1. The greatest portion of the budget of state and local governments is spent on
A) schools.
B) entitlements such as Medicare and Social Security.
C) national defense.
D) interest on previous debt.
E) public welfare.
2. In a given year, the budget deficit
A) is the accumulated value of outstanding payments owed to the government.
B) has always been there and is simply a fact of life.
C) is illegal due to the balanced-budget legislation.
D) is the amount in the budget not covered by tax and other revenues.
E) all of the above
3. The "ability-to-pay" principle of taxation states that
A) people who receive more benefits from a government service should pay more taxes for it than those who received fewer benefits.
B) government should reduce taxes during economic downturns when people have less ability to pay .
C) people with higher incomes should pay higher taxes than people with lower incomes.
D) federal, state, and local taxes should be reduced.
E) none of the above
4. Taxable income is
A) total income less deductions and exemptions.
B) earned income less property income.
C) all income other than wages and salaries.
D) wage and salary income only.
E) all earned income
5. A tax which takes a larger proportion of income from low-income groups than from high- income groups is a
A) shifted tax.
B) regressive tax.
C) progressive tax.
D) proportional tax.
E) an ability-to-pay tax.