the Tiger Cubs had graced the premises.
Simon put his hand on the door and pushed gently. It gave back
smoothly at his touch.
The Saint took his hand away as if the wood had burned it. The
door yielded smoothly! It wasn’t locked, or bolted, or barred, and
there wasn’t a creak anywhere. And the doors of houses that haven’t
been inhabited since the year Dot don’t do things like that—for one
thing, the hinges are so rusted up that it takes a thundering good
push to shift them; but these hinges turned like brand-new ones
freshly oiled. That meant that someone certainly was using the Old
House. And, plus the fact that there was apparently nothing to stop
anyone else using it as well, the complete scenery had a howling
warning scrawled all over it. A tight little smile moved the Saint’s
mouth.
“ ‘Will you walk into my parlour?’ said the spider to the fly,”
murmured the Saint. “Surest thing you know, son—but not exactly
like that sort of boob.”
He drew back to think it over, and cast a thoughtful glance at the
boarded windows. But the same difficulty presented itself: to break
away a plank makes a noise at the best of times, and he could now
see that the planks in question were not simply nailed to the frame
but solidly riveted in place. That seemed to rule out the windows,
which left only the door—with someone waiting for him inside, as like
as not. Well, Simon decided, that had got to be faced, and it was
better to tackle something you had a line on than something you
hadn’t. It wasn’t a time for humming and hawing and eventually
leaving your card and promising to look them up next walk you took
that way. He was more than ever determined to get inside the Old
House that afternoon, and the door was the only way in that
presented itself. Therefore, it must be the door.
The Saint pushed the door a little further. Nothing happened. Then
he slowly edged one eye round at a point where no one within would
expect a man to appear—only a few inches off the ground. But
inside was darkness, and he could distinguish nothing. The Saint
swung the door again, until it was over a foot ajar.
Plop!
Just the noise that a big stone makes falling into a well; and
something nicked the door, breaking a burst of splinters out of the
rotten wood. The Saint looked up at the wound, and saw that it
would have been on a level with his chest if he had been standing
up.
That was enough—ultimatum, declaration of war, and attack, all
together. And it meant also that, whatever was waiting for him inside,
it would probably be healthier to charge right in and take it on than to
stick around in the open where half a dozen Tiger Cubs could take
pot-shots at him from the windows. The Saint gathered himself for
the rush and slid Anna out of her sheath. He tested his muscles,
drew a deep breath, and jumped.
One leap took him well inside the door, and in a flash he had
banged it shut again behind him. That evened things up a bit, for it
stopped him being a target against the light outside for any sniper
hidden in the darkness. Then, almost in the same movement, he had
flung back again against the door, in a corner.
He had half expected to find someone waiting just behind the door
to put him down as he passed, but his groping fingers touched
nothing but dust. First mistake. Well, that meant that anything that
was coming to him would arrive out of the blackness in front.
The Saint stood motionless, listening intently and straining his
eyes to try and locate the gentleman who had fired that single shot—
and had been too surprised at the suddenness of the Saint’s reaction
to loose off another round at the critical instant when the Saint was
silhouetted in the doorway on his way in. It was at least a comfort to
have your back to a wall, and to know that the other man was literally
as much in the dark as you were; but there were such things as
electric torches, and the Saint was tensely prepared for a beam of
light to shoot from the obscurity and pick him out for the benefit of
the man with the gun. Simon had Anna held in his deft fingers ready
to send her whistling through the hand of any man who turned a
spotlight on him, and equally ready to hamstring anyone who might
creep up and jump on him.
Minutes passed without the other side making a move, and Simon
shifted one hand to scratch his head mechanically. Not even his
preternaturally acute hearing could catch the least sound—and in
that silence he would have bet half his worldly goods on being able
to detect the faint rustle of cloth if a man so much as lifted his arm.
He made out the steady beating of his own heart, and even heard
the whisper of his wrist watch ticking, but there was nothing else.
His eyes were gradually becoming accustomed to the gloom, and
at last he began to scowl very thoughtfully, for the passage in front of
him was empty. One by one the details became visible. First, two
doors, opposite each other and about two yards away, both of them
closed. He looked down. The dust lay thick on the floor of the
passage, and there were marks of many feet, both entering and
leaving. Some of the footprints branched off to the door on his right,
but it seemed that nobody had used the room on the left, unless
there was another entrance to it. At the far end of the passage was a
small window, boarded up like the rest, and it was through this that
enough light filtered in for him to be able to see.
It was not long before other features of the landscape showed up.
Further along, to the left, was another door and the footprints proved
that that room had been used fairly recently. And at the end of the
passage, under the window, stood a table with a square box on it.
The Saint looked long and hard at that box, and suddenly he had
an inspiration. Bending down, he felt along the ground by the door.
Presently he found wires, and a little research disclosed the fact that
they ran up the corridor—towards the table and the square box. A
little more investigation brought him to the metal contacts which
closed the electric circuit. One of them he found screwed to the
inside of the door, low down; the other projected from a terminal
fixed to the floor. On the strength of that, Simon began to tiptoe down
the passage, though he did not relax his vigilance for an instant. He
came to the table and the box, and examined them with interest. The
wires he had found led to terminals on the box, and from the front of
it protruded a shining steel tube.
“Very ingenious, my Tiger,” was the Saint’s unspoken comment.
“When I open the door, I get pipped. And I didn’t, after all. So sorry!”
However, just in case the arrangement had any more shots left,
and in case he should have to leave hurriedly by the door, he slewed
the box round so that the gun barrel pointed into the wall, and
disconnected the wires. Then he took stock of the position again.
The discovery and circumnavigation of that little booby-trap didn’t
dispose of the possibility of encountering others—in fact, his
estimate of the Tiger forced him to realise that the next step he took
might set some other equally neat little contrivance working. And if
not that, there might still be Tiger Cubs in the building, already
warned of his arrival by Booby Trap Number One going off, and
knowing that it hadn’t functioned quite according to plan. The
amusing thought that they might be in some fear of his fighting
record struck the Saint, and he chuckled quietly. Perhaps they felt
confident of having him safely trapped, and were just biding their
time to strike him down when the operation could be performed
without risk to themselves. Well, it wouldn’t hurt them to keep on
hoping.
But the job looked just as prickly now that he was inside the Old
House as it had been when he was outside. However gingerly he
opened the next door, there might be men inside the room waiting to
open fire as soon as he showed up in the doorway. Yet the Saint was
no piker; and, having got so far, he intended to go the rest of the
journey. And the only course he could see was to repeat the tactics
he had used when entering the building in the first place. So, without
further hesitation, he got on with it.
There was the door with footprints leading to and from it, and that
seemed the most promising. There were also footprints outside the
swing door nearest to him, but they were less encouraging, for at
that point there was only a double set, whereas the other seemed to
have been fairly popular. And the Saint’s philosophy laid down the
law that if you must stroll into the home-sweet-home of a bunch of
cut-throats you might as well do the thing in style. Wherefore the
Saint went down the passage and halted by the most dangerous-
looking door.
There was a handle on that door. He turned it and opened a
couple of inches. Then, keeping well away, he set his toe against the
wood, braced himself, and kicked. The door opened wide, but there
was no muffled report. That short history at least wasn’t going to
repeat itself. And, accordingly, the only thing to do was to march
straight in.
Simon went—in a catlike spring that carried him round the corner
and set his back against the wall again in a flash. But once more
there was no response. Simon had jerked the door shut behind him
as before, and one foot was against it so that nobody could open it
and sneak out without his knowing it. But only stillness answered his
listening, and the room was so dark that he could see nothing. He
cursed himself for not having an electric torch. But it was far too late
to remedy that, and therefore his only hope was to strike a match—
and hope that his concerted speed of eye and brain and hand would
be great enough to overcome the handicap he would have to create
for himself. If there was anyone in the room, he would be able to see
the Saint before the Saint saw him. But the Saint had taken longer
chances than that, and his nerves were getting just a shade raw.
Simon Templar was afraid of nothing that he could see and hit back
at, but this creeping around, seeing no sign of the enemy and yet
continually threatened by him, was turning into a joke that the Saint
didn’t feel inclined to laugh at.
Still gripping Anna, he fished a box of matches out of his pocket
and struck one quickly, holding it behind his head so that the flare of
it would not dazzle him.
And the room was perfectly empty.
The match burned down between his fingers and went out. He
struck another, but even that could not cause a human being to
materialise. Yet there had been men there—their footprints were all
over the floor, and there were three comparatively new-looking beer
bottles in one corner, and scraps of greasy paper were littered about.
“This is getting annoying,” said the Saint.
He struck a third match, and took a couple of steps into the room.
Then he tried to hurl himself back, but he was a fraction of a
second late. The ground dropped away beneath his feet and he felt
himself falling down and down into utter darkness.
Chapter XI.
Carn Listens In
Detective Inspector Carn of Scotland Yard, temporary medico, was
not far from being typical of the modern C.I.D. man—the difference,
in fact, being little more than an extra gramme or two of brain which
lifted him a finger’s breadth above the common competent herd and
which had led to his being detailed for the special work of tracking
the Tiger.
In other words, Carn was not obtrusively brilliant. He knew his job
from A to Z, plus one or two other letters. He was a plodder, but an
efficient plodder, having been taught in a school which prefers
perseverance to genius and which trains men to rely on methodical
painstaking investigation rather than on flashes of inspiration. Carn
would never send an adoring gallery into rhapsodies with some
dazzling feat of Holmesian deduction; he never whirled through a
case in a kind of triumphant procession, with bouquets and confetti
flying through the air, streamers blazing, and a brass band urging the
awestricken populace to see the conquering hero come—but his
superiors (a hard-headed and unromantic crowd) knew that he had a
record of generally getting there, even if his progress and arrival
were monotonous and unspectacular.
This brief biographical note is made for the disillusionment of
anyone who has imagined that Carn was a genial cypher in the affair
of the Tiger. He was not. But his tactics were different from those of
the Saint, who had a weakness for the limelight and no reason to
deny himself the gratification of his vanity. The Saint was one man,
nearly as far outside the law as the Tiger, and therefore the Tiger
would not hesitate to accept the challenge. But Carn represented
Authority, a vast and inexorable machinery backed up by arms and
men, and if Carn showed up in his true colours they were the colours
of Authority—and before that the Tiger would hesitate for a long time.
Carn had no chance of accomplishing his mission unless he worked
underground and in the dark, and that, in a way, was a handicap,
though it suited his temperament. But Carn, the stolid manhunter,
took one look at the handicap, shrugged, and went on with the job—
in his own laborious fashion.
The arrival of Mr. Templar, heralded by the Saint himself with the
moral equivalent of a fanfare of terrific trumpets, illuminated with
Klieg arcs, and fully equipped with one-man orchestra, noises off,
self-starter, alarums, excursions, and all modern conveniences,
lacking nothing but the camera men and Press agent, had eclipsed
Carn’s modest efficiency, and perhaps had even put him off his
plodding stroke for a while. But it would have taken more than a
legion of Saints to derange our Mr. Carn permanently.
Carn was slow and Simon was sensational; but in the end they
cancelled out, for Carn had had a start of several months. He knew
from certain happenings one evening that Templar was hot on the
Tiger’s heels; he was not unduly perturbed, for he could have said
the same for himself. In his quiet way, he had already given some
attention to Sir John Bittle, and he knew quite a lot about that
unpopular man and his strongly fortified house with its garrison of
toughs. He had also put some work into Bloem, among others; but
Bloem was the more slippery customer, and Carn had made very
little headway, so that the Boer’s sudden prominence in the field
came as a surprise. Carn, recuperating from the shock with his well-
tried resilience, had nevertheless not yet had time to follow up the
clue which the Saint had provided. Carn had also an eye to the
possibilities of Agatha Girton; he knew of her strange and secretive
association with Bittle, but so far he had been unable to account for it
better than by assuming her to be in with the gang—though in what
capacity, and with what rank, he hadn’t an inkling. There was Algy,
for another; and Inspector Carn was prepared to believe startling
things of Algy. The other three—Shaw, Smith and Lapping—Carn
had decided to rule out. Lapping in particular, with the policeman’s
ingrained reverence for the Law and its higher officers, he barred
completely. In fact, except the Saint, Sir Michael Lapping was the
only man in Baycombe who knew Carn’s true designation and sole
interest in life—Lapping was a Justice of the Peace, and Carn,
hopeful of success, realised that the ex-judge was an indispensable
ally, for Carn carried a warrant ready for Lapping’s signature as soon
as the name of the Tiger could be filled in with reasonable certainty.
Taking things all round, therefore, Carn reckoned that he was as well
posted as the Saint—and in this he was very nearly right. It was
Carn’s misfortune that he had never been privileged to make the
acquaintance of Fernando, and that because of this loss he had
been unaware of the significance of the Old House.
Carn had a hobby which he had only adopted since his arrival in
Baycombe. He was as enthusiastic about it as he was about
butterflies and beetles, but he reserved his pleasure for the hours
when he was alone. The nearest telephone was at Ilfracombe, and
by Carn’s orders all letters addressed to Baycombe were opened at
the post-office there, copied, tested for invisible ink, and forwarded to
their destinations after he had been informed of the results of this
prying. It was because of divers hints which he had picked up by this
means that Carn became so passionately devoted to wireless.
It was on the day following the apotheosis of Bloem, when the
remains of his lunch had been cleared away, that Carn’s hobby
justified its adoption.
As soon as he found himself alone, the detective went over and
unlocked his small roll-top writing desk. When this was opened, it
revealed an ebonite panel arrayed with the complicated system of
knobs, coils, and valves which have now ceased to be regarded as
mysteries sealed from all but the scientist. The aerial Carn had fixed
for himself among the rafters in the roof; and all the essential wiring
was cunningly concealed. There was need of this secrecy, for Carn,
who had never served an apprenticeship to a cook while walking his
beat, was forced to employ a woman from the village to look after his
digestion. Village women talk—and the merest whisper that there
was another radio fan in Baycombe, coming to the ears of the Tiger,
would have deprived Carn of one of his most promising lines of
investigation.
The detective put on the headphones, plugged in, and began his
systematic combing of the ether. It was not easy for Carn to use his

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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?

108. Under a progressive income tax, the average tax rate

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

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