Question 1

Which of the following statements is true?

Accepted Answer

A) The people that make up the top 5 percent of all income earners are all millionaires. 
B) In 2015, the lowest 20 percent of all income earners earned less than 5 percent of the total money income. 
C) The income distribution in the United States is completely equal. 
D) Between 1967 and 2015, the income distribution in the United States became more equal. 
A) The people that make up the top 5 percent of all income earners are all millionaires. 
B) In 2015, the lowest 20 percent of all income earners earned less than 5 percent of the total money income. 
C) The income distribution in the United States is completely equal. 
D) Between 1967 and 2015, the income distribution in the United States became more equal.

Question 2

A computer is a good example of human capital.

Accepted Answer

A) True 
 B)False

Question 3

In the United States, the average household in the top quintile (of total money income) contains fewer persons than the average household in the bottom quintile.

Accepted Answer

A) True 
 B)False

Question 4

In 2015, the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

Accepted Answer

A) 1% 
B) 3% 
C) 8% 
D) 16% 
E) 20% 
A) 1% 
B) 3% 
C) 8% 
D) 16% 
E) 20%

Question 5

Which of the following was not given as a reason for income differences in the textbook?

Accepted Answer

A) luck 
B) low minimum wage 
C) wage discrimination 
D) risk taking 
A) luck 
B) low minimum wage 
C) wage discrimination 
D) risk taking

Question 6

In 2015, approximately 13.5 percent of the total population in the United States were living below the poverty line.

Accepted Answer

A) True 
 B)False

Question 7

The Gini coefficient measures the degree of

Accepted Answer

A) racial discrimination. 
B) age discrimination. 
C) income inequality. 
D) sex discrimination. 
E) wage discrimination. 
A) racial discrimination. 
B) age discrimination. 
C) income inequality. 
D) sex discrimination. 
E) wage discrimination.

Question 8

Exhibit 28-2
​
  
-Refer to Exhibit 28-2. This graph depicts the Lorenz curve for two countries, country 1 (Lorenz curve 1) and country 2 (Lorenz curve 2). The Gini coefficient associated with Lorenz curve 1 appears to be ____________ than the Gini coefficient associated with Lorenz curve 2. This information indicates that the income distribution is ______________ equal in country 2 than in country 1.

Accepted Answer

A) lower; less 
B) higher; less 
C) lower; more 
D) higher; more 
A) lower; less 
B) higher; less 
C) lower; more 
D) higher; more

Question 9

Exhibit 28-2
​
  
-Refer to Exhibit 28-2. This graph depicts the Lorenz curve for two countries, country 1 (Lorenz curve 1) and country 2 (Lorenz curve 2). Although the Gini coefficient is __________ in country 1 than in country 2, the bottom quintile in ____________ receives a larger share of income compared to the bottom quintile in _______________.

Accepted Answer

A) lower; country 1; country 2 
B) lower; country 2; country 1 
C) higher; country 1; country 2 
D) higher; country 2; country 1 
A) lower; country 1; country 2 
B) lower; country 2; country 1 
C) higher; country 1; country 2 
D) higher; country 2; country 1

Question 10

The larger the Gini coefficient, the

Accepted Answer

A) greater the degree of income inequality. 
B) greater the degree of income equality. 
C) smaller the population. 
D) larger the population. 
E) b and d 
A) greater the degree of income inequality. 
B) greater the degree of income equality. 
C) smaller the population. 
D) larger the population. 
E) b and d

Question 11

The existence of which of the following leads to an overestimate of the number of persons in poverty?

Accepted Answer

A) unreported income 
B) in-kind benefits received by the poor 
C) uncounted homeless persons 
D) a and b 
E) a, b, and c 
A) unreported income 
B) in-kind benefits received by the poor 
C) uncounted homeless persons 
D) a and b 
E) a, b, and c

Question 12

Consider the area between the line of perfect income equality and the Lorenz curve. In country A this area is larger than in country B. It follows that

Accepted Answer

A) the bottom 20 percent income group receives a lower percentage of total income in country A than in country B. 
B) the bottom 20 percent income group receives a lower percentage of total income in country B than in county A. 
C) the top 20 percent income group receives a higher percentage of total income in country B than in country A. 
D) the top 20 percent income group receives a higher percentage of total income in country A than in country B. 
E) none of the above 
A) the bottom 20 percent income group receives a lower percentage of total income in country A than in country B. 
B) the bottom 20 percent income group receives a lower percentage of total income in country B than in county A. 
C) the top 20 percent income group receives a higher percentage of total income in country B than in country A. 
D) the top 20 percent income group receives a higher percentage of total income in country A than in country B. 
E) none of the above

Question 13

A disappearing middle class necessarily connotes a world of only the rich and the poor.

Accepted Answer

A) True 
 B)False

Question 14

Some economists contend that in-kind transfers should be included in the calculation of an individual's income because

Accepted Answer

A) in-kind items do not cost anything. 
B) simple money income is not a complete measure of one's command over goods and services. 
C) in-kind items make a person "better off" than the person's actual money income would lead us to believe. 
D) b and c 
A) in-kind items do not cost anything. 
B) simple money income is not a complete measure of one's command over goods and services. 
C) in-kind items make a person "better off" than the person's actual money income would lead us to believe. 
D) b and c

Question 15

Exhibit 28-4
   ​
-Refer to Exhibit 28-4. The Gini coefficient for the income distribution of the country depicted in the exhibit is

Accepted Answer

A) a number less than 0. 
B) a number between 0 and 1. 
C) equal to 1. 
D) equal to 0. 
A) a number less than 0. 
B) a number between 0 and 1. 
C) equal to 1. 
D) equal to 0.

Question 16

A Gini coefficient is a number between 0 and 1.

Accepted Answer

A) True 
 B)False

Question 17

A public good is

Accepted Answer

A) a good that government provides to the public, such as roads, education, etc. 
B) a good that is consumed in public, such as at a restaurant or ball park. 
C) a good that if consumed by one person can be consumed by other persons to the same degree and the consumption of which cannot be denied to anyone. 
D) a good that benefits the public more than it costs the public. 
E) none of the above 
A) a good that government provides to the public, such as roads, education, etc. 
B) a good that is consumed in public, such as at a restaurant or ball park. 
C) a good that if consumed by one person can be consumed by other persons to the same degree and the consumption of which cannot be denied to anyone. 
D) a good that benefits the public more than it costs the public. 
E) none of the above

Question 18

One measure of the severity of poverty is the ratio of income to poverty which is calculated by

Accepted Answer

A) dividing a family's poverty income threshold by that family's income. 
B) dividing a family's transfer payments received by that family's income. 
C) dividing a family's income by the family's poverty income threshold. 
D) dividing a family's income by that family's transfer payments received. 
E) none of the above 
A) dividing a family's poverty income threshold by that family's income. 
B) dividing a family's transfer payments received by that family's income. 
C) dividing a family's income by the family's poverty income threshold. 
D) dividing a family's income by that family's transfer payments received. 
E) none of the above

Question 19

Exhibit 28-1
​
  
-Refer to Exhibit 28-1. If the Gini coefficient equals 1, then the Lorenz curve is

Accepted Answer

A) point B. 
B) line OB. 
C) the horizontal axis from 0 to A. 
D) line AB. 
E) the horizontal axis from 0 to A and the line AB. 
A) point B. 
B) line OB. 
C) the horizontal axis from 0 to A. 
D) line AB. 
E) the horizontal axis from 0 to A and the line AB.

Question 20

In 2019 a woman won a $600 million lottery. Her income is (most likely) largely due to her

Accepted Answer

A) hard work. 
B) education. 
C) highly marketable innate abilities. 
D) good luck. 
E) none of the above 
A) hard work. 
B) education. 
C) highly marketable innate abilities. 
D) good luck. 
E) none of the above

Exam 28: The Distribution of Income and Poverty

Which of the following statements is true?

A computer is a good example of human capital.

In the United States, the average household in the top quintile (of total money income) contains fewer persons than the average household in the bottom quintile.

In 2015, the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

Which of the following was not given as a reason for income differences in the textbook?

In 2015, approximately 13.5 percent of the total population in the United States were living below the poverty line.

The Gini coefficient measures the degree of

The larger the Gini coefficient, the

The existence of which of the following leads to an overestimate of the number of persons in poverty?

Consider the area between the line of perfect income equality and the Lorenz curve. In country A this area is larger than in country B. It follows that

A disappearing middle class necessarily connotes a world of only the rich and the poor.

Some economists contend that in-kind transfers should be included in the calculation of an individual's income because

Exhibit 28-4 ​ -Refer to Exhibit 28-4. The Gini coefficient for the income distribution of the country depicted in the exhibit is

A Gini coefficient is a number between 0 and 1.

A public good is

One measure of the severity of poverty is the ratio of income to poverty which is calculated by

Exhibit 28-1 ​ -Refer to Exhibit 28-1. If the Gini coefficient equals 1, then the Lorenz curve is

In 2019 a woman won a $600 million lottery. Her income is (most likely) largely due to her

What Economics Is About

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Exhibit 28-4 -Refer to Exhibit 28-4. The Gini coefficient for the income distribution of the country depicted in the exhibit is

Exhibit 28-1 -Refer to Exhibit 28-1. If the Gini coefficient equals 1, then the Lorenz curve is