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Economic Concepts: Personal Income Distribution, Taxation, and Public Goods, Papers of Introduction to Macroeconomics

Mohawk Valley Community College - Utica Branch Introduction to Macroeconomics

Various economic concepts including the personal distribution of income, the largest functional share of national income, changes in personal taxes since 1940, consumption spending composition, saving definition, and advantages of the corporate form of business. Additionally, it discusses externalities, public goods, and government's role in providing public goods.

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CHAPTER 4

The U.S. Economy: Private and Public Sectors

1. The personal distribution of income refers to the:

A) division of income between personal taxes, consumption expenditures, and saving.

B) division of income on the basis of industry sources, for example, agriculture, transportation, and

mining.

C) distribution of income to basic resource classes, that is, wages, rents, interest, and profits.

D) way income is distributed among specific households or spending units.

6. The largest functional share of the national income consists of:

A) wages and salaries.

B) interest and rental income.

C) proprietors' income, that is, the income of unincorporated businesses.

D) corporate profits.

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CHAPTER 4 The U.S. Economy: Private and Public Sectors

The personal distribution of income refers to the: A) division of income between personal taxes, consumption expenditures, and saving. B) division of income on the basis of industry sources, for example, agriculture, transportation, and mining. C) distribution of income to basic resource classes, that is, wages, rents, interest, and profits. D) way income is distributed among specific households or spending units.
The largest functional share of the national income consists of: A) wages and salaries. B) interest and rental income. C) proprietors' income, that is, the income of unincorporated businesses. D) corporate profits.

Since 1940 personal taxes have: A) risen absolutely, but declined as a percentage of personal income. B) risen both absolutely and as a percentage of personal income. C) fallen absolutely, but risen as a percentage of personal income. D) fallen both absolutely and as a percentage of personal income.
Listed in descending order of relative size, total consumption spending is comprised of: A) nondurable goods, durable goods, and services. B) services, nondurable goods, and durable goods. C) services, durable goods, and nondurable goods. D) durable goods, nondurable goods, and services.
Economists define saving as: A) that part of after-tax income which is not consumed. B) total income less taxes. C) bank accounts. D) purchases of stocks and bonds.
Households in the aggregate use the largest share of their total income to: A) pay taxes. B) consume. C) save. D) buy capital goods.
What unusual event happened to U.S. households in 2005? A) Total payments of personal taxes exceeded consumption expenditures. B) Personal saving exceeded personal taxes. C) The rate of personal saving was negative. D) Households allocated equal percentages of their incomes to consumption, personal taxes, and personal saving.
Economists define durable goods as those products expected to last at least _____ year(s). A) 1 B) 3 C) 5 D) 10
The majority of personal consumption expenditures go to purchase: A) nondurable goods. B) durable goods. C) capital goods. D) services.

The most crucial determinant of the legal form of an enterprise will usually be the: A) ability of the firm to sell bonds to the public. B) amount of financial capital required by the line of production. C) amount of unemployment in the particular industry. D) state in which it is located.
An owner's liability for the debts of a business is: A) limited in a corporation to the assets of preferred stockholders. B) limited in a corporation to the assets of bondholders. C) limited to the owner's investment in a single proprietorship. D) unlimited in a partnership.
Limited liability applies to: A) partnerships. B) proprietorships. C) all corporations. D) financial corporations but not to manufacturing corporations.
The separation of ownership and control in a corporation means that: A) hired managers play a larger role in determining company policy than do a corporation's legal owners. B) the ownership of corporations is becoming increasingly concentrated in the hands of a few common stockholders. C) a firm's board of directors has no power over hired managers. D) stockholders have lost their voting privileges.
Limited liability means that: A) creditors have no legal claim on the personal assets of a proprietor. B) corporations cannot be sued. C) creditors have no legal claim on the personal assets of a corporate stockholder. D) corporations have a legal life independent of their owners and managers.
Stocks are: A) promises to repay a loan. C) issued by sole proprietorships. B) also known as bonds. D) shares of ownership of a corporation.
Corporate bonds are: A) promises by a corporation to repay a loan. C) illegal in the United States. B) also known as stocks. D) shares of ownership of a corporation.

In corporations, owners are __________________ and managers are ________________. A) agents; principals. C) agents; employees. B) stockholders; bondholders. D) principals; agents.
Most output in the United States is produced by: A) cooperatives. B) partnerships. C) sole proprietorships. D) corporations.
In a competitive market: A) demand will not always reflect all external benefits. B) demand will always reflect all external benefits. C) supply will always reflect all external costs. D) supply will always reflect all external benefits.
Negative externalities arise: A) when firms pay more than the opportunity cost of resources. B) when the demand curve for a product is located too far to the left. C) when firms "use" resources without being compelled to pay for their full costs. D) only in capitalistic societies.
Positive externalities benefits A) benefits that accrue to parties other than the producer and buyer of a good. B) the benefits that resource suppliers obtain from the production and sale of a good. C) the benefit that a consumer receives from buying a good. D) the combined benefits that buyer and seller receive from a voluntary market transaction.
When externalities cause substantial positive benefits for third parties, a competitive market: A) underallocates resources to the production of the good. B) overallocates resources to the production of the good. C) is allocatively efficient. D) compensates people for the value of the benefits that these third parties receive.
Suppose a product creates substantial negative externalities. If government adopts a policy that forces producers to pay these costs, the: A) output of the product will decrease. B) initial misallocation of resources will be intensified. C) output of the product will increase. D) price of the product will decrease.

The main characteristics of a public good are: A) nonrivalry and nonexcludability. B) nonexcludability and rising costs of production. C) nonrivalry and large external costs. D) production at constant cost and rising demand.
Rivalry and excludability are the main characteristics of: A) capital goods. B) private goods. C) public goods. D) consumption goods.
Nonrivalry and nonexcludability are the main characteristics of: A) capital goods. B) private goods. C) public goods. D) consumption goods.
Which of the following is an example of a public good? A) a fireworks display. B) a hotdog C) a barbeque grill D) a personal computer
Which of the following is a public good? A) chewing gum B) bread C) a professional baseball game D) street lights in a city
A public good: A) can be produced profitably by private firms. B) is available to all and cannot be denied to anyone. C) is characterized by rivalry and excludability. D) produces no externalities.
The market system does not produce public goods because: A) there is no need or demand for such goods. B) private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them. C) public enterprises can produce such goods at lower cost than can private enterprises. D) their production seriously distorts the distribution of income.

Nonexcludability is the idea that: A) government actions cannot remedy market failure. B) the presence of external costs and benefits produces a misallocation of resources. C) individuals cannot receive benefits from a good without paying for it. D) individuals who are unable or unwilling to pay for a good cannot be excluded from the benefits provided by that product.
Excludability: A) is a characteristics of private goods, but not of public goods. B) applies only where external benefits exceed external costs. C) suggest there are certain economic functions from which government must be excluded. D) is a fundamental characteristic of public goods.
Government rather than the private sector must provide economically desirable public goods because: A) private production of those goods would entail unacceptably high external costs. B) the availability of such goods yields no benefits to individuals. C) the benefits yielded by such goods are available to everyone and cannot be withheld from those who refuse to pay for them. D) their provision is necessary to achieve full employment and price-level stability.
The free-rider problem is that: A) free public transportation is overcrowded. B) people will not voluntarily pay for something that they can obtain without paying. C) government supplies goods at no charge to people who can afford to pay for them. D) public goods often create large external costs.
Government rather than private firms must provide economically desirable public goods because: A) high marginal costs preclude their production in the private sector. B) public goods have characteristics that make it difficult or impossible for private firms to produce them profitably. C) public goods have marginal costs that exceed marginal benefits. D) the law of increasing opportunity costs applies only to private goods.

Stabilization

The stabilization function of government involves government's efforts to: A) alter the output of specific goods when external costs or benefits are present. B) reduce the after-tax incomes of the rich and increase the after-tax incomes of the poor. C) deal with the problems of substantial unemployment and rapid inflation. D) provide the socially desired output of public goods.
Government's economic role is complicated by the fact that: A) public goods entail no opportunity costs. B) the public sector cannot base decisions on marginal costs and marginal benefits. C) economic decisions are made in a political context. D) the marginal utility of public goods rises rather than falls.

Purchases, transfers, and government size

In 2006, "Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was: A) February 10. B) April 15. C) April 26. D) July 7.
Government transfer payments: A) have been virtually eliminated by Federal revenue sharing. B) have virtually no effect on the distribution of income. C) make the distribution of income less equal. D) make the distribution of income less unequal.
The three most important sources of Federal tax revenue in order of descending importance are: A) sales, payroll, and personal income taxes. B) personal income, corporate income, and sales taxes. C) personal income, corporate income, and payroll taxes. D) personal income, payroll, and corporate income taxes.
The largest category of Federal spending is for: A) agriculture and rural development. C) pensions and income security. B) science, space, and technology. D) highway construction.

Which of the following is not an important source of revenue for the Federal government? A) corporate income taxes B) property taxes C) payroll taxes D) personal income taxes
An income tax is progressive if the: A) absolute amount paid as taxes varies directly with income. B) percentage of income paid as taxes is the same regardless of the size of income. C) percentage of income paid as taxes increases as income increases. D) tax rate varies inversely with income.
The marginal tax rate is: A) the difference between the total tax rate and the average tax rate. B) the percentage of total income paid as taxes. C) change in taxes / change in taxable income D) total taxes / total taxable income
The average tax rate is: A) change in taxes / change in taxable income B) total taxes / total taxable income C) the sum of the marginal tax rate and the rate of transfer payments. D) the tax on incremental income less the tax on total income.
The most important source of Federal tax revenue is: A) sales taxes. B) personal income taxes. C) corporate income taxes. D) payroll taxes.
Taxable income is: A) total income less deductions and exemptions. B) only income to which marginal tax rates apply. C) the same as gross income. D) the sum of all wage and property income.
The basic tax rate on taxable corporate income is: A) 15 percent. B) 22 percent. C) 35 percent. D) 52 percent.

True/False Questions

Economic Concepts: Personal Income Distribution, Taxation, and Public Goods, Papers of Introduction to Macroeconomics

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Partial preview of the text

Download Economic Concepts: Personal Income Distribution, Taxation, and Public Goods and more Papers Introduction to Macroeconomics in PDF only on Docsity!

CHAPTER 4

The U.S. Economy: Private and Public Sectors