Question 1

If the Gini coefficient is equal to 2, we can conclude that

Accepted Answer

A) 2 percent of the households receive 100 percent of total income. 
B) 2 percent of the households receive 50 percent of total income. 
C) 50 percent of the households receive only 2 percent of total income. 
D) b and c 
E) None of the above, because the Gini coefficient cannot exceed 1. 
A) 2 percent of the households receive 100 percent of total income. 
B) 2 percent of the households receive 50 percent of total income. 
C) 50 percent of the households receive only 2 percent of total income. 
D) b and c 
E) None of the above, because the Gini coefficient cannot exceed 1.

Question 2

If we define poverty using absolute terms, it follows that

Accepted Answer

A) people are poor if they earn less than a specified income level. 
B) there can be situations in which no one would be considered poor. 
C) poverty exists if the Gini coefficient is small. 
D) b and c 
E) a and b 
A) people are poor if they earn less than a specified income level. 
B) there can be situations in which no one would be considered poor. 
C) poverty exists if the Gini coefficient is small. 
D) b and c 
E) a and b

Question 3

In 2015, the top fifth of households in the U.S. received approximately 51 percent of the total money income.

Accepted Answer

A) True 
 B)False

Question 4

The Lorenz curve for a country with perfect income equality is a horizontal line.

Accepted Answer

A) True 
 B)False

Question 5

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 6

When 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

Question 7

Exhibit 28-4
   ​
-Refer to Exhibit 28-4. The Lorenz curve for the country depicted in the exhibit is

Accepted Answer

A) a horizontal line. 
B) a vertical line. 
C) the same as the line of perfect income equality. 
D) as far away from the line of perfect income equality as is possible. 
A) a horizontal line. 
B) a vertical line. 
C) the same as the line of perfect income equality. 
D) as far away from the line of perfect income equality as is possible.

Question 8

The closer the Gini coefficient is to 1, the

Accepted Answer

A) greater the degree of income inequality. 
B) less the degree of income inequality. 
C) greater the degree of discrimination. 
D) less the degree of discrimination. 
A) greater the degree of income inequality. 
B) less the degree of income inequality. 
C) greater the degree of discrimination. 
D) less the degree of discrimination.

Question 9

The economist who said, "I am distressed by the sight of poverty. I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrues to me" was

Accepted Answer

A) John Kenneth Galbraith. 
B) John Rawls. 
C) Milton Friedman. 
D) Adam Smith. 
E) David Ricardo. 
A) John Kenneth Galbraith. 
B) John Rawls. 
C) Milton Friedman. 
D) Adam Smith. 
E) David Ricardo.

Question 10

Smith and Jones are different when it comes to taking risk. Smith will assume much more risk than Jones. It follows that

Accepted Answer

A) Smith will earn more income than Jones. 
B) Jones will earn more income than Smith. 
C) Smith has a higher probability than Jones of earning a higher income. 
D) Smith has a higher probability than Jones of earning a lower income. 
E) c and d 
A) Smith will earn more income than Jones. 
B) Jones will earn more income than Smith. 
C) Smith has a higher probability than Jones of earning a higher income. 
D) Smith has a higher probability than Jones of earning a lower income. 
E) c and d

Question 11

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 12

Which of the following statements is true?

Accepted Answer

A) If the Gini coefficient is large, then the space between the Lorenz curve and the line of perfect income equality will be small. 
B) If the Gini coefficient is 1.00, then the Lorenz curve and the line of perfect income equality coincide. 
C) If the government succeeds in decreasing income inequality, then the Gini coefficient will decrease. 
D) If the Gini coefficient is 0.50, then one-half of the households earn one-half of the income, and the other half of the households earn the other half. 
A) If the Gini coefficient is large, then the space between the Lorenz curve and the line of perfect income equality will be small. 
B) If the Gini coefficient is 1.00, then the Lorenz curve and the line of perfect income equality coincide. 
C) If the government succeeds in decreasing income inequality, then the Gini coefficient will decrease. 
D) If the Gini coefficient is 0.50, then one-half of the households earn one-half of the income, and the other half of the households earn the other half.

Question 13

In the United States, there are _______________ people in the average household in the top quintile (of total money income) than in the bottom quintile. This situation tends to skew the Census's measure of the income distribution so that the income distribution appears to be __________________ than it would be if a correction were made so that each quintile actually contained 20% of the population.

Accepted Answer

A) more; less equal 
B) less; less equal 
C) more; more equal 
D) less; more equal 
A) more; less equal 
B) less; less equal 
C) more; more equal 
D) less; more equal

Question 14

Exhibit 28-2
​
  
-A graph showing the relationship between the ____________________ and the ________________________ is called the ______________ curve.

Accepted Answer

A) cumulative percentage of households; cumulative percentage of income; Lorenz 
B) cumulative percentage of households; cumulative percentage of income; Gini 
C) cumulative percentage of households; cumulative percentage of income; Laffer 
D) percentage of households living in poverty; percentage of households living above the poverty line; Lorenz 
E) none of the above 
A) cumulative percentage of households; cumulative percentage of income; Lorenz 
B) cumulative percentage of households; cumulative percentage of income; Gini 
C) cumulative percentage of households; cumulative percentage of income; Laffer 
D) percentage of households living in poverty; percentage of households living above the poverty line; Lorenz 
E) none of the above

Question 15

If the Gini coefficient is zero (0), this means that

Accepted Answer

A) there is complete income inequality. 
B) there is some income inequality. 
C) there is perfect income equality. 
D) the area between the line of perfect income equality and the actual Lorenz curve is very large. 
E) a and d 
A) there is complete income inequality. 
B) there is some income inequality. 
C) there is perfect income equality. 
D) the area between the line of perfect income equality and the actual Lorenz curve is very large. 
E) a and d

Question 16

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 17

The Lorenz curve is a graphical representation of

Accepted Answer

A) the income to poverty ratio. 
B) economic growth. 
C) the percentage of total income left to spend after taxes. 
D) the distribution of income. 
A) the income to poverty ratio. 
B) economic growth. 
C) the percentage of total income left to spend after taxes. 
D) the distribution of income.

Question 18

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 19

Individual income is equal to labor income less income taxes.

Accepted Answer

A) True 
 B)False

Question 20

Evidence seems to indicate that the distribution of income prior to adjusting for taxes and in-kind transfer payments is

Accepted Answer

A) less equal than after adjusting for taxes and in-kind transfer payments. 
B) more equal than after adjusting for taxes and in-kind transfer payments. 
C) the same as after adjusting for taxes and in-kind transfer payments. 
D) impossible to determine. 
A) less equal than after adjusting for taxes and in-kind transfer payments. 
B) more equal than after adjusting for taxes and in-kind transfer payments. 
C) the same as after adjusting for taxes and in-kind transfer payments. 
D) impossible to determine.

Exam 28: The Distribution of Income and Poverty

If the Gini coefficient is equal to 2, we can conclude that

If we define poverty using absolute terms, it follows that

In 2015, the top fifth of households in the U.S. received approximately 51 percent of the total money income.

The Lorenz curve for a country with perfect income equality is a horizontal line.

In relative terms, poverty will always exist

When the ratio of income to poverty for a family is

Exhibit 28-4 ​ -Refer to Exhibit 28-4. The Lorenz curve for the country depicted in the exhibit is

The closer the Gini coefficient is to 1, the

The economist who said, "I am distressed by the sight of poverty. I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrues to me" was

Smith and Jones are different when it comes to taking risk. Smith will assume much more risk than Jones. It follows that

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

Which of the following statements is true?

Exhibit 28-2 ​ -A graph showing the relationship between the ____________________ and the ________________________ is called the ______________ curve.

If the Gini coefficient is zero (0), this means that

To an economist, wage discrimination exists when

The Lorenz curve is a graphical representation of

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

Individual income is equal to labor income less income taxes.

Evidence seems to indicate that the distribution of income prior to adjusting for taxes and in-kind transfer payments is

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Exhibit 28-4 -Refer to Exhibit 28-4. The Lorenz curve for the country depicted in the exhibit is

Exhibit 28-2 -A graph showing the relationship between the ______ and the is called the curve.

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