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Economics 101 Practice Test: The Tax System
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Taxation is a term for when a taxing authority, usually a government, levies or imposes a financial obligation on its citizens or residents.

Related Test: Economics 101 Practice Test: Taxation

Economics 101 Practice Test: The Tax System
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25 Questions

1. State and local governments receive the largest portion of their tax revenues from
2. When the government places a tax on labor earnings, one result is that people
3. The argument that might be used to require wealthier taxpayers to pay more in taxes for law enforcement because they own more and therefore have more to protect than poorer taxpayers would be based on
4. The “flypaper theory” of taxation suggests that
5. The corporate income tax
6. Vertical equity states that taxpayers with a greater ability to pay taxes should
7. The biggest single expenditure for state and local governments is
8. The essence of most proposals for a flat tax are captured in
9. If Shannon earns $60,000 a year and pays $12,000 in taxes while Sean earns $90,000 yearly and pays $18,000 in taxes, this income tax system would be
10. A tax levied on the total amount spent in retail stores is called a
11. Which component of federal government spending is the largest?
12. In designing a tax system, policymakers have two objectives:
13. The largest source of revenue for the federal government is the
14. Which of the following statements would NOT be used by an advocate of the flat tax?
15. When the government levies a tax on a corporation,
16. The deadweight loss associated with a tax on a product occurs because
17. As government debt increases,
18. Horizontal equity refers to the idea that
19. The extra taxes paid on an additional dollar of taxable income is called the
20. The concept that each citizen should make an ‘equal sacrifice’ and pay taxes according to how well that person can shoulder the burden is called
21. Tax evasion is
22. One way to reduce the administrative burden of the tax system is to
23. The government finances the budget deficit by
24. As tax laws become more complex,
25. If the government were attempting to get people to save more of their income they might choose to impose a

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