Question 1

The Social Security program is an income transfer program for retired workers only.

Accepted Answer

A) True 
 B)False

Question 2

Since 1950,the labor force participation rate of older Americans has primarily

Accepted Answer

A) Increased because of the high marginal tax rate implicit in the Social Security system. 
B) Increased because of the low marginal tax rate implicit in the Social Security system. 
C) Decreased because of the low marginal tax rate implicit in the Social Security system. 
D) Decreased because of the high marginal tax rate implicit in the Social Security system. 
A) Increased because of the high marginal tax rate implicit in the Social Security system. 
B) Increased because of the low marginal tax rate implicit in the Social Security system. 
C) Decreased because of the low marginal tax rate implicit in the Social Security system. 
D) Decreased because of the high marginal tax rate implicit in the Social Security system.

Question 3

Social Security benefits paid by the federal government

Accepted Answer

A) Are income transfers financed by taxes on workers and employers. 
B) Are classified as in-kind benefits. 
C) Have no effect on the decision of for whom output is to be produced. 
D) Are not a transfer program because people must contribute to the fund in order to receive benefits. 
A) Are income transfers financed by taxes on workers and employers. 
B) Are classified as in-kind benefits. 
C) Have no effect on the decision of for whom output is to be produced. 
D) Are not a transfer program because people must contribute to the fund in order to receive benefits.

Question 4

Suppose a poverty program provides a basic benefit of $6,000,zero deductions,and a marginal tax rate of 0.6.The breakeven level of income is

Accepted Answer

A) $10,000. 
B) $3,600. 
C) $6,000. 
D) $2,400. 
A) $10,000. 
B) $3,600. 
C) $6,000. 
D) $2,400.

Question 5

Which of the following is a welfare program?

Accepted Answer

A) Food stamps. 
B) Social Security. 
C) Medicare. 
D) Disaster relief. 
A) Food stamps. 
B) Social Security. 
C) Medicare. 
D) Disaster relief.

Question 6

Describe how the moral hazard associated with welfare benefits can be reduced,and tell what other problems this creates.

Accepted Answer

The moral hazard associated with welfare

Question 7

A market failure exists when an imperfection in

Accepted Answer

A) Federal government policies prevents an optimal outcome. 
B) Welfare programs prevents an optimal outcome. 
C) The market mechanism prevents an optimal outcome. 
D) State government policies prevents an optimal outcome. 
A) Federal government policies prevents an optimal outcome. 
B) Welfare programs prevents an optimal outcome. 
C) The market mechanism prevents an optimal outcome. 
D) State government policies prevents an optimal outcome.

Question 8

The creation of the Social Security program caused a decrease in the labor force participation rate.

Accepted Answer

A) True 
 B)False

Question 9

Social insurance programs are

Accepted Answer

A) Event-conditional. 
B) Means-tested. 
C) Available only to those at least 65 years old. 
D) Considered a welfare program. 
A) Event-conditional. 
B) Means-tested. 
C) Available only to those at least 65 years old. 
D) Considered a welfare program.

Question 10

Lower marginal tax rates increase the breakeven level of income faced by welfare recipients.

Accepted Answer

A) True 
 B)False

Question 11

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)] Based on the information given,the marginal tax rate is

Accepted Answer

A) Zero percent. 
B) 40 percent. 
C) 60 percent. 
D) 100 percent. 
A) Zero percent. 
B) 40 percent. 
C) 60 percent. 
D) 100 percent.

Question 12

Medicaid and food stamps are received by

Accepted Answer

A) Anyone that applies. 
B) Only the elderly. 
C) Only the poor. 
D) Mostly upper-income households in the United States due to inequities in the system. 
A) Anyone that applies. 
B) Only the elderly. 
C) Only the poor. 
D) Mostly upper-income households in the United States due to inequities in the system.

Question 13

A transfer program that is event-triggered for those who are eligible for benefits is known as

Accepted Answer

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

Question 14

A welfare recipient receives $10,000 in benefits when he does not work but receives an income of $15,000 when he works part-time and earns $6,000 in wages.What is the implicit marginal tax rate the recipient faces?

Accepted Answer

A) 15.5 percent. 
B) 100 percent. 
C) 0 percent. 
D) 16.6 percent. 
A) 15.5 percent. 
B) 100 percent. 
C) 0 percent. 
D) 16.6 percent.

Question 15

Higher breakeven levels of income can be achieved by decreasing

Accepted Answer

A) In-kind benefits. 
B) Earnings disregards. 
C) Basic benefits. 
D) The marginal tax rate. 
A) In-kind benefits. 
B) Earnings disregards. 
C) Basic benefits. 
D) The marginal tax rate.

Question 16

Welfare benefits reduce the need to work and result in a shift in the

Accepted Answer

A) Labor supply curve to the left. 
B) Labor supply curve to the right. 
C) Labor demand curve to the left. 
D) Labor demand curve to the right. 
A) Labor supply curve to the left. 
B) Labor supply curve to the right. 
C) Labor demand curve to the left. 
D) Labor demand curve to the right.

Question 17

Which of the following student aid programs is likely to have the highest target efficiency?

Accepted Answer

A) Direct payment of tuition to the university. 
B) Direct cash payments to the student. 
C) Low-interest loans. 
D) Job opportunities for students. 
A) Direct payment of tuition to the university. 
B) Direct cash payments to the student. 
C) Low-interest loans. 
D) Job opportunities for students.

Question 18

The higher the marginal tax rate for a given welfare program,the greater the damage to the work incentives of recipients,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 19

The breakeven level of income is

Accepted Answer

A) The amount of welfare benefits that can be received without taxation. 
B) The amount of income that can be earned without a loss of welfare benefits. 
C) A welfare recipient who is ignored or who does not receive benefits. 
D) The highest level of income a household can earn and still receive welfare benefits. 
A) The amount of welfare benefits that can be received without taxation. 
B) The amount of income that can be earned without a loss of welfare benefits. 
C) A welfare recipient who is ignored or who does not receive benefits. 
D) The highest level of income a household can earn and still receive welfare benefits.

Question 20

The Social Security program is financed by

Accepted Answer

A) Corporate profit taxes. 
B) Sales taxes. 
C) Taxes on payrolls. 
D) Charitable contributions. 
A) Corporate profit taxes. 
B) Sales taxes. 
C) Taxes on payrolls. 
D) Charitable contributions.

Exam 34: Transfer Payments: Welfare and Social Security

The Social Security program is an income transfer program for retired workers only.

Since 1950,the labor force participation rate of older Americans has primarily

Social Security benefits paid by the federal government

Suppose a poverty program provides a basic benefit of $6,000,zero deductions,and a marginal tax rate of 0.6.The breakeven level of income is

Which of the following is a welfare program?

Describe how the moral hazard associated with welfare benefits can be reduced,and tell what other problems this creates.

A market failure exists when an imperfection in

The creation of the Social Security program caused a decrease in the labor force participation rate.

Social insurance programs are

Lower marginal tax rates increase the breakeven level of income faced by welfare recipients.

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)] Based on the information given,the marginal tax rate is

Medicaid and food stamps are received by

A transfer program that is event-triggered for those who are eligible for benefits is known as

A welfare recipient receives $10,000 in benefits when he does not work but receives an income of $15,000 when he works part-time and earns $6,000 in wages.What is the implicit marginal tax rate the recipient faces?

Higher breakeven levels of income can be achieved by decreasing

Welfare benefits reduce the need to work and result in a shift in the

Which of the following student aid programs is likely to have the highest target efficiency?

The higher the marginal tax rate for a given welfare program,the greater the damage to the work incentives of recipients,ceteris paribus.

The breakeven level of income is

The Social Security program is financed by

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