Question 1

A person's labor income is equal to the __________ times __________.The return on savings that a person receives is referred to as __________.

Accepted Answer

A)  wage rate a person earns; number of hours the person works; transfer income 
B)  wage rate a person earns; number of hours the person works; asset income 
C)  price divided by number of units sold; number of hours worked; liabilities income 
D)  wage rate a person earns; number of hours the person works; labor income 
E)  annual salary a person earns; number of days a year the person works; asset income 
A)  wage rate a person earns; number of hours the person works; transfer income 
B)  wage rate a person earns; number of hours the person works; asset income 
C)  price divided by number of units sold; number of hours worked; liabilities income 
D)  wage rate a person earns; number of hours the person works; labor income 
E)  annual salary a person earns; number of days a year the person works; asset income

Question 2

In 2009,the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

Accepted Answer

A)  1% 
B)  3% 
C)  8% 
D)  16% 
E)  20% 
A)  1% 
B)  3% 
C)  8% 
D)  16% 
E)  20%

Question 3

The Gini coefficients for countries A and B are 0.25 and 0.30,respectively.We can definitely conclude that

Accepted Answer

A)  the lowest 20 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively. 
B)  the lowest 50 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively. 
C)  the lowest 20 percent family income group receives a greater share of total income in country A than in country B. 
D)  the lowest 20 percent family income group receives a greater share of total income in country B than in country A. 
E)  none of the above 
A)  the lowest 20 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively. 
B)  the lowest 50 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively. 
C)  the lowest 20 percent family income group receives a greater share of total income in country A than in country B. 
D)  the lowest 20 percent family income group receives a greater share of total income in country B than in country A. 
E)  none of the above

Question 4

If a person's asset income rises and his or her transfer payments (received)decline,it follows that that person's

Accepted Answer

A)  overall income rises. 
B)  overall income falls. 
C)  overall income stays constant. 
D)  labor income will rise as his or her asset income rises. 
E)  none of the above 
A)  overall income rises. 
B)  overall income falls. 
C)  overall income stays constant. 
D)  labor income will rise as his or her asset income rises. 
E)  none of the above

Question 5

To an economist,wage discrimination exists when

Accepted Answer

A)  individuals of equal marginal revenue products are paid different wage rates. 
B)  people of different ethnic backgrounds are treated differently by employers. 
C)  women are paid different wage rates than men. 
D)  African-Americans are paid different wage rates than whites. 
E)  b, c, and d 
A)  individuals of equal marginal revenue products are paid different wage rates. 
B)  people of different ethnic backgrounds are treated differently by employers. 
C)  women are paid different wage rates than men. 
D)  African-Americans are paid different wage rates than whites. 
E)  b, c, and d

Question 6

Luck is more likely to influence incomes in the short run than in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Individual income is equal to labor income less income taxes.

Accepted Answer

A) True 
 B)False

Question 8

One measure of the severity of poverty is the ratio of income to poverty which is calculated by

Accepted Answer

A)  dividing a family's poverty income threshold by that family's income. 
B)  dividing a family's transfer payments received by that family's income. 
C)  dividing a family's income by the family's poverty income threshold. 
D)  dividing a family's income by that family's transfer payments received. 
E)  none of the above 
A)  dividing a family's poverty income threshold by that family's income. 
B)  dividing a family's transfer payments received by that family's income. 
C)  dividing a family's income by the family's poverty income threshold. 
D)  dividing a family's income by that family's transfer payments received. 
E)  none of the above

Question 9

If we define poverty as income below $10,000 per year,we have set a(n)__________ definition of poverty.

Accepted Answer

A)  relative 
B)  constrained 
C)  absolute 
D)  denominated 
A)  relative 
B)  constrained 
C)  absolute 
D)  denominated

Question 10

In relative terms,poverty will always exist

Accepted Answer

A)  regardless of how high the average absolute standard of living is. 
B)  given an unequal income distribution. 
C)  unless there is absolute income equality. 
D)  b and c 
E)  all of the above 
A)  regardless of how high the average absolute standard of living is. 
B)  given an unequal income distribution. 
C)  unless there is absolute income equality. 
D)  b and c 
E)  all of the above

Question 11

If the Gini coefficient is zero,there is

Accepted Answer

A)  relative income equality. 
B)  complete income inequality. 
C)  complete income equality. 
D)  relative income inequality. 
E)  none of the above 
A)  relative income equality. 
B)  complete income inequality. 
C)  complete income equality. 
D)  relative income inequality. 
E)  none of the above

Question 12

An individual's income equals

Accepted Answer

A)  labor income + wages + asset income. 
B)  labor income + asset income. 
C)  labor income + asset income - taxes. 
D)  labor income - taxes. 
E)  labor income + asset income + transfer payments - taxes. 
A)  labor income + wages + asset income. 
B)  labor income + asset income. 
C)  labor income + asset income - taxes. 
D)  labor income - taxes. 
E)  labor income + asset income + transfer payments - taxes.

Question 13

Exhibit 29-1
  
-Refer to Exhibit 29-1. If the Gini coefficient is some number greater than 0,but less than 1,then the Lorenz curve could be

Accepted Answer

A)  line AB. 
B)  line OB. 
C)  the curve connecting point O to point B. 
D)  the horizontal axis from 0 to A and the line AB. 
E)  point B. 
A)  line AB. 
B)  line OB. 
C)  the curve connecting point O to point B. 
D)  the horizontal axis from 0 to A and the line AB. 
E)  point B.

Question 14

If the Gini coefficient is one (1),this means that there is

Accepted Answer

A)  perfect income equality. 
B)  some income inequality. 
C)  complete income inequality. 
D)  no area between the line of perfect income equality and the actual Lorenz curve. 
E)  c and d 
A)  perfect income equality. 
B)  some income inequality. 
C)  complete income inequality. 
D)  no area between the line of perfect income equality and the actual Lorenz curve. 
E)  c and d

Question 15

A factor that does not contribute to income inequality includes

Accepted Answer

A)  innate abilities and attributes. 
B)  the amount of work a person chooses to do. 
C)  education and training. 
D)  luck. 
E)  none of the above; that is, all factors contribute to income inequality. 
A)  innate abilities and attributes. 
B)  the amount of work a person chooses to do. 
C)  education and training. 
D)  luck. 
E)  none of the above; that is, all factors contribute to income inequality.

Question 16

One way to reduce the degree of income inequality is to

Accepted Answer

A)  increase transfer payments going to people with low labor and asset incomes and increase taxes on people with high labor and asset incomes. 
B)  decrease transfer payments going to people with low labor and asset incomes and decrease taxes on people with high labor and asset incomes. 
C)  increase transfer payments going to people with low labor and asset incomes by less than taxes are increased on the same people. 
D)  increase transfer payments going to people with high labor and asset incomes by more than taxes are increased on the same people. 
E)  a and c 
A)  increase transfer payments going to people with low labor and asset incomes and increase taxes on people with high labor and asset incomes. 
B)  decrease transfer payments going to people with low labor and asset incomes and decrease taxes on people with high labor and asset incomes. 
C)  increase transfer payments going to people with low labor and asset incomes by less than taxes are increased on the same people. 
D)  increase transfer payments going to people with high labor and asset incomes by more than taxes are increased on the same people. 
E)  a and c

Question 17

When the actual Lorenz curve is as far away from the 45-degree line as possible,there is

Accepted Answer

A)  perfect income equality. 
B)  perfect income inequality. 
C)  a more equal distribution of income than before. 
D)  a less equal distribution of income than before. 
A)  perfect income equality. 
B)  perfect income inequality. 
C)  a more equal distribution of income than before. 
D)  a less equal distribution of income than before.

Question 18

Transfer payments are payments that are

Accepted Answer

A)  made in return for goods and services currently supplied. 
B)  made in return for goods and services to be supplied in the future. 
C)  made in return for goods and services that were supplied in the past. 
D)  not made in return for goods and services currently supplied. 
A)  made in return for goods and services currently supplied. 
B)  made in return for goods and services to be supplied in the future. 
C)  made in return for goods and services that were supplied in the past. 
D)  not made in return for goods and services currently supplied.

Question 19

Economists often assert that a person who receives an in-kind transfer payment (from government)has a higher income as a result.But an in-kind transfer is not money income,so what are economists thinking?

Accepted Answer

A)  They are thinking that an additional in-kind benefit, like more money income, makes a person better off and thus they are equating being better off (in the sense of having more goods and services) with a higher income. 
B)  They are thinking that persons who receive in-kind benefits end up selling them, receiving money in exchange. 
C)  They are thinking that the individuals who receive the in-kind benefits equate more in-kind benefits with more money income. 
D)  They are thinking that individuals who receive in-kind benefits would prefer to receive them over receiving additional money income, so that in-kind benefits are worth at least their monetary value. 
E)  none of the above 
A)  They are thinking that an additional in-kind benefit, like more money income, makes a person better off and thus they are equating being better off (in the sense of having more goods and services) with a higher income. 
B)  They are thinking that persons who receive in-kind benefits end up selling them, receiving money in exchange. 
C)  They are thinking that the individuals who receive the in-kind benefits equate more in-kind benefits with more money income. 
D)  They are thinking that individuals who receive in-kind benefits would prefer to receive them over receiving additional money income, so that in-kind benefits are worth at least their monetary value. 
E)  none of the above

Question 20

Anytime the ratio of income to poverty for a family is

Accepted Answer

A)  greater than 1.00, the family is not considered to be living in poverty. 
B)  greater than zero, the family is not considered to be living in poverty. 
C)  between 1.00 and 1.25, the family is considered to be "near poor." 
D)  a and b 
E)  a and c 
A)  greater than 1.00, the family is not considered to be living in poverty. 
B)  greater than zero, the family is not considered to be living in poverty. 
C)  between 1.00 and 1.25, the family is considered to be "near poor." 
D)  a and b 
E)  a and c

Exam 29: The Distribution of Income and Poverty

A person's labor income is equal to the __________ times __________.The return on savings that a person receives is referred to as __________.

In 2009,the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

The Gini coefficients for countries A and B are 0.25 and 0.30,respectively.We can definitely conclude that

If a person's asset income rises and his or her transfer payments (received)decline,it follows that that person's

To an economist,wage discrimination exists when

Luck is more likely to influence incomes in the short run than in the long run.

Individual income is equal to labor income less income taxes.

One measure of the severity of poverty is the ratio of income to poverty which is calculated by

If we define poverty as income below $10,000 per year,we have set a(n)__________ definition of poverty.

In relative terms,poverty will always exist

If the Gini coefficient is zero,there is

An individual's income equals

Exhibit 29-1 -Refer to Exhibit 29-1. If the Gini coefficient is some number greater than 0,but less than 1,then the Lorenz curve could be

If the Gini coefficient is one (1),this means that there is

A factor that does not contribute to income inequality includes

One way to reduce the degree of income inequality is to

When the actual Lorenz curve is as far away from the 45-degree line as possible,there is

Transfer payments are payments that are

Economists often assert that a person who receives an in-kind transfer payment (from government)has a higher income as a result.But an in-kind transfer is not money income,so what are economists thinking?

Anytime the ratio of income to poverty for a family is

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A person's labor income is equal to the times .The return on savings that a person receives is referred to as __.