Question 1

Table 20-7  
-Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the data?

Accepted Answer

A) The most alarming statistic is the lowering of the top income level that defines the bottom fifth of the income distribution because this indicates that the income distribution is becoming more unequal. 
B) The greatest cause for concern is the increase in the minimum income level that defines the top fifth of the income distribution because this indicates that the rich have become richer. 
C) The income distribution has been relatively unchanged from 2001 to 2011. 
D) Both a and b are correct. 
A) The most alarming statistic is the lowering of the top income level that defines the bottom fifth of the income distribution because this indicates that the income distribution is becoming more unequal. 
B) The greatest cause for concern is the increase in the minimum income level that defines the top fifth of the income distribution because this indicates that the rich have become richer. 
C) The income distribution has been relatively unchanged from 2001 to 2011. 
D) Both a and b are correct.

Question 2

Which of the following pholitical philosophies would support redistribution of income that makes society fully egalitarian?

Accepted Answer

A) Liberals, because they believe in the maximin criterion. 
B) Libertarians, because they believe in evaluating the process by which economic outcomes arise. 
C) Utilitarians, because they believe in diminishing marginal utility. 
D) None of the above would support completely egalitarian redistribution of income. 
A) Liberals, because they believe in the maximin criterion. 
B) Libertarians, because they believe in evaluating the process by which economic outcomes arise. 
C) Utilitarians, because they believe in diminishing marginal utility. 
D) None of the above would support completely egalitarian redistribution of income.

Question 3

A disadvantage associated with in-kind transfers to reduce poverty is that they

Accepted Answer

A) alter peoples' incentives, whereas a negative income tax does not alter peoples' incentives. 
B) do not allow poor families to make purchases based on their preferences. 
C) can only be distributed by the federal government. 
D) cannot restrict the group of recipients and some middle-class families may benefit from them. 
A) alter peoples' incentives, whereas a negative income tax does not alter peoples' incentives. 
B) do not allow poor families to make purchases based on their preferences. 
C) can only be distributed by the federal government. 
D) cannot restrict the group of recipients and some middle-class families may benefit from them.

Question 4

Utilitarians believe

Accepted Answer

A) that the government should choose just policies as evaluated by an impartial observer behind a "veil of ignorance." 
B) in the assumption of diminishing marginal utility. 
C) that everyone in society should have equal utility. 
D) that the government should not redistribute income. 
A) that the government should choose just policies as evaluated by an impartial observer behind a "veil of ignorance." 
B) in the assumption of diminishing marginal utility. 
C) that everyone in society should have equal utility. 
D) that the government should not redistribute income.

Question 5

The 2011 U.S. distribution of income shows that the top 5 percent of families have approximately what share of income?

Accepted Answer

A) 4 percent 
B) 9 percent 
C) 21 percent 
D) 49 percent 
A) 4 percent 
B) 9 percent 
C) 21 percent 
D) 49 percent

Question 6

The study by economists Cox and Alm found

Accepted Answer

A) inequality in consumption is much smaller than inequality in annual income. 
B) inequality in consumption is slightly smaller than inequality in annual income. 
C) inequality in consumption is slightly larger than inequality in annual income. 
D) inequality in consumption is much larger than inequality in annual income. 
A) inequality in consumption is much smaller than inequality in annual income. 
B) inequality in consumption is slightly smaller than inequality in annual income. 
C) inequality in consumption is slightly larger than inequality in annual income. 
D) inequality in consumption is much larger than inequality in annual income.

Question 7

The distribution of income for Dismal is as follows:   If the poverty rate in Dismal is about 17 percent, what is the poverty line in Dismal?

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $30,000. 
D) $40,000. 
A) $10,000. 
B) $20,000. 
C) $30,000. 
D) $40,000.

Question 8

Suppose that a family saves and borrows to buffer itself against changes in income. These actions relate to which problem in measuring inequality?

Accepted Answer

A) in-kind transfers 
B) negative income tax 
C) transitory versus permanent income 
D) economic mobility 
A) in-kind transfers 
B) negative income tax 
C) transitory versus permanent income 
D) economic mobility

Question 9

Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) are examples of .

Accepted Answer

The answer of Temporary Assistance for Needy Families (TANF) and...

Question 10

The U.S. welfare system was revised by a 1996 law that

Accepted Answer

A) consolidated all of the previous assistance programs into a single program. 
B) limited the amount of time that people could receive assistance. 
C) said it was no longer necessary for poor people to demonstrate an additional "need," such as small children or a disability, to qualify for assistance. 
D) turned all federally-run welfare programs over to the states. 
A) consolidated all of the previous assistance programs into a single program. 
B) limited the amount of time that people could receive assistance. 
C) said it was no longer necessary for poor people to demonstrate an additional "need," such as small children or a disability, to qualify for assistance. 
D) turned all federally-run welfare programs over to the states.

Question 11

Figure 20-2  
-Refer to Figure 20-2. Which of the following is consistent with the data reported in the figure?

Accepted Answer

A) The female poverty rate is higher for all age groups than the male poverty rate. 
B) The disparity between male and female poverty increases with age. 
C) Neither a nor b are correct. 
D) Both a and b are correct. 
A) The female poverty rate is higher for all age groups than the male poverty rate. 
B) The disparity between male and female poverty increases with age. 
C) Neither a nor b are correct. 
D) Both a and b are correct.

Question 12

Approximately what fraction of total income in the US economy comes from labor earnings?

Accepted Answer

The answer of Approximately what fraction of total income in...

Question 13

If the value of in-kind transfers are taken into account, the number of families living in poverty in the United States would

Accepted Answer

A) increase by about 1 percent. 
B) decrease by about 1 percent. 
C) decrease by about 5 percent. 
D) decrease by about 10 percent. 
A) increase by about 1 percent. 
B) decrease by about 1 percent. 
C) decrease by about 5 percent. 
D) decrease by about 10 percent.

Question 14

The goal of utilitarians is to

Accepted Answer

A) punish crimes and enforce voluntary agreements but not to redistribute income. 
B) redistribute income until each person has equal earnings. 
C) redistribute income until the marginal utility of the wealthiest person equals the total utility of the poorest person. 
D) redistribute income based on the assumption of diminishing marginal utility. 
A) punish crimes and enforce voluntary agreements but not to redistribute income. 
B) redistribute income until each person has equal earnings. 
C) redistribute income until the marginal utility of the wealthiest person equals the total utility of the poorest person. 
D) redistribute income based on the assumption of diminishing marginal utility.

Question 15

If the U.S. government determines that the cost of feeding an urban family of four is $7,500 per year, then the official poverty line for a family of that type is

Accepted Answer

A) $7,500. 
B) $15,000. 
C) $22,500. 
D) $30,000. 
A) $7,500. 
B) $15,000. 
C) $22,500. 
D) $30,000.

Question 16

The marketplace allocates resources

Accepted Answer

A) fairly. 
B) efficiently. 
C) to those desiring them least. 
D) both efficiently and equitably. 
A) fairly. 
B) efficiently. 
C) to those desiring them least. 
D) both efficiently and equitably.

Question 17

Scenario 20-5
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $10,000
-Refer to Scenario 20-5. Below what level of income would families start to receive a subsidy from this negative income tax?

Accepted Answer

A) $10,000 
B) $25,000 
C) $40,000 
D) $50,000 
A) $10,000 
B) $25,000 
C) $40,000 
D) $50,000

Question 18

Which of the following statements is not correct?

Accepted Answer

A) An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol. 
B) An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled. 
C) An advantage of a negative income tax program is that the poor must work to be eligible. 
D) Minimum wage laws result in higher unemployment among those groups of workers affected by the minimum wage. 
A) An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol. 
B) An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled. 
C) An advantage of a negative income tax program is that the poor must work to be eligible. 
D) Minimum wage laws result in higher unemployment among those groups of workers affected by the minimum wage.

Question 19

Scenario 20-4
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/5 of income) - $15,000
-Refer to Scenario 20-4. Below what level of income would families start to receive a subsidy from this negative income tax?

Accepted Answer

A) $5,000 
B) $15,000 
C) $50,000 
D) $75,000 
A) $5,000 
B) $15,000 
C) $50,000 
D) $75,000

Question 20

When the government provides poor families with antipoverty programs such as welfare, Medicaid, food stamps, and the Earned Income Tax Credit which are all tied to income,

Accepted Answer

A) the government creates an egalitarian distribution of income. 
B) the recipients can usually receive benefits for an unlimited amount of time. 
C) it is common for families to face very high effective marginal tax rates. 
D) the incentive to work and earn more income remains unchanged. 
A) the government creates an egalitarian distribution of income. 
B) the recipients can usually receive benefits for an unlimited amount of time. 
C) it is common for families to face very high effective marginal tax rates. 
D) the incentive to work and earn more income remains unchanged.

Exam 20: Income Inequality and Poverty

Table 20-7 -Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the data?

Which of the following pholitical philosophies would support redistribution of income that makes society fully egalitarian?

A disadvantage associated with in-kind transfers to reduce poverty is that they

Utilitarians believe

The 2011 U.S. distribution of income shows that the top 5 percent of families have approximately what share of income?

The study by economists Cox and Alm found

The distribution of income for Dismal is as follows: If the poverty rate in Dismal is about 17 percent, what is the poverty line in Dismal?

Suppose that a family saves and borrows to buffer itself against changes in income. These actions relate to which problem in measuring inequality?

Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) are examples of .

The U.S. welfare system was revised by a 1996 law that

Figure 20-2 -Refer to Figure 20-2. Which of the following is consistent with the data reported in the figure?

Approximately what fraction of total income in the US economy comes from labor earnings?

If the value of in-kind transfers are taken into account, the number of families living in poverty in the United States would

The goal of utilitarians is to

If the U.S. government determines that the cost of feeding an urban family of four is $7,500 per year, then the official poverty line for a family of that type is

The marketplace allocates resources

Which of the following statements is not correct?

When the government provides poor families with antipoverty programs such as welfare, Medicaid, food stamps, and the Earned Income Tax Credit which are all tied to income,

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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