Principles of Economics An Asian Edition 2nd Edition by N. Gregory Mankiw – Test Bank

Principles of Economics An Asian Edition 2nd Edition by N. Gregory Mankiw – Test Bank

Chapter 8: MC-Application: The Costs of Taxation

MULTIPLE CHOICE

1. In 1776, the American Revolution was sparked by anger over
a. the extravagant lifestyle of British royalty.
b. the crimes of British soldiers stationed in the American colonies.
c. British taxes imposed on the American colonies.
d. the failure of the British to protect American colonists from attack by hostile Native Americans.

ANS: C PTS: 1 DIF: 1 REF: 8-0
TOP: Taxes MSC: Definitional

2. Anger over British taxes played a significant role in bringing about
a. the election of John Adams as the second American president.
b. the American Revolution.
c. the War of 1812.
d. the “no new taxes” clause in the US Constitution.

ANS: B PTS: 1 DIF: 1 REF: 8-0
TOP: Taxes MSC: Definitional

3. When Ronald Reagan ran for the presidency in 1980, he pledged to bring about
a. large cuts in personal income taxes. c. large increases in personal income taxes.
b. large cuts in payroll taxes. d. large increases in payroll taxes.

ANS: A PTS: 1 DIF: 1 REF: 8-0
TOP: Taxes MSC: Definitional

4. Which US president lost his bid for re-election, in part because he had broken an earlier campaign promise to refrain from imposing any new taxes?
a. Lyndon B. Johnson c. George H.W. Bush
b. Jimmy Carter d. Bill Clinton

ANS: C PTS: 1 DIF: 1 REF: 8-0
TOP: Taxes MSC: Definitional

5. Which of the following statements is true?
a. When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.
b. A tax places a wedge between the price buyers pay and the price sellers receive.
c. A tax on a good causes the size of the market to increase.
d. A tax raises the price received by sellers and lowers the price paid by buyers.

ANS: B PTS: 1 DIF: 1 REF: 8-1
TOP: Taxes MSC: Interpretive

6. During Ronald Reagan’s presidency, the top tax rate on income fell from
a. 36 percent to 22 percent. c. 50 percent to 28 percent.
b. 50 percent to 22 percent. d. 70 percent to 28 percent.

ANS: D PTS: 1 DIF: 2 REF: 8-0
TOP: Tax rates MSC: Definitional

7. In recent decades, which of the following US presidents promised tax cuts and subsequently delivered them?
a. Jimmy Carter and Ronald Reagan c. Gerald Ford and George W. Bush
b. Ronald Reagan and Bill Clinton d. Ronald Reagan and George W. Bush

ANS: D PTS: 1 DIF: 2 REF: 8-0
TOP: Taxes MSC: Definitional

8. Who once said that taxes are the price we pay for a civilized society?
a. Aristotle c. Oliver Wendell Holmes
b. George Washington d. Ronald Reagan

ANS: C PTS: 1 DIF: 1 REF: 8-3
TOP: Taxes MSC: Definitional

9. Taxes do the following:
a. lower the price buyers pay and raise the price sellers receive
b. raise the price buyers pay and sellers receive
c. raise the price buyers pay and lowers the price sellers receive
d. None of the above

ANS: C PTS: 1 DIF: 1 REF: 8-3
TOP: Taxes MSC: Definitional

10. To fully understand how taxes affect economic well-being, we must
a. assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.
b. know the dollar amount of all taxes raised in the country each year.
c. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
d. take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.

ANS: C PTS: 1 DIF: 2 REF: 8-0
TOP: Taxes | Economic welfare MSC: Interpretive