Question 1

The existence of income transfer programs can

Accepted Answer

A) Decrease the birth rate. 
B) Increase the wage rate as the labor supply decreases. 
C) Decrease the wage rate as labor supply increases. 
D) Encourage workers to enter the labor force more quickly. 
A) Decrease the birth rate. 
B) Increase the wage rate as the labor supply decreases. 
C) Decrease the wage rate as labor supply increases. 
D) Encourage workers to enter the labor force more quickly.

Question 2

To be eligible for a welfare program,a recipient must be elderly.

Accepted Answer

A) True 
 B)False

Question 3

Explain the trade-off between equity and economic efficiency inherent in the welfare system.

Accepted Answer

Equity is improved when the income of th

Question 4

Refer to Figure 34.1.Suppose the production possibilities curve PP2 represents the U.S.economy and point C represents the combination of goods and services currently being produced.If welfare discourages people from seeking work and welfare is currently in effect,the most likely result of eliminating welfare in the United States would be

Accepted Answer

A) A movement from point C to a point on PP2. 
B) A shift from PP2 to PP1. 
C) A shift from PP2 to PP3. 
D) No change from PP2 or point C. 
A) A movement from point C to a point on PP2. 
B) A shift from PP2 to PP1. 
C) A shift from PP2 to PP3. 
D) No change from PP2 or point C.

Question 5

To be eligible for a welfare program,the recipient must

Accepted Answer

A) Be elderly. 
B) Be low income. 
C) Be in need of medical care. 
D) Have contributed to the fund. 
A) Be elderly. 
B) Be low income. 
C) Be in need of medical care. 
D) Have contributed to the fund.

Question 6

The breakeven level of income is the

Accepted Answer

A) Lowest level of income at which in-kind benefits are no longer necessary. 
B) Level of income at which an individual household begins to have some discretionary income. 
C) Level of income at which welfare eligibility ceases. 
D) Amount of income a person must have to reach the poverty line. 
A) Lowest level of income at which in-kind benefits are no longer necessary. 
B) Level of income at which an individual household begins to have some discretionary income. 
C) Level of income at which welfare eligibility ceases. 
D) Amount of income a person must have to reach the poverty line.

Question 7

A zero marginal tax rate in welfare programs will make everyone eligible for welfare benefits.

Accepted Answer

A) True 
 B)False

Question 8

Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.6 (Wages in excess of ceiling)Raynoo is retired and earns $15,000 per year working part-time.She is entitled to a maximum Social Security retirement benefit of $14,000.Social Security regulations allow her to earn $9,000 and still get maximum benefits.Raynoo's total income,including Social Security benefits,is

Accepted Answer

A) $14,000. 
B) $15,000. 
C) $25,400. 
D) $29,000. 
A) $14,000. 
B) $15,000. 
C) $25,400. 
D) $29,000.

Question 9

Transfer payments include all of the following except

Accepted Answer

A) Government-subsidized loans for students. 
B) Federal crop assistance for farmers. 
C) A church-run thrift store for the poor. 
D) Social Security benefits for retirees. 
A) Government-subsidized loans for students. 
B) Federal crop assistance for farmers. 
C) A church-run thrift store for the poor. 
D) Social Security benefits for retirees.

Question 10

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)] Suppose Emily works 1,800 hours per year at a wage of $8 per hour,has child care expenses of $4,000 per year,and has work expenses of $1,000.If the state maximum welfare benefit is $12,000 per year,based on the welfare formula given,Emily's welfare benefit will be

Accepted Answer

A) $8,240. 
B) $2,600. 
C) $3,760. 
D) Zero because her income exceeds the limit. 
A) $8,240. 
B) $2,600. 
C) $3,760. 
D) Zero because her income exceeds the limit.

Question 11

The creation of the Social Security program had no impact on the labor force participation rate because people are not interested in working past the age of 65.

Accepted Answer

A) True 
 B)False

Question 12

Social insurance programs are event-conditional.

Accepted Answer

A) True 
 B)False

Question 13

An assistance program that guarantees a minimum income,regardless of the family's earned income,has a

Accepted Answer

A) Marginal tax rate of zero percent. 
B) Breakeven income level equal to the need standard. 
C) Zero disregard. 
D) High tax elasticity of labor supply. 
A) Marginal tax rate of zero percent. 
B) Breakeven income level equal to the need standard. 
C) Zero disregard. 
D) High tax elasticity of labor supply.

Question 14

The impact of a decrease in the marginal tax rate on labor supply will be larger as the tax elasticity of supply gets smaller.

Accepted Answer

A) True 
 B)False

Question 15

Setting time limits on welfare eligibility will increase the incentive to work.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a goal of an in-kind transfer program but not a cash transfer program?

Accepted Answer

A) To change the market's answer to the FOR WHOM question. 
B) To address the issue of inequity. 
C) To ensure that recipients get the type of aid intended. 
D) To change the market's answer to the HOW question. 
A) To change the market's answer to the FOR WHOM question. 
B) To address the issue of inequity. 
C) To ensure that recipients get the type of aid intended. 
D) To change the market's answer to the HOW question.

Question 17

The official definition of poverty is based on a comparison of cash and in-kind benefits with family size.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a poverty program has a basic benefit of $8,000,and a family can earn up to $16,000 before losing all welfare benefits.The marginal tax rate is ________ percent.

Accepted Answer

A) 0.2 
B) 0.10 
C) 2.0 
D) 0.5 
A) 0.2 
B) 0.10 
C) 2.0 
D) 0.5

Question 19

Recipients of TANF funds are identified

Accepted Answer

A) By Senate subcommittees at either the state or federal level. 
B) By the federal housing authority. 
C) By the federally established poverty line. 
D) At the discretion of private,not-for-profit charities. 
A) By Senate subcommittees at either the state or federal level. 
B) By the federal housing authority. 
C) By the federally established poverty line. 
D) At the discretion of private,not-for-profit charities.

Question 20

Which of the following statements concerning lower 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 more 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 fewer 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 more 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 fewer people eligible for welfare benefits.

Exam 34: Transfer Payments: Welfare and Social Security

The existence of income transfer programs can

To be eligible for a welfare program,a recipient must be elderly.

Explain the trade-off between equity and economic efficiency inherent in the welfare system.

To be eligible for a welfare program,the recipient must

The breakeven level of income is the

A zero marginal tax rate in welfare programs will make everyone eligible for welfare benefits.

Transfer payments include all of the following except

The creation of the Social Security program had no impact on the labor force participation rate because people are not interested in working past the age of 65.

Social insurance programs are event-conditional.

An assistance program that guarantees a minimum income,regardless of the family's earned income,has a

The impact of a decrease in the marginal tax rate on labor supply will be larger as the tax elasticity of supply gets smaller.

Setting time limits on welfare eligibility will increase the incentive to work.

Which of the following is a goal of an in-kind transfer program but not a cash transfer program?

The official definition of poverty is based on a comparison of cash and in-kind benefits with family size.

Suppose a poverty program has a basic benefit of $8,000,and a family can earn up to $16,000 before losing all welfare benefits.The marginal tax rate is ________ percent.

Recipients of TANF funds are identified

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

Economics: the Core Issues

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National Income Accounting

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Aggregate Demand

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Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

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