ECON 1B03 Lecture Notes - Lecture 5: Tax Rate, Lump Sum, Proportional Tax

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plumwasp894

29 Jan 2020

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Free rider

a person who receives the benefits of a good but avoids paying for it

Budget surplus

an excess of government receipts over government spending

Budget deficit

a shortfall of tax revenue from government spending

Average tax rate

total taxes paid divided by total income

Marginal tax rate

the extra taxes paid on an additional dollar of income

Lump sum tax

a tax that is the same amount for every person

Proportional tax

a tax for which higher income taxpayers and low income taxpayers

pay the same fraction of income

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ECON 1B03 Full Course Notes

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Related Questions

Consider an economy where natural real GDP is $15,000, the average tax rate is 15%, government spending is $2,500.

A. Compute the amount of taxes collected by the government at natural real GDP.

B. Calculate the size of the natural employment deficit.

C. How do we know this is a natural employment deficit instead of a natural employment surplus? (Hint: What is the sign of the value you calculated in part b?)

D. Suppose the government wants to close the natural employment deficit (i.e. get a balanced budget) by increasing taxes. What is the net tax revenue that the government must earn in order to have a balanced budget, assuming they don't want to change their spending?

E. What does the average tax rate need to be in order to achieve the net tax revenue from part d at natural real GDP?

blushcrow724

1.If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes?

		income tax is a proportional tax
		income tax is a progressive tax
		payroll tax is a regressive tax
		payroll tax is a progressive tax

2.If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

		budget deficit.
		budget surplus.
		the decrease in the payroll tax.
		the decrease in proportional taxes.

3.If South Dakota's governor reports a budget surplus in 2011, that state government likely:

		received more in taxes than it spent in that year.
		increased the proportional tax level.
		equalized spending and taxes in that year.
		increased the corporate income tax rate.

4.If government tax policy requires Peter to pay $15,000 in tax on the annual income of $200,000 and Paul to pay $10,000 in tax on the annual income of $100,000, then the tax policy is:

		optional.
		progressive.
		proportional.
		regressive.

5.In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.

		proportional tax rate
		corporate profits
		optional tax rate
		excise profits

taupealligator611

5 Multiple choice questions... please answer all of them.

15.

The accumulation of years of spending more money than is collected in revenues over several years creates a budget (5 points)

	debt
	deficit
	surplus
	reversal

16.

How does the U.S. government promote economic growth? (5 points)

	By decreasing taxes and decreasing spending
	By decreasing taxes and increasing spending
	By increasing taxes and decreasing spending
	By increasing taxes and increasing spending

17.

The country of Lilliput has low unemployment and high consumer spending, and small businesses are thriving. However, prices are starting to rise throughout the economy. What should Lilliput's government do to prevent inflation from happening? (5 points)

	Lower the income tax, which gives citizens less money to spend, and buy services from civilian-owned businesses, which creates more jobs.
	Lower the income tax, which gives citizens more money to spend, and buy more services from civilian-owned businesses, which creates more jobs.
	Raise the income tax, which gives citizens less money to spend, and stop buying services from civilian-owned businesses, which eliminates jobs.
	Raise the income tax, which gives citizens less money to spend, and buy more services from civilian-owned businesses, which creates more jobs.

18.

The government increases taxes. What might be a reason for this change in fiscal policy? (5 points)

	A deficit due to improving nationwide public transportation
	A deficit due to more monies flowing in from investors
	A surplus due to greater amounts of income from exports
	A surplus due to more government spending on building roads

19.

Which of these is required to balance the budget for the year? (5 points)

	Revenue equal to spending
	Revenue greater than spending
	Revenue less than spending
	No national debt

ECON 1B03 Lecture Notes - Lecture 5: Tax Rate, Lump Sum, Proportional Tax

ECON 1B03 Full Course Notes

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