Question 1

The largest amounts of dollars spent on income transfers are for

Accepted Answer

A) Social insurance programs. 
B) Welfare programs. 
C) TANF. 
D) Unemployment insurance. 
A) Social insurance programs. 
B) Welfare programs. 
C) TANF. 
D) Unemployment insurance. A

Question 2

In-kind transfers

Accepted Answer

A) Are a payment for work. 
B) Increase the poverty index. 
C) Are one way to reduce the moral hazards of the welfare system. 
D) Provide the direct transfer of goods and services. 
A) Are a payment for work. 
B) Increase the poverty index. 
C) Are one way to reduce the moral hazards of the welfare system. 
D) Provide the direct transfer of goods and services. D

Question 3

A goal of income transfer programs is to do all of the following except

Accepted Answer

A) Alter the distribution of income. 
B) Reduce income inequalities. 
C) Change the mix of output. 
D) Change how output is produced. 
A) Alter the distribution of income. 
B) Reduce income inequalities. 
C) Change the mix of output. 
D) Change how output is produced. D

Question 4

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)] Suppose Shanika works 2,000 hours per year at a wage of $6 per hour,has child care expenses of $3,000 per year,and has work expenses of $900.If the state maximum welfare benefit is $11,000 per year,based on the welfare formula given,Shanika's welfare benefit will be

Accepted Answer

A) $2,900. 
B) $8,100. 
C) $7,760. 
D) Zero because her income exceeds the limit. 
A) $2,900. 
B) $8,100. 
C) $7,760. 
D) Zero because her income exceeds the limit.

Question 5

Refer to Figure 34.3.The disincentive to work caused by this welfare program

Accepted Answer

A) Ends as soon as any income is earned. 
B) Ends at $5,000 where benefits equal wages. 
C) Ends at $10,000. 
D) Exists at all income levels. 
A) Ends as soon as any income is earned. 
B) Ends at $5,000 where benefits equal wages. 
C) Ends at $10,000. 
D) Exists at all income levels.

Question 6

Welfare costs can be reduced by

Accepted Answer

A) Decreasing the breakeven level of income. 
B) Reducing the marginal tax rate. 
C) Increasing earnings disregards. 
D) Decreasing the tax elasticity of labor supply. 
A) Decreasing the breakeven level of income. 
B) Reducing the marginal tax rate. 
C) Increasing earnings disregards. 
D) Decreasing the tax elasticity of labor supply.

Question 7

The primary benefit of the Social Security program is the

Accepted Answer

A) Increased work incentives for older workers. 
B) More equitable distribution of income that results. 
C) Jobs created by the additional spending. 
D) Regressive nature of the benefits. 
A) Increased work incentives for older workers. 
B) More equitable distribution of income that results. 
C) Jobs created by the additional spending. 
D) Regressive nature of the benefits.

Question 8

Social Security annual benefits to retirees

Accepted Answer

A) Are equal to the retirees' average annual salaries when they were working. 
B) Are higher for high-income workers and lower for low-income workers. 
C) Are higher for low-income workers and lower for high-income workers. 
D) Do not depend on prior earnings. 
A) Are equal to the retirees' average annual salaries when they were working. 
B) Are higher for high-income workers and lower for low-income workers. 
C) Are higher for low-income workers and lower for high-income workers. 
D) Do not depend on prior earnings.

Question 9

Which of the following statements concerning higher marginal tax rates is correct?

Accepted Answer

A) They encourage work effort and make more people eligible for welfare benefits. 
B) They discourage work effort and make fewer people eligible for welfare benefits. 
C) They encourage work effort and make fewer people eligible for welfare benefits. 
D) They discourage work effort and make more people eligible for welfare benefits. 
A) They encourage work effort and make more people eligible for welfare benefits. 
B) They discourage work effort and make fewer people eligible for welfare benefits. 
C) They encourage work effort and make fewer people eligible for welfare benefits. 
D) They discourage work effort and make more people eligible for welfare benefits.

Question 10

The primary eligibility requirement for Social Security is

Accepted Answer

A) Income level. 
B) Total dollar amount of assets. 
C) Poverty level. 
D) Age. 
A) Income level. 
B) Total dollar amount of assets. 
C) Poverty level. 
D) Age.

Question 11

A lower marginal tax rate for welfare recipients will

Accepted Answer

A) Decrease work incentives. 
B) Reduce the possibility of moral hazard. 
C) Increase the poverty gap. 
D) Reduce total welfare expenditures. 
A) Decrease work incentives. 
B) Reduce the possibility of moral hazard. 
C) Increase the poverty gap. 
D) Reduce total welfare expenditures.

Question 12

Which of the following is not a determinant of eligibility for Social Security benefits?

Accepted Answer

A) Reaching retirement age. 
B) Being too disabled to work. 
C) Having low income. 
D) Being the survivor of a deceased worker. 
A) Reaching retirement age. 
B) Being too disabled to work. 
C) Having low income. 
D) Being the survivor of a deceased worker.

Question 13

The Social Security payments received by retired persons are an in-kind transfer payment.

Accepted Answer

A) True 
 B)False

Question 14

An unfair distribution of incomes is the result of

Accepted Answer

A) Income inequity. 
B) Market failure. 
C) Generous philanthropy. 
D) Government failure. 
A) Income inequity. 
B) Market failure. 
C) Generous philanthropy. 
D) Government failure.

Question 15

Transfer payments are

Accepted Answer

A) Payments to individuals for which no current goods or services are exchanged. 
B) Government tax receipts. 
C) Government expenditures on goods and services. 
D) Social Security taxes paid by employers. 
A) Payments to individuals for which no current goods or services are exchanged. 
B) Government tax receipts. 
C) Government expenditures on goods and services. 
D) Social Security taxes paid by employers.

Question 16

The impact of a decrease in the marginal tax rate on labor supply depends on the tax elasticity of labor supply.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following programs is the second-largest federal income transfer program?

Accepted Answer

A) Medicare. 
B) Social Security. 
C) Unemployment compensation. 
D) Medicaid. 
A) Medicare. 
B) Social Security. 
C) Unemployment compensation. 
D) Medicaid.

Question 18

Suppose a poverty program has a basic benefit of $10,000,zero deductions,and a breakeven level of income of $25,000.The marginal tax rate is ________ percent.

Accepted Answer

A) 2.50 
B) 0.40 
C) 0.20 
D) 0.08 
A) 2.50 
B) 0.40 
C) 0.20 
D) 0.08

Question 19

Higher basic benefits increase the breakeven level of income faced by welfare recipients.

Accepted Answer

A) True 
 B)False

Question 20

The shortfall between actual income and the poverty threshold is the

Accepted Answer

A) Welfare gap. 
B) Poverty gap. 
C) Target efficiency. 
D) Moral hazard. 
A) Welfare gap. 
B) Poverty gap. 
C) Target efficiency. 
D) Moral hazard.

Exam 34: Transfer Payments: Welfare and Social Security

The largest amounts of dollars spent on income transfers are for

In-kind transfers

A goal of income transfer programs is to do all of the following except

Refer to Figure 34.3.The disincentive to work caused by this welfare program

Welfare costs can be reduced by

The primary benefit of the Social Security program is the

Social Security annual benefits to retirees

Which of the following statements concerning higher marginal tax rates is correct?

The primary eligibility requirement for Social Security is

A lower marginal tax rate for welfare recipients will

Which of the following is not a determinant of eligibility for Social Security benefits?

The Social Security payments received by retired persons are an in-kind transfer payment.

An unfair distribution of incomes is the result of

Transfer payments are

The impact of a decrease in the marginal tax rate on labor supply depends on the tax elasticity of labor supply.

Which of the following programs is the second-largest federal income transfer program?

Suppose a poverty program has a basic benefit of $10,000,zero deductions,and a breakeven level of income of $25,000.The marginal tax rate is ________ percent.

Higher basic benefits increase the breakeven level of income faced by welfare recipients.

The shortfall between actual income and the poverty threshold is the

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