Question 1

Higher marginal tax rates for welfare programs will

Accepted Answer

A) Increase total welfare costs. 
B) Decrease the incentive to work. 
C) Increase the number of people eligible for welfare. 
D) Decrease the moral hazard associated with welfare. 
A) Increase total welfare costs. 
B) Decrease the incentive to work. 
C) Increase the number of people eligible for welfare. 
D) Decrease the moral hazard associated with welfare.

Question 2

A marginal tax rate of zero for welfare programs will

Accepted Answer

A) Increase work effort. 
B) Reduce welfare costs. 
C) Will make everyone eligible for welfare. 
D) Increase the risk of moral hazard. 
A) Increase work effort. 
B) Reduce welfare costs. 
C) Will make everyone eligible for welfare. 
D) Increase the risk of moral hazard.

Question 3

Large in-kind benefits tend to increase the incentive to seek employment.

Accepted Answer

A) True 
 B)False

Question 4

In-kind transfers are

Accepted Answer

A) The transfer of goods and services rather than cash. 
B) Paid to individuals in a form that gives them the maximum flexibility to buy what they need. 
C) A means to allow the poor to make financial transactions between private providers of their own choosing. 
D) Programs for job relocation and training of poor people who wish to work in other geographic areas. 
A) The transfer of goods and services rather than cash. 
B) Paid to individuals in a form that gives them the maximum flexibility to buy what they need. 
C) A means to allow the poor to make financial transactions between private providers of their own choosing. 
D) Programs for job relocation and training of poor people who wish to work in other geographic areas.

Question 5

Lower marginal tax rates in welfare programs will increase the incentive to work.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a poverty program has a basic benefit of $5,000 with zero deductions,and a marginal tax rate of 0.50.The breakeven level of income is

Accepted Answer

A) $2,500. 
B) $25,000. 
C) $15,000. 
D) $10,000. 
A) $2,500. 
B) $25,000. 
C) $15,000. 
D) $10,000.

Question 7

A transfer program that uses means testing to identify who is eligible for benefits is known as

Accepted Answer

A) An in-kind transfer. 
B) A cash transfer. 
C) Welfare. 
D) Social Security. 
A) An in-kind transfer. 
B) A cash transfer. 
C) Welfare. 
D) Social Security.

Question 8

Almost every U.S.household receives some form of income transfer payments.

Accepted Answer

A) True 
 B)False

Question 9

Refer to Figure 34.4.If an individual does not work,she or he will receive welfare benefits of

Accepted Answer

A) $0. 
B) $5,000. 
C) $7,500. 
D) $12,500. 
A) $0. 
B) $5,000. 
C) $7,500. 
D) $12,500.

Question 10

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)] Suppose Miller works 2,000 hours per year at a wage of $8 per hour,has child care expenses of $3,000 per year,and has work expenses of $2,000.If the state maximum welfare benefit is $10,000 per year,based on the welfare formula given,Miller's welfare benefit will be

Accepted Answer

A) Zero because his income has exceeded the limit. 
B) $2,300. 
C) $10,000. 
D) $14,400. 
A) Zero because his income has exceeded the limit. 
B) $2,300. 
C) $10,000. 
D) $14,400.

Question 11

In 2016 the largest U.S.cash transfer program was

Accepted Answer

A) Food stamps. 
B) Social Security. 
C) Medicaid. 
D) TANF. 
A) Food stamps. 
B) Social Security. 
C) Medicaid. 
D) TANF.

Question 12

Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.6 (Wages in excess of ceiling)Jarrett is retired and earns $10,000 per year working part-time.He is entitled to a maximum Social Security retirement benefit of $14,000.Social Security regulations allow him to earn $8,000 and still get maximum benefits.Jarrett's total income,including Social Security benefits,is

Accepted Answer

A) $8,000. 
B) $10,000. 
C) $22,800. 
D) $23,000. 
A) $8,000. 
B) $10,000. 
C) $22,800. 
D) $23,000.

Question 13

Social Security is a welfare program.

Accepted Answer

A) True 
 B)False

Question 14

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)] Suppose Carter works 1,200 hours per year at a wage of $6 per hour,has child care expenses of $2,200 per year,and has work expenses of $800.If the state maximum welfare benefit is $12,000 per year,based on the welfare formula given,Carter's welfare benefit will be

Accepted Answer

A) $3,000. 
B) $10,200. 
C) $9,060. 
D) $12,000. 
A) $3,000. 
B) $10,200. 
C) $9,060. 
D) $12,000.

Question 15

Refer to Figure 34.4.There is a welfare-induced disincentive to work starting at

Accepted Answer

A) 500 hours. 
B) 750 hours. 
C) 1250 hours. 
D) 17,50 hours. 
A) 500 hours. 
B) 750 hours. 
C) 1250 hours. 
D) 17,50 hours.

Question 16

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages Based on the information given,the marginal tax rate is

Accepted Answer

A) Zero percent. 
B) 33 percent. 
C) 67 percent. 
D) 100 percent. 
A) Zero percent. 
B) 33 percent. 
C) 67 percent. 
D) 100 percent.

Question 17

If welfare benefits equal the poverty gap for each household in poverty,then the

Accepted Answer

A) Effective marginal tax rate for welfare recipients is 100 percent. 
B) Poor have a strong incentive to begin working. 
C) The poverty gap will become greater. 
D) Production possibilities curve will shift to the right. 
A) Effective marginal tax rate for welfare recipients is 100 percent. 
B) Poor have a strong incentive to begin working. 
C) The poverty gap will become greater. 
D) Production possibilities curve will shift to the right.

Question 18

Welfare programs differ from social insurance programs in that welfare programs

Accepted Answer

A) Are event-based. 
B) Are available only to people who do not work. 
C) Offer benefits only to the needy. 
D) Have low target efficiency. 
A) Are event-based. 
B) Are available only to people who do not work. 
C) Offer benefits only to the needy. 
D) Have low target efficiency.

Question 19

What are in-kind transfers,and why are they more target-efficient than cash transfers?

Accepted Answer

In-kind transfers are direct transfers o

Question 20

Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.4 (Wages in excess of ceiling)Renard is retired and earns $10,000 per year working part-time.He is entitled to a maximum Social Security retirement benefit of $12,000.Social Security regulations allow him to earn $7,000 and still get maximum benefits.If he increases the number of hours he works and thus increases his earnings to $20,000,his total income will increase by

Accepted Answer

A) $6,000. 
B) $7,000. 
C) $10,000. 
D) $26,800. 
A) $6,000. 
B) $7,000. 
C) $10,000. 
D) $26,800.

Exam 34: Transfer Payments: Welfare and Social Security

Higher marginal tax rates for welfare programs will

A marginal tax rate of zero for welfare programs will

Large in-kind benefits tend to increase the incentive to seek employment.

In-kind transfers are

Lower marginal tax rates in welfare programs will increase the incentive to work.

Suppose a poverty program has a basic benefit of $5,000 with zero deductions,and a marginal tax rate of 0.50.The breakeven level of income is

A transfer program that uses means testing to identify who is eligible for benefits is known as

Almost every U.S.household receives some form of income transfer payments.

Refer to Figure 34.4.If an individual does not work,she or he will receive welfare benefits of

In 2016 the largest U.S.cash transfer program was

Social Security is a welfare program.

Refer to Figure 34.4.There is a welfare-induced disincentive to work starting at

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages Based on the information given,the marginal tax rate is

If welfare benefits equal the poverty gap for each household in poverty,then the

Welfare programs differ from social insurance programs in that welfare programs

What are in-kind transfers,and why are they more target-efficient than cash transfers?

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