Question 1

A tax that takes a higher percentage of income as income rises is called a(n)

Accepted Answer

A)  proportional tax.
B)  regressive tax.
C)  progressive tax.
D)  excise tax.
E)  value-added tax.F) A) and B)
G) C) and D)

Question 2

Suppose a firm buys $1000 worth of inputs from other firms,hires $1000 worth of labour services,and has sales revenue of $2500.The firmʹs resulting profit is $500.According to a value-added tax such as the GST,this firm would pay taxes on

Accepted Answer

A)  $500.
B)  $1000.
C)  $1500.
D)  $2500.
E)  $4500.F) B) and C)
G) A) and B)

Question 3

In Canada, the corporate income tax is integrated with the ________, so that ________ are not taxed twice on the firmʹs earnings.

Accepted Answer

A)  sales tax; consumers
B)  property tax; corporations
C)  personal income tax; corporations
D)  sales tax; shareholders
E)  income tax; shareholdersF) All of the above
G) C) and E)

Question 4

Consider a monopolist that is earning profits in the long run.If the government imposes a lump -sum tax on this monopolist (that is less than its profits) ,then

Accepted Answer

A)  output would decrease and price to consumers would increase.
B)  neither output nor price would change.
C)  the output would remain the same while price increased.
D)  the monopolist would cease production.
E)  new firms would enter the industry.F) A) and B)
G) B) and D)

Question 5

The various provincial sales taxes are mildly regressive because

Accepted Answer

A)  richer households spend more in total and therefore pay more sales tax.
B)  poorer households tend to spend a larger proportion of their incomes than richer households.
C)  they are indirect taxes.
D)  they are value added taxes.
E)  richer households can avoid paying sales taxes while poorer households cannot.F) A) and B)
G) A) and C)

Question 6

The Employment Insurance (EI) system operates whereby

Accepted Answer

A)  Canadians contribute during their working years and then receive payments when they are retired.
B)  the federal government transfers funds to provincial governments.
C)  any unemployed worker is paid while searching for employment.
D)  the federal and provincial governments allow income-tax deductions for contributions made to special retirement funds.
E)  eligible unemployed workers are paid while searching for new employment.F) A) and B)
G) B) and D)

Question 7

The important debate about the appropriate balance between the public and private sectors

Accepted Answer

A)  has been solved in Canada.
B)  is largely about the marginal benefits of public spending versus the marginal benefits of private spending,received for the last dollar spent.
C)  was solved by John Kenneth Galbraith in his book The Affluent Society.
D)  was solved by James Buchanan,a Nobel laureate .
E)  should be decided by economists because they know the right balance.F) A) and E)
G) C) and D)

Question 8

In Canada,studentsʹ tuition fees for post -secondary education account for about

Accepted Answer

A)  12% of total costs.
B)  16% of total costs.
C)  24% of total costs.
D)  50% of total costs.
E)  54% of total costs.F) B) and E)
G) C) and E)

Question 9

Consider two families,each of whom earn total income of $80 000,but that are different in many other respects,such as the number of individuals to support.If each family is assessed income tax payable of $14 749,then it is very likely that the principle of ________ is being violated.

Accepted Answer

A)  progressivity
B)  horizontal equity
C)  vertical equity
D)  ability to pay
E)  proportionalityF) A) and C)
G) B) and D)

Question 10

Which of the following areas of spending account for the largest portion of total Canadian government expenditures?

Accepted Answer

A)  equalization payments
B)  defence spending
C)  subsidies to Canadian businesses
D)  social services
E)  interest payments on public debtF) C) and E)
G) D) and E)

Question 11

Consider the allocation of a nationʹs resources between additional public-sector spending versus additional private spending.John Kenneth Galbraith argued that

Accepted Answer

A)  the value of the marginal dollar spent by government is less than the value of that dollar left in the hands of households or firms.
B)  public sector spending is always subject to corruption and is therefore not as valuable as private spending.
C)  the marginal utility of an additional dollarʹs worth of spending on public goods is higher than an additional dollarʹs worth of spending on private goods.
D)  compared to public spending,private spending leads to more sustained long -run economic growth.
E)  compared to private spending,public spending leads to more sustained long -run economic growth.F) None of the above
G) B) and D)

Question 12

The most important source of revenue for the Canadian federal government is ________ taxes; the most important source of revenue for Canadian municipal governments is ________ taxes.

Accepted Answer

A)  income; excise
B)  property; payroll
C)  corporate; sales
D)  sales; property
E)  income; propertyF) D) and E)
G) A) and B)

Question 13

The table below shows 2015 federal income-tax rates in Canada.  TABLE 18-1
-Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 26%?

Accepted Answer

A)  $497
B)  $5639
C)  $8960
D)  $7955
E)  $31 200F) C) and D)
G) All of the above

Question 14

What is a demogrant?

Accepted Answer

A)  A federal transfer to individuals that is administered through the tax system.
B)  A federal transfer to provincial governments that is adjusted annually based on demographic shifts in the province.
C)  A social benefit that is paid to individuals according to their demographic group (race,age or income group,for example) .
D)  A social benefit that is paid to individuals depending on their income.
E)  A social benefit that is paid to individuals,regardless of their income.F) A) and C)
G) A) and D)

Question 15

The table below shows 2015 federal income-tax rates in Canada.  TABLE 18-1
-Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 22%?

Accepted Answer

A)  $1629
B)  $17 004
C)  $9834
D)  $26 400
E)  $28 020F) C) and D)
G) A) and B)

Question 16

Which of the following statements about the Canada Health Transfer (CHT) and the Canada Social Transfer (CST) is correct?

Accepted Answer

A)  The federal government makes the CHT and the CST annually to the provinces,who are legally bound to spend on the funds for their intended purposes.
B)  The federal government makes the CHT and CST annually to the provinces,who in turn make transfers to individuals according to need.
C)  The federal government makes the CHT and CST annually to the provinces for spending on health and social programs,but the provinces are free to spend the funds as they wish.
D)  The CHT and CST are both components of equalization payments from the federal to provincial governments.
E)  The CHT and CST are demogrants that are transferred annually from the federal government to individuals residing in regions of Canada that lack adequate access to health and education programs.F) B) and D)
G) A) and B)

Question 17

An income tax is progressive if,as income increases,

Accepted Answer

A)  its average tax rate is increasing.
B)  its marginal tax rate is falling.
C)  its average tax rate is falling,but total taxes are increasing.
D)  its average tax rate and marginal tax rate are constant while income is increasing.
E)  its average tax rate is falling,but the marginal tax rate is increasing.F) D) and E)
G) B) and D)

Question 18

The table below shows 2015 federal income-tax rates in Canada.  TABLE 18-1
-Refer to Table 18-1.If an individual had a taxable income of $70 000,how much federal tax would be due?

Accepted Answer

A)  $6004
B)  $6406
C)  $10 500
D)  $12 271
E)  $15 400F) B) and E)
G) All of the above

Question 19

Suppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is $7 and 940 visits per week.Now suppose the government imposes a tax of $3 per movie admission,and the new equilibrium price and quantity are $8.75 and 750 visits per week.What is the direct burden of this tax?

Accepted Answer

A)  $937.50
B)  $1312.50
C)  $1645
D)  $2250
E)  There is not enough information to know.F) B) and E)
G) A) and E)

Question 20

The diagram below shows supply and demand diagrams (S and D) for some product.The government then imposes an excise tax.The new supply curve is ST.
  FIGURE 18-4
-Refer to Figure 18-4.What is the producersʹ net revenue after the imposition of the tax?

Accepted Answer

A)  $450
B)  $500
C)  $540
D)  $600
E)  $630F) D) and E)
G) B) and E)

Exam 18: Taxation and Public Expenditure

Which of the following statements about the Canada Health Transfer (CHT) and the Canada Social Transfer (CST) is correct?

Correct Answer
verified

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 26%?

Correct Answer
verified

What is a demogrant?

Correct Answer
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Which of the following areas of spending account for the largest portion of total Canadian government expenditures?

Correct Answer
verified

Consider two families,each of whom earn total income of $80 000,but that are different in many other respects,such as the number of individuals to support.If each family is assessed income tax payable of $14 749,then it is very likely that the principle of ________ is being violated.

Correct Answer
verified

A tax that takes a higher percentage of income as income rises is called a(n)

Correct Answer
verified

Consider the allocation of a nationʹs resources between additional public-sector spending versus additional private spending.John Kenneth Galbraith argued that

Correct Answer
verified

An income tax is progressive if,as income increases,

Correct Answer
verified

In Canada, the corporate income tax is integrated with the , so that are not taxed twice on the firmʹs earnings.

Correct Answer
verified

The important debate about the appropriate balance between the public and private sectors

Correct Answer
verified

The most important source of revenue for the Canadian federal government is taxes; the most important source of revenue for Canadian municipal governments is taxes.

Correct Answer
verified

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 22%?

Correct Answer
verified

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $70 000,how much federal tax would be due?

Correct Answer
verified

Correct Answer
verified

The various provincial sales taxes are mildly regressive because

Correct Answer
verified

In Canada,studentsʹ tuition fees for post -secondary education account for about

Correct Answer
verified

The diagram below shows supply and demand diagrams (S and D) for some product.The government then imposes an excise tax.The new supply curve is ST. FIGURE 18-4 -Refer to Figure 18-4.What is the producersʹ net revenue after the imposition of the tax?

Correct Answer
verified

The Employment Insurance (EI) system operates whereby

Correct Answer
verified

Suppose a firm buys $1000 worth of inputs from other firms,hires $1000 worth of labour services,and has sales revenue of $2500.The firmʹs resulting profit is $500.According to a value-added tax such as the GST,this firm would pay taxes on

Correct Answer
verified

Consider a monopolist that is earning profits in the long run.If the government imposes a lump -sum tax on this monopolist (that is less than its profits) ,then

Correct Answer
verified

Exam 18: Taxation and Public Expenditure

Which of the following statements about the Canada Health Transfer (CHT) and the Canada Social Transfer (CST) is correct?

Correct AnswerverifiedShow Answer

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 26%?

Correct AnswerverifiedShow Answer

What is a demogrant?

Correct AnswerverifiedShow Answer

Which of the following areas of spending account for the largest portion of total Canadian government expenditures?

Correct AnswerverifiedShow Answer

Consider two families,each of whom earn total income of $80 000,but that are different in many other respects,such as the number of individuals to support.If each family is assessed income tax payable of $14 749,then it is very likely that the principle of ________ is being violated.

Correct AnswerverifiedShow Answer

A tax that takes a higher percentage of income as income rises is called a(n)

Correct AnswerverifiedShow Answer

Consider the allocation of a nationʹs resources between additional public-sector spending versus additional private spending.John Kenneth Galbraith argued that

Correct AnswerverifiedShow Answer

An income tax is progressive if,as income increases,

Correct AnswerverifiedShow Answer

In Canada, the corporate income tax is integrated with the ________, so that ________ are not taxed twice on the firmʹs earnings.

Correct AnswerverifiedShow Answer

The important debate about the appropriate balance between the public and private sectors

Correct AnswerverifiedShow Answer

The most important source of revenue for the Canadian federal government is ________ taxes; the most important source of revenue for Canadian municipal governments is ________ taxes.

Correct AnswerverifiedShow Answer

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $120 000,how much federal tax would be due from the earnings taxed at the rate of 22%?

Correct AnswerverifiedShow Answer

The table below shows 2015 federal income-tax rates in Canada. TABLE 18-1 -Refer to Table 18-1.If an individual had a taxable income of $70 000,how much federal tax would be due?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The various provincial sales taxes are mildly regressive because

Correct AnswerverifiedShow Answer

In Canada,studentsʹ tuition fees for post -secondary education account for about

Correct AnswerverifiedShow Answer

The diagram below shows supply and demand diagrams (S and D) for some product.The government then imposes an excise tax.The new supply curve is ST. FIGURE 18-4 -Refer to Figure 18-4.What is the producersʹ net revenue after the imposition of the tax?

Correct AnswerverifiedShow Answer

The Employment Insurance (EI) system operates whereby

Correct AnswerverifiedShow Answer

Suppose a firm buys $1000 worth of inputs from other firms,hires $1000 worth of labour services,and has sales revenue of $2500.The firmʹs resulting profit is $500.According to a value-added tax such as the GST,this firm would pay taxes on

Correct AnswerverifiedShow Answer

Consider a monopolist that is earning profits in the long run.If the government imposes a lump -sum tax on this monopolist (that is less than its profits) ,then

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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In Canada, the corporate income tax is integrated with the , so that are not taxed twice on the firmʹs earnings.

Correct Answer
verified

Correct Answer
verified

The most important source of revenue for the Canadian federal government is taxes; the most important source of revenue for Canadian municipal governments is taxes.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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