#1
Which of the following is an example of a regressive tax?
Sales tax
ExplanationImposes a higher burden on lower-income individuals.
#2
Which tax system allows for the same percentage of income to be taxed regardless of income level?
Proportional tax
ExplanationApplies a constant tax rate regardless of income.
#3
What is the primary purpose of using tax incentives in economic policy?
To promote specific economic activities
ExplanationEncourages desired behaviors through tax breaks.
#4
What is the purpose of a sin tax?
To discourage unhealthy behavior
ExplanationIntended to deter activities deemed harmful.
#5
Which tax is typically considered the most progressive?
Income tax
ExplanationTax rate increases with higher income levels.
#6
What does the Laffer curve illustrate in taxation?
The relationship between tax rates and tax revenue
ExplanationShows the point at which tax revenue maximizes.
#7
Which economic theory suggests that individuals will adjust their behavior to minimize their tax liabilities?
Rational choice theory
ExplanationPredicts individuals act in self-interest regarding taxes.
#8
What is the incidence of a tax?
The burden of the tax on different groups
ExplanationExamines who ultimately bears the tax burden.
#9
What is the economic rationale behind tax deductions for charitable donations?
To encourage individuals to donate to charitable causes
ExplanationProvides an incentive for philanthropy.
#10
What is the term for the practice of shifting profits to low-tax jurisdictions to reduce overall tax liability?
Tax avoidance
ExplanationLegal means to minimize tax payments.