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6 / 7

1. (a), 2. (b), 3. (c), 4. (b), 5. (a), 6. (c), 7. (c), 8. (d), 9. (a), 10. (c)

Special Topic 1

Government Spending and Taxation

Questions 1 through 5 are a suggested special topic quiz.

1.Between 1960 and 2003, the share of federal spending allocated to national defense

a.declined sharply, while the share allocated to health care increased substantially.

b.rose sharply, while the share allocated to health care declined substantially.

c.was relatively constant, while the share allocated to health care declined modestly.

d.declined modestly, while the share allocated to health care was relatively constant.

2.How much does it cost to tax a dollar of revenue away from the private sector and transfer it to the government to finance a government program?

a.one dollar

b.less than one dollar because the administration of and compliance with the tax laws creates jobs for people

c.more than a dollar because collection of the taxes requires resources that would otherwise be available for private sector production

d.more than a dollar because of the excess burden resulting from the elimination of productive exchanges by the taxes

e.Both c and d are correct.

3.Real (adjusted for inflation) federal spending per person in the United States

a.has increased by approximately 10 percent per decade during the last 225 years.

b.increased more rapidly during the nineteenth century than during the twentieth century.

c.in 2002 was approximately 60 times the level of 1916.

d.increased rapidly during the first half of the twentieth century but has changed very little since 1950.

4.Compared to the situation prior to 1980, the top marginal personal income tax rate imposed on the rich is now substantially

a.lower and so is the share of the revenue collected from them.

b.higher and so is the share of the revenue collected from them.

c.lower, but the share of the revenue collected from them is now higher.

d.higher, but the share of the revenue collected from them is now lower.

5.Government expenditures as a share of the U.S. economy are

a.the largest in the world.

b.the smallest in the world.

c.smaller than most Western European countries but larger than a number of high-growth Asian economies.

d.larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy.

Answer Key 1 through 5

1. (a), 2. (e), 3. (c), 4. (c), 5. (c)

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