Question 1

Annual income data would be a better index of economic inequality if

Accepted Answer

A)  all households filed tax returns revealing their real income. 
B)  households were more different with regard to age and size characteristics. 
C)  all households were more similar with regard to size, age, education, and other major factors that are linked to income. 
D)  mathematicians could grasp the complexities of the calculations. 
A)  all households filed tax returns revealing their real income. 
B)  households were more different with regard to age and size characteristics. 
C)  all households were more similar with regard to size, age, education, and other major factors that are linked to income. 
D)  mathematicians could grasp the complexities of the calculations. C

Question 2

Income inequality exists in the United States. Is this necessarily a bad thing? Explain how our assessment of income inequality depends crucially on the source of that inequality.

Accepted Answer

In a market economy, the distribution of income reflects the voluntary trades made by fully informed consumers and businesses. Those who provide goods, services, or resources that are highly valued by others will receive high incomes. Since all people differ in ability, education, preferences, and other factors, we would expect that people will receive different incomes. If the process that generates the income distribution is fair, many would agree that the resulting distribution is fair as well. Of course, if the process that distributes income is not fair--if it involves coercion or fraud, for example--we may very well be dissatisfied with the resulting distribution.

Question 3

If substantial income mobility is present,

Accepted Answer

A)  there is considerable movement of individuals up and down the income ladder when income comparisons among the same individuals or households are made at different points in time. 
B)  annual income data are an accurate indicator of the long-term economic status of individuals and families. 
C)  the rich tend to stay rich and the poor tend to stay poor. 
D)  individuals and families move quite often among the geographic regions of a country but not among income groups. 
A)  there is considerable movement of individuals up and down the income ladder when income comparisons among the same individuals or households are made at different points in time. 
B)  annual income data are an accurate indicator of the long-term economic status of individuals and families. 
C)  the rich tend to stay rich and the poor tend to stay poor. 
D)  individuals and families move quite often among the geographic regions of a country but not among income groups. A

Question 4

-As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

Accepted Answer

A)  5 percent 
B)  15 percent 
C)  30 percent 
D)  50 percent 
A)  5 percent 
B)  15 percent 
C)  30 percent 
D)  50 percent

Question 5

Why have the earnings of persons with less education (and skill) fallen relative to those with more education (and skill)?

Accepted Answer

A)  More regulation of the transport industry. 
B)  More powerful unions. 
C)  International competition. 
D)  All of the above. 
A)  More regulation of the transport industry. 
B)  More powerful unions. 
C)  International competition. 
D)  All of the above.

Question 6

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Accepted Answer

A)  filed tax returns and thus all their income were known. 
B)  were different with regard to their age and size characteristics. 
C)  were more similar with regard to size, age, education, and other major factors that are linked to income. 
D)  were more similar with regard to their hair color, height, and weight. 
A)  filed tax returns and thus all their income were known. 
B)  were different with regard to their age and size characteristics. 
C)  were more similar with regard to size, age, education, and other major factors that are linked to income. 
D)  were more similar with regard to their hair color, height, and weight.

Question 7

Government programs that take money from high-income people and give it to low-income people typically

Accepted Answer

A)  improve economic efficiency because they reducing poverty. 
B)  reduce economic efficiency because they distort incentives. 
C)  have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D)  sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency. 
A)  improve economic efficiency because they reducing poverty. 
B)  reduce economic efficiency because they distort incentives. 
C)  have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D)  sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Question 8

During 1959 through 2014, the percent of poor families headed by an elderly person

Accepted Answer

A)  rose. 
B)  steadily declined. 
C)  remained virtually unchanged. 
D)  steadily increased until 1980 when it began to decline. 
A)  rose. 
B)  steadily declined. 
C)  remained virtually unchanged. 
D)  steadily increased until 1980 when it began to decline.

Question 9

Most studies indicate that the degree of income inequality in the United States has

Accepted Answer

A)  been increasing in recent decades. 
B)  been declining in recent decades. 
C)  been constant since 1970. 
D)  fluctuated widely from year to year. 
A)  been increasing in recent decades. 
B)  been declining in recent decades. 
C)  been constant since 1970. 
D)  fluctuated widely from year to year.

Question 10

Analysis of the economic status of poor people reveals that

Accepted Answer

A)  most are poor because they did not have the opportunity to obtain training and a quality education. 
B)  most had poor parents, grandparents, and great-grandparents, suggesting that poverty is inherited. 
C)  the poverty population is very homogeneous regarding opportunity, cultural disadvantages, alcoholism, and other personal contributing factors. 
D)  poverty is a complex issue; the poor are a heterogeneous population, and the causes of poverty are multidimensional. 
A)  most are poor because they did not have the opportunity to obtain training and a quality education. 
B)  most had poor parents, grandparents, and great-grandparents, suggesting that poverty is inherited. 
C)  the poverty population is very homogeneous regarding opportunity, cultural disadvantages, alcoholism, and other personal contributing factors. 
D)  poverty is a complex issue; the poor are a heterogeneous population, and the causes of poverty are multidimensional.

Question 11

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

Accepted Answer

Benefits in-kind address the paternal as

Question 12

If complete equality of income were legislated, which of the following would economics predict?

Accepted Answer

A)  People would become richer. 
B)  Society would gain utility from the extra goods produced. 
C)  Individuals would willingly work longer hours and thus produce more. 
D)  The incentive to produce and perform efficiently would be virtually eliminated. 
A)  People would become richer. 
B)  Society would gain utility from the extra goods produced. 
C)  Individuals would willingly work longer hours and thus produce more. 
D)  The incentive to produce and perform efficiently would be virtually eliminated.

Question 13

(I) Positive economics cannot determine how much income inequality should be present in a country. (II) Critics of government action to reduce income inequality argue that modifying the market process of income determination may create perverse incentives and hurt wealth creation.

Accepted Answer

A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true. 
A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true.

Question 14

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Accepted Answer

If poverty is only measured based on cas

Question 15

Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades. He concludes that the rich stay rich and the poor stay poor. Is this a valid conclusion, or has Andy missed something?

Accepted Answer

What Andy has missed is the possibility

Question 16

Regarding income distribution, which of the following is true?

Accepted Answer

A)  The size of the economic pie to be divided among a country's residents is fixed. 
B)  Government tax and transfer programs have exerted a strong equalizing impact on the distribution of income in the United States. 
C)  The method of allocating income is relevant to the issue of fairness as well as the pattern of income distribution. 
D)  The optimal distribution of income can be determined by objective economic criteria. 
A)  The size of the economic pie to be divided among a country's residents is fixed. 
B)  Government tax and transfer programs have exerted a strong equalizing impact on the distribution of income in the United States. 
C)  The method of allocating income is relevant to the issue of fairness as well as the pattern of income distribution. 
D)  The optimal distribution of income can be determined by objective economic criteria.

Question 17

This year, Abigail earned $15,000 and she paid 15 percent in income and payroll taxes. She qualified for Medicaid and food stamps. For every $100 that she earns, Abigail loses $35 in Medicaid benefits and $15 in food stamps. Abigail faces an effective marginal tax rate of

Accepted Answer

A)  15 percent. 
B)  35 percent. 
C)  50 percent. 
D)  65 percent. 
A)  15 percent. 
B)  35 percent. 
C)  50 percent. 
D)  65 percent.

Question 18

In a market economy,

Accepted Answer

A)  there is a fixed economic pie to be divided among individuals. 
B)  differences in incomes provide individuals with an incentive to supply resources that are highly valued by others. 
C)  a central distributing agency carves up the economic pie and allocates slices to individuals. 
D)  both a and b above are true. 
A)  there is a fixed economic pie to be divided among individuals. 
B)  differences in incomes provide individuals with an incentive to supply resources that are highly valued by others. 
C)  a central distributing agency carves up the economic pie and allocates slices to individuals. 
D)  both a and b above are true.

Question 19

The level of money income below which a family is considered poor is called the

Accepted Answer

A)  bottom 20 percent of the income distribution. 
B)  poverty threshold income level. 
C)  guaranteed income level. 
D)  subsistence income level. 
A)  bottom 20 percent of the income distribution. 
B)  poverty threshold income level. 
C)  guaranteed income level. 
D)  subsistence income level.

Question 20

Which of the following groups are overrepresented among those with low incomes?

Accepted Answer

A)  Youthful inexperienced workers. 
B)  College students working on graduate degrees. 
C)  Single-parent families. 
D)  All of the above. 
A)  Youthful inexperienced workers. 
B)  College students working on graduate degrees. 
C)  Single-parent families. 
D)  All of the above.

Annual income data would be a better index of economic inequality if

Income inequality exists in the United States. Is this necessarily a bad thing? Explain how our assessment of income inequality depends crucially on the source of that inequality.

If substantial income mobility is present,

-As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

Why have the earnings of persons with less education (and skill) fallen relative to those with more education (and skill)?

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Government programs that take money from high-income people and give it to low-income people typically

During 1959 through 2014, the percent of poor families headed by an elderly person

Most studies indicate that the degree of income inequality in the United States has

Analysis of the economic status of poor people reveals that

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

If complete equality of income were legislated, which of the following would economics predict?

(I) Positive economics cannot determine how much income inequality should be present in a country. (II) Critics of government action to reduce income inequality argue that modifying the market process of income determination may create perverse incentives and hurt wealth creation.

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades. He concludes that the rich stay rich and the poor stay poor. Is this a valid conclusion, or has Andy missed something?

Regarding income distribution, which of the following is true?

This year, Abigail earned $15,000 and she paid 15 percent in income and payroll taxes. She qualified for Medicaid and food stamps. For every $100 that she earns, Abigail loses $35 in Medicaid benefits and $15 in food stamps. Abigail faces an effective marginal tax rate of

In a market economy,

The level of money income below which a family is considered poor is called the

Which of the following groups are overrepresented among those with low incomes?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Gaining From International Trade

Filters

Exam 15: Income Inequality and Poverty

Annual income data would be a better index of economic inequality if

Income inequality exists in the United States. Is this necessarily a bad thing? Explain how our assessment of income inequality depends crucially on the source of that inequality.

If substantial income mobility is present,

-As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

Why have the earnings of persons with less education (and skill) fallen relative to those with more education (and skill)?

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Government programs that take money from high-income people and give it to low-income people typically

During 1959 through 2014, the percent of poor families headed by an elderly person

Most studies indicate that the degree of income inequality in the United States has

Analysis of the economic status of poor people reveals that

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

If complete equality of income were legislated, which of the following would economics predict?

(I) Positive economics cannot determine how much income inequality should be present in a country. (II) Critics of government action to reduce income inequality argue that modifying the market process of income determination may create perverse incentives and hurt wealth creation.

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades. He concludes that the rich stay rich and the poor stay poor. Is this a valid conclusion, or has Andy missed something?

Regarding income distribution, which of the following is true?

This year, Abigail earned $15,000 and she paid 15 percent in income and payroll taxes. She qualified for Medicaid and food stamps. For every $100 that she earns, Abigail loses $35 in Medicaid benefits and $15 in food stamps. Abigail faces an effective marginal tax rate of

In a market economy,

The level of money income below which a family is considered poor is called the

Which of the following groups are overrepresented among those with low incomes?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Gaining From International Trade

Filters