Question 1

-As shown in Figure 15-1, the distance between points B and D means that 60 percent of families earn less of total income than required for perfect equality.

Accepted Answer

A)  30 percent 
B)  60 percent 
C)  90 percent 
D)  insufficient information to answer question. 
A)  30 percent 
B)  60 percent 
C)  90 percent 
D)  insufficient information to answer question.

Question 2

Which of the following programs is most clearly advantageous to those with lower levels of income?

Accepted Answer

A)  Farm subsidy programs. 
B)  The Social Security retirement program. 
C)  The Earned Income Tax Credit. 
D)  Credit subsidies provided by the Import-Export bank to business firms that sell goods abroad. 
A)  Farm subsidy programs. 
B)  The Social Security retirement program. 
C)  The Earned Income Tax Credit. 
D)  Credit subsidies provided by the Import-Export bank to business firms that sell goods abroad.

Question 3

Data on the distribution of income among individuals and families in the United States indicate that

Accepted Answer

A)  the power of labor unions and corporations is the major determinant of income inequality. 
B)  the rich stay rich and the poor stay poor from one generation to another. 
C)  much of the inequality in annual income emanates from differences in education, age, hours worked, and family size. 
D)  the difference in annual income emanating from ownership of capital assets is the major source of economic inequality. 
A)  the power of labor unions and corporations is the major determinant of income inequality. 
B)  the rich stay rich and the poor stay poor from one generation to another. 
C)  much of the inequality in annual income emanates from differences in education, age, hours worked, and family size. 
D)  the difference in annual income emanating from ownership of capital assets is the major source of economic inequality.

Question 4

A valid argument against redistributing income to achieve complete equality is that

Accepted Answer

A)  income equality would destroy the social cohesiveness that exists among different income groupings. 
B)  this would eliminate the monetary incentives to work and produce. 
C)  the cost of obtaining the equality would be so deflationary as to promote economic instability. 
D)  income equality would imply class segregation based on factors such as sex or race since income would be constant. 
A)  income equality would destroy the social cohesiveness that exists among different income groupings. 
B)  this would eliminate the monetary incentives to work and produce. 
C)  the cost of obtaining the equality would be so deflationary as to promote economic instability. 
D)  income equality would imply class segregation based on factors such as sex or race since income would be constant.

Question 5

Which one of the following groups has a below-average incidence of poverty?

Accepted Answer

A)  Divorced or separated persons. 
B)  African Americans and other minorities. 
C)  Families headed by a female. 
D)  Persons between the ages of 35 and 54. 
A)  Divorced or separated persons. 
B)  African Americans and other minorities. 
C)  Families headed by a female. 
D)  Persons between the ages of 35 and 54.

Question 6

Redistribution through the public sector tends to lower economic prosperity because

Accepted Answer

A)  it weakens the link between productive activity and the reward derived from it. 
B)  it encourages resources to flow into wasteful rent-seeking activities. 
C)  the higher tax rates required to finance redistribution result in resources being devoted toward tax avoidance activities. 
D)  all of the above are true. 
A)  it weakens the link between productive activity and the reward derived from it. 
B)  it encourages resources to flow into wasteful rent-seeking activities. 
C)  the higher tax rates required to finance redistribution result in resources being devoted toward tax avoidance activities. 
D)  all of the above are true.

Question 7

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

Accepted Answer

A)  been virtually unchanged. 
B)  increased. 
C)  decreased. 
D)  fluctuated in a random pattern. 
A)  been virtually unchanged. 
B)  increased. 
C)  decreased. 
D)  fluctuated in a random pattern.

Question 8

-Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Which of the following statements is true?

Accepted Answer

A)  Country I has the most unequal income distribution. 
B)  Country II has the most unequal income distribution. 
C)  Country I has the most equal income distribution. 
D)  Country III has the most equal income distribution. 
E)  Country II has a more equal income distribution than Country I. 
A)  Country I has the most unequal income distribution. 
B)  Country II has the most unequal income distribution. 
C)  Country I has the most equal income distribution. 
D)  Country III has the most equal income distribution. 
E)  Country II has a more equal income distribution than Country I.

Question 9

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

Accepted Answer

A)  The high implicit marginal tax rates that accompany the current income transfer programs reduce the incentive of the poor to earn. 
B)  The transfer programs encourage the poor to marry and form dual-earner families. 
C)  The transfer programs tend to increase the wages that employers are required by law to pay for low-skill labor. 
D)  The transfer programs reduce the likelihood of single-parent families. 
A)  The high implicit marginal tax rates that accompany the current income transfer programs reduce the incentive of the poor to earn. 
B)  The transfer programs encourage the poor to marry and form dual-earner families. 
C)  The transfer programs tend to increase the wages that employers are required by law to pay for low-skill labor. 
D)  The transfer programs reduce the likelihood of single-parent families.

Question 10

Why don't we divide the economic pie evenly so that each person receives the same income?

Accepted Answer

This question addresses the role of ince

Question 11

This year, Tyrone earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

Accepted Answer

A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent. 
A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent.

Question 12

-As shown in Figure 15-1, the perfect equality line is drawn between points

Accepted Answer

A)  A and B. 
B)  B and D. 
C)  A and C along the straight line. 
D)  A and C along the curve. 
A)  A and B. 
B)  B and D. 
C)  A and C along the straight line. 
D)  A and C along the curve.

Question 13

Income mobility

Accepted Answer

A)  is a term used to characterize the ease of establishing residence or a business in a new area of the country. 
B)  has increased in recent years because of reductions in transportation cost. 
C)  is the term used to describe the movements up and down the economic ladder. 
D)  is present only when the general level of prices is rising. 
A)  is a term used to characterize the ease of establishing residence or a business in a new area of the country. 
B)  has increased in recent years because of reductions in transportation cost. 
C)  is the term used to describe the movements up and down the economic ladder. 
D)  is present only when the general level of prices is rising.

Question 14

Why not designate the poorest 10 percent of the population as the official measure of poverty?

Accepted Answer

This relative measure would imply that p

Question 15

The sharp reduction in marginal tax rates during the 1980s

Accepted Answer

A)  reduced the incentive of high-income Americans to work. 
B)  increased the incentive of high-income Americans to utilize tax shelters. 
C)  increased the unemployment rate of high-income Americans. 
D)  increased the visible income of high-income Americans. 
A)  reduced the incentive of high-income Americans to work. 
B)  increased the incentive of high-income Americans to utilize tax shelters. 
C)  increased the unemployment rate of high-income Americans. 
D)  increased the visible income of high-income Americans.

Question 16

-As shown in Figure 15-1, the degree of unequal income distribution is measured by the area between the

Accepted Answer

A)  Lorenz curve and the horizontal axis. 
B)  Lorenz curve and the vertical axis. 
C)  Perfect equality line and the origin. 
D)  Perfect equality line and the Lorenz curve. 
A)  Lorenz curve and the horizontal axis. 
B)  Lorenz curve and the vertical axis. 
C)  Perfect equality line and the origin. 
D)  Perfect equality line and the Lorenz curve.

Question 17

Which of the following best explains why so many persons with incomes below the poverty threshold income level work very little or not at all?

Accepted Answer

A)  They confront high implicit marginal tax rates. 
B)  They do not enjoy income as much as other people. 
C)  There are no jobs for low-skill workers. 
D)  They often face very low explicit marginal tax rates. 
A)  They confront high implicit marginal tax rates. 
B)  They do not enjoy income as much as other people. 
C)  There are no jobs for low-skill workers. 
D)  They often face very low explicit marginal tax rates.

Question 18

-As shown in Figure 15-3, 20 percent of families earned a cumulative share of about ____ percent of income.

Accepted Answer

A)  5 
B)  10 
C)  30 
D)  50 
A)  5 
B)  10 
C)  30 
D)  50

Question 19

When there is only a weak link between work effort and reward

Accepted Answer

A)  individuals will undertake fewer projects that create income. 
B)  taxing the rich and distributing the money to the poor becomes the best way to increase the size of the economic pie. 
C)  corporations will profit more. 
D)  individuals have a strong incentive to undertake projects that generate income. 
A)  individuals will undertake fewer projects that create income. 
B)  taxing the rich and distributing the money to the poor becomes the best way to increase the size of the economic pie. 
C)  corporations will profit more. 
D)  individuals have a strong incentive to undertake projects that generate income.

Question 20

The official poverty rate of elderly families

Accepted Answer

A)  has been virtually unchanged for the last four decades. 
B)  increased as the elderly became a larger proportion of the U.S. population during the 1970s. 
C)  rose prior to the War on Poverty programs of the late 1960s, but it has declined steadily since. 
D)  has declined during the last four decades. 
A)  has been virtually unchanged for the last four decades. 
B)  increased as the elderly became a larger proportion of the U.S. population during the 1970s. 
C)  rose prior to the War on Poverty programs of the late 1960s, but it has declined steadily since. 
D)  has declined during the last four decades.

-As shown in Figure 15-1, the distance between points B and D means that 60 percent of families earn less of total income than required for perfect equality.

Which of the following programs is most clearly advantageous to those with lower levels of income?

Data on the distribution of income among individuals and families in the United States indicate that

A valid argument against redistributing income to achieve complete equality is that

Which one of the following groups has a below-average incidence of poverty?

Redistribution through the public sector tends to lower economic prosperity because

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

-Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Which of the following statements is true?

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

Why don't we divide the economic pie evenly so that each person receives the same income?

This year, Tyrone earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

-As shown in Figure 15-1, the perfect equality line is drawn between points

Income mobility

Why not designate the poorest 10 percent of the population as the official measure of poverty?

The sharp reduction in marginal tax rates during the 1980s

-As shown in Figure 15-1, the degree of unequal income distribution is measured by the area between the

Which of the following best explains why so many persons with incomes below the poverty threshold income level work very little or not at all?

-As shown in Figure 15-3, 20 percent of families earned a cumulative share of about ____ percent of income.

When there is only a weak link between work effort and reward

The official poverty rate of elderly families

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

-As shown in Figure 15-1, the distance between points B and D means that 60 percent of families earn less of total income than required for perfect equality.

Which of the following programs is most clearly advantageous to those with lower levels of income?

Data on the distribution of income among individuals and families in the United States indicate that

A valid argument against redistributing income to achieve complete equality is that

Which one of the following groups has a below-average incidence of poverty?

Redistribution through the public sector tends to lower economic prosperity because

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

-Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Which of the following statements is true?

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

Why don't we divide the economic pie evenly so that each person receives the same income?

This year, Tyrone earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

-As shown in Figure 15-1, the perfect equality line is drawn between points

Income mobility

Why not designate the poorest 10 percent of the population as the official measure of poverty?

The sharp reduction in marginal tax rates during the 1980s

-As shown in Figure 15-1, the degree of unequal income distribution is measured by the area between the

Which of the following best explains why so many persons with incomes below the poverty threshold income level work very little or not at all?

-As shown in Figure 15-3, 20 percent of families earned a cumulative share of about ____ percent of income.

When there is only a weak link between work effort and reward

The official poverty rate of elderly families

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