Taxation and Economic Policy Multiple-Choice o C) Flat tax

Questions
o D) Graduated tax
1. Which type of tax structure increases the rate
7. Which policy is likely to stimulate economic
as income increases?
growth?
o A) Flat tax
o A) Increase government spending and
o B) Regressive tax reduce taxes

o C) Proportional tax o B) Increase interest rates

o D) Progressive tax o C) Reduce government spending

2. The primary purpose of a government o D) Increase taxes

imposing tariffs is to:
8. A tax that charges higher rates on higher
o A) Increase trade volume incomes is:

o B) Protect domestic industries o A) Regressive

o C) Increase imports o B) Proportional

o D) Reduce government revenue o C) Regressive

3. Which type of tax system is considered the o D) Progressive

fairest for reducing income inequality?
9. Which of the following is a form of government
o A) Flat tax assistance given directly to individuals?

o B) Regressive tax o A) Sales tax

o C) Progressive tax o B) Transfer payment

o D) Proportional tax o C) Import tariff

4. VAT (Value-Added Tax) is an example of a: o D) Excise tax

o A) Direct tax 10. Government policies that use spending and

taxation to influence the economy are part of:
o B) Consumption tax
o A) Monetary policy
o C) Income tax
o B) Trade policy
o D) Corporate tax
o C) Fiscal policy
5. An economic policy that involves reducing
interest rates to increase spending is known as: o D) Supply-side policy

o A) Fiscal policy 11. Sales tax is an example of a(n):

o B) Contractionary monetary policy o A) Direct tax

o C) Expansionary monetary policy o B) Corporate tax

o D) Quantitative tightening o C) Income tax

6. A proportional tax is also known as a: o D) Indirect tax

o A) Progressive tax 12. Which term describes the amount of income

subject to taxation?
o B) Regressive tax
 o A) Disposable income 18. Expansionary fiscal policy typically involves:

o B) Taxable income o A) Cutting taxes only

o C) Gross income o B) Cutting government programs

o D) Adjusted income o C) Increasing government spending and

cutting taxes
13. Export subsidies are generally used to:
o D) Increasing interest rates
o A) Increase exports
19. When a government aims to reduce
o B) Reduce imports
unemployment, it may implement policies to:
o C) Protect local industries
o A) Lower inflation
o D) Reduce inflation
o B) Increase employment and reduce
14. In a regressive tax system: inflation

o A) Tax rates increase with income o C) Increase tax revenue

o B) Tax rates remain constant o D) Increase imports

o C) Lower-income individuals pay a 20. Taxes on company profits are known as:
higher percentage
o A) Excise taxes
o D) Higher-income individuals pay a
o B) Payroll taxes
higher percentage
o C) Corporate taxes
15. Contractionary fiscal policy is often used to:
o D) Tariffs
o A) Reduce unemployment
21. Economic policy is primarily aimed at:
o B) Reduce inflation
o A) Stabilizing the economy and
o C) Increase government debt
promoting growth
o D) Increase imports
o B) Increasing inflation
16. Which of the following is a tax on specific
o C) Encouraging imports over exports
goods, such as gasoline or cigarettes?
o D) Reducing national debt
o A) Excise tax
22. The term that refers to the total amount of
o B) Property tax
money owed by a government is:
o C) Income tax
o A) Budget surplus
o D) Value-added tax
o B) Trade deficit
17. Gains from selling an asset held for a long time
o C) Public spending
are often subject to:
o D) National debt
o A) Sales tax
23. Income tax is considered a(n):
o B) Excise tax
o A) Indirect tax
o C) Import tax
o B) Direct tax
o D) Capital gains tax
o C) Consumption tax
 o D) Excise tax o C) Personal savings

24. A dollar-for-dollar reduction in tax liability is o D) Corporate tax rates

called a:
30. When a government spends more than it
o A) Tax credit receives in revenue, it has a:

o B) Tax deduction o A) Trade deficit

o C) Tax exemption o B) Budget deficit

o D) Allowance o C) Budget surplus

25. Government payments that help low-income o D) Balanced budget

individuals cover essential costs are known as:
31. Public services funded by taxes generally
o A) Income tax refunds include:

o B) Excise taxes o A) Social services

o C) Welfare payments o B) Private goods

o D) Subsidies o C) Stock dividends

26. Which institution generally implements o D) Investment grants

monetary policy?
32. Adjustments to interest rates to control
o A) Treasury Department inflation or stimulate growth are part of:

o B) Department of Commerce o A) Fiscal policy

o C) Office of the President o B) Trade policy

o D) Central bank o C) Monetary policy

27. To reduce inflation, a government is likely to: o D) Investment policy

o A) Increase government spending 33. Tariffs are primarily taxes on:

o B) Raise interest rates o A) Exports

o C) Reduce taxes o B) Domestic goods

o D) Increase the money supply o C) Services

28. One way to expand the economy through o D) Imports

monetary policy is to:
34. A flat tax is one in which:
o A) Increase money supply
o A) All income levels are taxed at the
o B) Raise interest rates same rate

o C) Decrease taxes o B) Higher incomes are taxed more

o D) Cut government spending o C) Lower incomes are taxed less

29. A high level of government debt could o D) Corporations pay more

potentially reduce:
35. A tax system where the rate increases as
o A) Exports income increases is known as:

o B) Consumer spending o A) Regressive tax system

 o B) Progressive tax system o A) Value-added tax

o C) Proportional tax system o B) Income tax

o D) Flat tax system o C) Luxury tax

36. Using legal methods to reduce taxable income o D) Payroll tax

is called:
42. In a regressive tax system, which income group
o A) Tax evasion bears a higher relative burden?

o B) Tax fraud o A) High-income

o C) Tax liability o B) Middle-income

o D) Tax avoidance o C) Lower income

37. Taxes on gasoline, cigarettes, and alcohol are o D) Upper-income

known as:
43. Tariffs are typically imposed on:
o A) Sales tax
o A) Exports
o B) Income tax
o B) Domestic goods
o C) Excise tax
o C) Services
o D) Property tax
o D) Imports
38. Redistribution of wealth to reduce inequality is
44. Government borrowing is often done by
often done through:
issuing:
o A) Income redistribution
o A) Stocks
o B) Subsidy cuts
o B) Government bonds
o C) Increased corporate taxes
o C) Corporate bonds
o D) Lower tariffs
o D) Bank loans
39. Tax cuts for businesses are intended to:
45. Reducing corporate tax rates may attract:
o A) Reduce employment
o A) Higher tax revenue
o B) Stimulate economic growth
o B) More regulation
o C) Increase imports
o C) Foreign investors
o D) Decrease revenue
o D) Higher wages
40. In a progressive tax system, who pays the
46. Raising the sales tax is likely intended to:
highest tax rates?
o A) Increase tax revenue
o A) Middle-income earners
o B) Reduce public spending
o B) Low-income earners
o C) Increase demand
o C) High-income earners
o D) Decrease consumer goods prices
o D) All income groups equally
47. Austerity measures often involve:
41. The VAT (Value-Added Tax) is generally
categorized as: o A) Increased subsidies
 o B) Public spending cuts

o C) More government borrowing

o D) Increasing tariffs

48. A tax on property value is known as:

o A) Sales tax

o B) Corporate tax

o C) Excise tax

o D) Property tax

49. Income tax brackets indicate:

o A) Taxable income threshold

o B) Tax credits

o C) Marginal tax rate

o D) Flat rate

50. Taxes on luxury items like alcohol or cigarettes

are known as:

o A) Sales tax

o B) Excise tax

o C) Property tax

o D) Value-added tax

Answer Key

1. D, 2. B, 3. C, 4. B, 5. C, 6. C, 7. A, 8. D, 9. B, 10.
C,

2. D, 12. B, 13. A, 14. C, 15. B, 16. A, 17. D, 18. C,

19. B, 20. C,

3. A, 22. D, 23. B, 24. A, 25. C, 26. D, 27. B, 28. A,

29. C, 30. B,

4. A, 32. C, 33. D, 34. A, 35. B, 36. D, 37. C, 38. A,

39. B, 40. C,

5. A, 42. C, 43. D, 44. B, 45. C, 46. A, 47. B, 48. D,

49. A, 50. B