f
2-1f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
Chapterf02f
PolicyfStandardsfforfafGoodfTaxf
ff
f
Truef/fFalsefQuestionsf
ff
1.f
Aftaxfmeetsfthefstandardfoffsufficiencyfiffitfisfeasyfforfpeopleftofpayftheftax.ff
ff
TrueffffFalsef
ff
2.fTheffederalfgovernmentfisfnotfrequiredftofpayfinterestfonfthefnationalfdebt.ff
ff
TrueffffFalsef
ff
3.fAfstaticfforecastfoffthefrevenuefeffectfoffaftaxfratefchangefassumesfthatftheftaxfbasefdoesfnotf
change.ff
ff
TrueffffFalsef
ff
4.fAfdynamicfforecastfoffthefrevenuefeffectfoffaftaxfratefchangefassumesfthatftheftaxfbasefdoesfn
otf
change.ff
ff
TrueffffFalsef
ff
5.fTheffederalfSocialfSecurityftaxfburdenfonfemployeesfhasfnotfincreasedfsincef1990fbecauseft
heftaxf
ratefhasfnotfincreasedfsincefthatfyear.ff
ff
TrueffffFalsef
ff
6.fIffStatefHfincreasesfitsfsalesftaxfratefbyf1%,fitsfsalesftaxfrevenuefmustfalsofincreasefbyf1%.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-2f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
7.f
ThefcityfoffBernefrecentlyfenactedfaf10%ftaxfonfthefpricefoffafsubwayfticket.fConsequently,fMrs
,.f
Lanefnowfwalksftofworkfinsteadfofftakingfthefsubway.fHerfbehaviorfillustratesfthefsubstitution
f
effectfoffaftaxfincrease.ff
ff
TrueffffFalsef
ff
8.fJurisdictionfPfrecentlyfincreasedfitsfincomeftaxfrate.fAftaxpayerfwhofreactsftofthefincreasefby
f
workingfharderftofearnfmorefincomefisfdemonstratingfthefincomefeffectfoffthefratefincrease.ff
ff
TrueffffFalsef
ff
9.fAccordingftofsupply-sidefeconomicftheory,fafdecreasefinftaxfratesfforfhigh-
incomefindividualsf
couldfactuallyfcausefanfincreasefinftaxfrevenue.ff
ff
TrueffffFalsef
ff
10.fSupply-
sidefeconomicftheoryfholdsfthatfpeoplefwhofbenefitffromfaftaxfratefreductionfwillfspendf
theirftaxfwindfallfonfconsumptionfgoods.ff
ff
TrueffffFalsef
ff
11.fStatefuseftaxesfarefmorefconvenientfforfindividualfconsumersfthanfstatefsalesftaxes.ff
ff
TrueffffFalsef
ff
12.fThefInternalfRevenuefService'sfcostfoffcollectingf$100fofftaxfrevenuefisfaboutf$3.ff
ff
TrueffffFalsef
ff
13.fAfconvenientftaxfhasflowfcompliancefcostsfforftaxpayersfandflowfcollectionfandfenforceme
ntfcostsf
forfthefgovernment.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-3f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
14.fAccordingftofthefclassicalfconceptfoffefficiency,fanfefficientftaxfshouldfbefneutralfinfitsfeffect
fonf
freefmarketfallocationsfoffeconomicfresources.ff
ff
TrueffffFalsef
ff
,15.fAccordingftofthefKeynesianfconceptfoffefficiency,fanfefficientftaxfshouldfbefneutralfinfitsfeff
ectfonf
freefmarketfallocationsfoffeconomicfresources.ff
ff
TrueffffFalsef
ff
16.fAftaxfmeetsfthefstandardfoffefficiencyfiffitfgeneratesfenoughfrevenueftofpayfforfthefpublicfgo
odsf
andfservicesfprovidedfbyfthefgovernment.ff
ff
TrueffffFalsef
ff
17.fAfprovisionfinftheftaxflawfdesignedftofencouragefafspecificfeconomicfbehaviorfisfaftaxfprefe
rence.ff
ff
TrueffffFalsef
ff
18.fAfgoodftaxfshouldfresultfinfeitherfhorizontalforfverticalfequityfacrossftaxpayers.ff
ff
TrueffffFalsef
ff
19.fChangesfinftheftaxflawfintendedftofmakefthefmeasurementfofftaxablefincomefmorefprecisef
usuallyf
makeftheftaxflawflessfcomplex.ff
ff
TrueffffFalsef
ff
20.fVerticalfequityffocusesfonfmeasurementfofftheftaxfbase,fandfhorizontalfequityffocusesfonfth
eftaxf
ratefstructure.ff
ff
TrueffffFalsef
ff
21.fTaxfsystemsfwithfregressivefratefstructuresfresultfinfafproportionallyfheavierftaxfburdenfo
nfpersonsf
withfsmallerftaxfbases.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-4f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
22.fAfprogressivefratefstructurefandfafproportionatefratefstructurefbothfresultfinfverticalfequit
yfacrossf
taxpayers.ff
ff
, TrueffffFalsef
ff
23.fThefU.S.findividualfincomeftaxfhasfalwaysfusedfafprogressivefratefstructure.ff
ff
TrueffffFalsef
ff
24.fThefdecliningfmarginalfutilityfoffincomefacrossfindividualsfcanfbefmeasuredfempirically.ff
ff
TrueffffFalsef
ff
25.fTaxfliabilityfdividedfbyftaxablefincomefequalsfmarginalftaxfrate.ff
ff
TrueffffFalsef
ff
26.fIffaftaxfhasfafproportionatefratefstructure,faftaxpayer'sfmarginalfratefandfaveragefratefarefe
qual.ff
ff
TrueffffFalsef
ff
27.fIffaftaxfhasfafprogressivefratefstructure,faftaxpayer'sfaveragefratefisfgreaterfthanfherfmargin
alfrate.ff
ff
TrueffffFalsef
ff
28.fTheftheoryfoffdistributionalfjusticefisfafrationalefforfafprogressivefincomeftaxfsystem.ff
ff
TrueffffFalsef
ff
29.fIndividualsfwhofbelievefthatfaftaxfsystemfisffairfareflessflikelyftofcheatfonftheirftaxesfthanf
individualsfwhofbelievefthatfthefsystemfisfunfair.ff
ff
TrueffffFalsef
ff
30.fManyftaxpayersfbelievefthefincomeftaxfsystemfisfunfairfbecausefitfisfsofcomplicated.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-5f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
ff
f
MultiplefChoicefQuestionsf
ff
31.fGovernmentfofficialsfoffCountryfZfestimatefthatfnextfyear'sfpublicfprogramsfwillfcostf$19fm
illionf
butfthatftaxfrevenuesfwillfbefonlyf$15fmillion.fThefofficialsfcouldfavoidfafdeficitfnextfyearfbyf
adoptingfwhichfofftheffollowingffiscalfstrategies?ff
ff
f
2-1f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
Chapterf02f
PolicyfStandardsfforfafGoodfTaxf
ff
f
Truef/fFalsefQuestionsf
ff
1.f
Aftaxfmeetsfthefstandardfoffsufficiencyfiffitfisfeasyfforfpeopleftofpayftheftax.ff
ff
TrueffffFalsef
ff
2.fTheffederalfgovernmentfisfnotfrequiredftofpayfinterestfonfthefnationalfdebt.ff
ff
TrueffffFalsef
ff
3.fAfstaticfforecastfoffthefrevenuefeffectfoffaftaxfratefchangefassumesfthatftheftaxfbasefdoesfnotf
change.ff
ff
TrueffffFalsef
ff
4.fAfdynamicfforecastfoffthefrevenuefeffectfoffaftaxfratefchangefassumesfthatftheftaxfbasefdoesfn
otf
change.ff
ff
TrueffffFalsef
ff
5.fTheffederalfSocialfSecurityftaxfburdenfonfemployeesfhasfnotfincreasedfsincef1990fbecauseft
heftaxf
ratefhasfnotfincreasedfsincefthatfyear.ff
ff
TrueffffFalsef
ff
6.fIffStatefHfincreasesfitsfsalesftaxfratefbyf1%,fitsfsalesftaxfrevenuefmustfalsofincreasefbyf1%.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-2f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
7.f
ThefcityfoffBernefrecentlyfenactedfaf10%ftaxfonfthefpricefoffafsubwayfticket.fConsequently,fMrs
,.f
Lanefnowfwalksftofworkfinsteadfofftakingfthefsubway.fHerfbehaviorfillustratesfthefsubstitution
f
effectfoffaftaxfincrease.ff
ff
TrueffffFalsef
ff
8.fJurisdictionfPfrecentlyfincreasedfitsfincomeftaxfrate.fAftaxpayerfwhofreactsftofthefincreasefby
f
workingfharderftofearnfmorefincomefisfdemonstratingfthefincomefeffectfoffthefratefincrease.ff
ff
TrueffffFalsef
ff
9.fAccordingftofsupply-sidefeconomicftheory,fafdecreasefinftaxfratesfforfhigh-
incomefindividualsf
couldfactuallyfcausefanfincreasefinftaxfrevenue.ff
ff
TrueffffFalsef
ff
10.fSupply-
sidefeconomicftheoryfholdsfthatfpeoplefwhofbenefitffromfaftaxfratefreductionfwillfspendf
theirftaxfwindfallfonfconsumptionfgoods.ff
ff
TrueffffFalsef
ff
11.fStatefuseftaxesfarefmorefconvenientfforfindividualfconsumersfthanfstatefsalesftaxes.ff
ff
TrueffffFalsef
ff
12.fThefInternalfRevenuefService'sfcostfoffcollectingf$100fofftaxfrevenuefisfaboutf$3.ff
ff
TrueffffFalsef
ff
13.fAfconvenientftaxfhasflowfcompliancefcostsfforftaxpayersfandflowfcollectionfandfenforceme
ntfcostsf
forfthefgovernment.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-3f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
14.fAccordingftofthefclassicalfconceptfoffefficiency,fanfefficientftaxfshouldfbefneutralfinfitsfeffect
fonf
freefmarketfallocationsfoffeconomicfresources.ff
ff
TrueffffFalsef
ff
,15.fAccordingftofthefKeynesianfconceptfoffefficiency,fanfefficientftaxfshouldfbefneutralfinfitsfeff
ectfonf
freefmarketfallocationsfoffeconomicfresources.ff
ff
TrueffffFalsef
ff
16.fAftaxfmeetsfthefstandardfoffefficiencyfiffitfgeneratesfenoughfrevenueftofpayfforfthefpublicfgo
odsf
andfservicesfprovidedfbyfthefgovernment.ff
ff
TrueffffFalsef
ff
17.fAfprovisionfinftheftaxflawfdesignedftofencouragefafspecificfeconomicfbehaviorfisfaftaxfprefe
rence.ff
ff
TrueffffFalsef
ff
18.fAfgoodftaxfshouldfresultfinfeitherfhorizontalforfverticalfequityfacrossftaxpayers.ff
ff
TrueffffFalsef
ff
19.fChangesfinftheftaxflawfintendedftofmakefthefmeasurementfofftaxablefincomefmorefprecisef
usuallyf
makeftheftaxflawflessfcomplex.ff
ff
TrueffffFalsef
ff
20.fVerticalfequityffocusesfonfmeasurementfofftheftaxfbase,fandfhorizontalfequityffocusesfonfth
eftaxf
ratefstructure.ff
ff
TrueffffFalsef
ff
21.fTaxfsystemsfwithfregressivefratefstructuresfresultfinfafproportionallyfheavierftaxfburdenfo
nfpersonsf
withfsmallerftaxfbases.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-4f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
22.fAfprogressivefratefstructurefandfafproportionatefratefstructurefbothfresultfinfverticalfequit
yfacrossf
taxpayers.ff
ff
, TrueffffFalsef
ff
23.fThefU.S.findividualfincomeftaxfhasfalwaysfusedfafprogressivefratefstructure.ff
ff
TrueffffFalsef
ff
24.fThefdecliningfmarginalfutilityfoffincomefacrossfindividualsfcanfbefmeasuredfempirically.ff
ff
TrueffffFalsef
ff
25.fTaxfliabilityfdividedfbyftaxablefincomefequalsfmarginalftaxfrate.ff
ff
TrueffffFalsef
ff
26.fIffaftaxfhasfafproportionatefratefstructure,faftaxpayer'sfmarginalfratefandfaveragefratefarefe
qual.ff
ff
TrueffffFalsef
ff
27.fIffaftaxfhasfafprogressivefratefstructure,faftaxpayer'sfaveragefratefisfgreaterfthanfherfmargin
alfrate.ff
ff
TrueffffFalsef
ff
28.fTheftheoryfoffdistributionalfjusticefisfafrationalefforfafprogressivefincomeftaxfsystem.ff
ff
TrueffffFalsef
ff
29.fIndividualsfwhofbelievefthatfaftaxfsystemfisffairfareflessflikelyftofcheatfonftheirftaxesfthanf
individualsfwhofbelievefthatfthefsystemfisfunfair.ff
ff
TrueffffFalsef
ff
30.fManyftaxpayersfbelievefthefincomeftaxfsystemfisfunfairfbecausefitfisfsofcomplicated.ff
ff
TrueffffFalsef
ff
DOWNLOADfTHEfTestfBankfforfPrinciplesfoffTaxationfforfBusinessfand
fffffffffffInvestmentfPlanningf2016f19thfEditionfJones
nursytestbank.store
f
2-5f
Copyrightf©f2016fMcGraw-
HillfEducation.fAllfrightsfreserved.fNofreproductionforfdistributionfwithoutfthefpriorfwrittenfc
onsentfoff
McGraw-HillfEducation.f
ff
f
MultiplefChoicefQuestionsf
ff
31.fGovernmentfofficialsfoffCountryfZfestimatefthatfnextfyear'sfpublicfprogramsfwillfcostf$19fm
illionf
butfthatftaxfrevenuesfwillfbefonlyf$15fmillion.fThefofficialsfcouldfavoidfafdeficitfnextfyearfbyf
adoptingfwhichfofftheffollowingffiscalfstrategies?ff
ff
f
