Question 1

A disadvantage associated with an Earned Income Tax Credit (EITC) program to reduce poverty is that it

Accepted Answer

A) encourages illegitimate births because single women with children receive higher payments. 
B) rewards laziness because it provides payments to those with low incomes regardless of their work effort. 
C) does not help the poor who are unemployed. 
D) creates unemployment by increasing the wage paid to unskilled workers above the equilibrium wage. 
A) encourages illegitimate births because single women with children receive higher payments. 
B) rewards laziness because it provides payments to those with low incomes regardless of their work effort. 
C) does not help the poor who are unemployed. 
D) creates unemployment by increasing the wage paid to unskilled workers above the equilibrium wage.

Question 2

Table 20-1
The following table shows the distribution of income in Marysville.  
-Refer to Table 20-1. If the poverty line were $23,021, what would be the poverty rate?

Accepted Answer

A) less than 25% 
B) between 25% and 50% 
C) between 50% and 75% 
D) There is insufficient information to answer this question. 
A) less than 25% 
B) between 25% and 50% 
C) between 50% and 75% 
D) There is insufficient information to answer this question.

Question 3

Pietro is 40 years old and is laid off from his job at the paper plant and borrows from his savings for 8 months until he finds a new job. Pietro's

Accepted Answer

A) transitory income likely exceeds his permanent income for that year. 
B) borrowing is representative of a normal economic life cycle. 
C) permanent income is largely unaffected by this one time change to his income. 
D) economic mobility during this year is highly unusual, as US workers tend to stay in a particular income class. 
A) transitory income likely exceeds his permanent income for that year. 
B) borrowing is representative of a normal economic life cycle. 
C) permanent income is largely unaffected by this one time change to his income. 
D) economic mobility during this year is highly unusual, as US workers tend to stay in a particular income class.

Question 4

Which of the following statements is correct?

Accepted Answer

A) A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers. 
B) A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit. 
C) A disadvantage of an Earned Income Tax Credit (EIT
C)  is that a person who is unable to work due to a disability does not benefit from the program. 
D) All of the above are correct. 
A) A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers. 
B) A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit. 
C) A disadvantage of an Earned Income Tax Credit (EIT
C)  is that a person who is unable to work due to a disability does not benefit from the program. 
D) All of the above are correct.

Question 5

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: taxes owed equal 30% of income less $12,000. A family that earns an income of $40,000 will

Accepted Answer

A) neither pay taxes nor receive an income subsidy. 
B) receive an income subsidy of $3,600. 
C) pay $3,600 in taxes. 
D) pay $12,000 in taxes. 
A) neither pay taxes nor receive an income subsidy. 
B) receive an income subsidy of $3,600. 
C) pay $3,600 in taxes. 
D) pay $12,000 in taxes.

Question 6

What percent of families are poor for eight or more years?

Accepted Answer

A) more than 20 percent 
B) between 15 and 20 percent 
C) approximately 10 percent 
D) less than 3 percent 
A) more than 20 percent 
B) between 15 and 20 percent 
C) approximately 10 percent 
D) less than 3 percent

Question 7

The poverty line in the country of Abbyville is $15,000. The distribution of income for Abbyville is as follows:   The poverty rate in Abbyville is

Accepted Answer

A) 12 percent. 
B) 32 percent. 
C) 50 percent. 
D) 68 percent. 
A) 12 percent. 
B) 32 percent. 
C) 50 percent. 
D) 68 percent.

Question 8

A commonly-used gauge of poverty is the

Accepted Answer

A) income inequality rate. 
B) average income rate. 
C) poverty rate. 
D) social inequality rate. 
A) income inequality rate. 
B) average income rate. 
C) poverty rate. 
D) social inequality rate.

Question 9

The Supplemental Security Income (SSI) program focuses on the poor who are sick or disabled.

Accepted Answer

A) True 
 B)False

Question 10

Economic mobility in the United States is so great that fewer than

Accepted Answer

A) 3 percent of families are poor for 8 or more years. 
B) 5 percent of families are poor for 8 or more years. 
C) 8 percent of families are poor for 8 or more years. 
D) 10 percent of families are poor for 8 or more years. 
A) 3 percent of families are poor for 8 or more years. 
B) 5 percent of families are poor for 8 or more years. 
C) 8 percent of families are poor for 8 or more years. 
D) 10 percent of families are poor for 8 or more years.

Question 11

Susan won $2,000 at the blackjack tables on her birthday. Her winnings are an example of

Accepted Answer

A) permanent income. 
B) life-cycle income. 
C) transitory income. 
D) an in-kind transfer. 
A) permanent income. 
B) life-cycle income. 
C) transitory income. 
D) an in-kind transfer.

Question 12

An advantage of a negative income tax is that it does not encourage the breakup of families because the only criterion for assistance is family income.

Accepted Answer

A) True 
 B)False

Question 13

The United States has a more equal income distribution than many developing economies such as Mexico, South Africa, and Brazil.

Accepted Answer

A) True 
 B)False

Question 14

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 15

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

Accepted Answer

A) 48.9 percent 
B) 21.3 percent 
C) 8.6 percent 
D) 3.8 percent 
A) 48.9 percent 
B) 21.3 percent 
C) 8.6 percent 
D) 3.8 percent

Question 16

Economists study poverty and income inequality to answer which of the following questions?

Accepted Answer

A) What are people's wages? 
B) How does labor-force experience affect wages? 
C) How much inequality is there in society? 
D) How do people adjust their behavior due to taxation? 
A) What are people's wages? 
B) How does labor-force experience affect wages? 
C) How much inequality is there in society? 
D) How do people adjust their behavior due to taxation?

Question 17

Table 20-8   Source: U.S. Bureau of Census
-Refer to Table 20-8. In 2011, the bottom 40% of families has

Accepted Answer

A) about 13% of total income in the U.S. 
B) about 28% of total income in the U.S. 
C) about 51% of total income in the U.S. 
D) about 72% of total income in the U.S. 
A) about 13% of total income in the U.S. 
B) about 28% of total income in the U.S. 
C) about 51% of total income in the U.S. 
D) about 72% of total income in the U.S.

Question 18

The normal life cycle pattern of income

Accepted Answer

A) contributes to more inequality in the distribution of annual income and to more inequality in living standards. 
B) contributes to more inequality in the distribution of annual income, but it does not necessarily contribute to more inequality in living standards. 
C) contributes to less inequality in the distribution of annual income and to less inequality in living standards. 
D) has no effect on either the distribution of annual income or on living standards. 
A) contributes to more inequality in the distribution of annual income and to more inequality in living standards. 
B) contributes to more inequality in the distribution of annual income, but it does not necessarily contribute to more inequality in living standards. 
C) contributes to less inequality in the distribution of annual income and to less inequality in living standards. 
D) has no effect on either the distribution of annual income or on living standards.

Question 19

What percentage of millionaires in the United States are self-made?

Accepted Answer

A) about 20 percent 
B) about 40 percent 
C) about 60 percent 
D) about 80 percent 
A) about 20 percent 
B) about 40 percent 
C) about 60 percent 
D) about 80 percent

Question 20

The 2011 U.S. distribution of income shows that the top 5 percent of families earn approximately how much income per year?

Accepted Answer

A) $170,000 and over 
B) $205,000 and over 
C) $250,000 and over 
D) $325,000 and over 
A) $170,000 and over 
B) $205,000 and over 
C) $250,000 and over 
D) $325,000 and over

Exam 20: Income Inequality and Poverty

A disadvantage associated with an Earned Income Tax Credit (EITC) program to reduce poverty is that it

Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. If the poverty line were $23,021, what would be the poverty rate?

Pietro is 40 years old and is laid off from his job at the paper plant and borrows from his savings for 8 months until he finds a new job. Pietro's

Which of the following statements is correct?

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: taxes owed equal 30% of income less $12,000. A family that earns an income of $40,000 will

What percent of families are poor for eight or more years?

The poverty line in the country of Abbyville is $15,000. The distribution of income for Abbyville is as follows: The poverty rate in Abbyville is

A commonly-used gauge of poverty is the

The Supplemental Security Income (SSI) program focuses on the poor who are sick or disabled.

Economic mobility in the United States is so great that fewer than

Susan won $2,000 at the blackjack tables on her birthday. Her winnings are an example of

An advantage of a negative income tax is that it does not encourage the breakup of families because the only criterion for assistance is family income.

The United States has a more equal income distribution than many developing economies such as Mexico, South Africa, and Brazil.

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

Economists study poverty and income inequality to answer which of the following questions?

Table 20-8 Source: U.S. Bureau of Census -Refer to Table 20-8. In 2011, the bottom 40% of families has

The normal life cycle pattern of income

What percentage of millionaires in the United States are self-made?

The 2011 U.S. distribution of income shows that the top 5 percent of families earn approximately how much income per year?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

The Theory of Consumer Choice

Frontiers in Microeconomics

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