Question 1

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Accepted Answer

A) People will alter their behaviors. 
B) Incentives will be distorted. 
C) Total utility will likely remain constant. 
D) The allocation of resources will be less efficient. 
A) People will alter their behaviors. 
B) Incentives will be distorted. 
C) Total utility will likely remain constant. 
D) The allocation of resources will be less efficient.

Question 2

Over the past 50 years, the U.S. poverty rate was at its lowest level in

Accepted Answer

A) 1973. 
B) 1980. 
C) 1990. 
D) 2008. 
A) 1973. 
B) 1980. 
C) 1990. 
D) 2008.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Accepted Answer

A) an income distribution that is relatively equal. 
B) that everyone has the same work opportunities and market-determined wage rates. 
C) that private property be transformed to government property to safeguard people's incomes. 
D) less economic assistance to the poor because it distorts the price system. 
A) an income distribution that is relatively equal. 
B) that everyone has the same work opportunities and market-determined wage rates. 
C) that private property be transformed to government property to safeguard people's incomes. 
D) less economic assistance to the poor because it distorts the price system.

Question 6

When designing public policies, which income group would philosopher John Rawls argue needs the most attention?

Accepted Answer

A) Individuals located in the bottom fifth of the income distribution. 
B) Individuals located at the average income level. 
C) Individuals located in the top fifth of the income distribution. 
D) Individuals located in the top five percent of the income distribution. 
A) Individuals located in the bottom fifth of the income distribution. 
B) Individuals located at the average income level. 
C) Individuals located in the top fifth of the income distribution. 
D) Individuals located in the top five percent of the income distribution.

Question 7

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 = (1/4 of income) - $14,000
-Refer to Scenario 20-4. The government does not have to pay a subsidy to any family through this negative income tax if the family with the lowest income earns $50,000.

Accepted Answer

A) True 
 B)False

Question 8

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 = (1/4 of income) - $14,000
-Refer to Scenario 20-4. The government does not receive any tax revenue through this negative income tax if the family with the highest income earns $56,000.

Accepted Answer

A) True 
 B)False

Question 9

Scenario 20-1
​
The government is proposing switching from a progressive tax system in which families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35% of any income over $100,000 to a tax system in which every family pays 20% of their income minus $20,000.
-Refer to Scenario 20-1. What would libertarians think of the tax two policies?

Accepted Answer

A) They would favor the current progressive policy over the proposed policy because it accounts for diminishing marginal utility. 
B) They would favor the proposed tax policy over the current progressive policy because it would result in a negative tax for the poorest families. 
C) They would favor the current progressive tax policy over the proposed policy because it rewards those who work the hardest. 
D) They would oppose both tax policies because both redistribute income. 
A) They would favor the current progressive policy over the proposed policy because it accounts for diminishing marginal utility. 
B) They would favor the proposed tax policy over the current progressive policy because it would result in a negative tax for the poorest families. 
C) They would favor the current progressive tax policy over the proposed policy because it rewards those who work the hardest. 
D) They would oppose both tax policies because both redistribute income.

Question 10

Among all countries in the world, the United States has the most income inequality.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer. Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Washington. Which of the following is correct?

Accepted Answer

A) Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income." 
B) Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C) Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D) Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income. 
A) Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income." 
B) Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C) Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D) Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income.

Question 12

John Rawls, who developed the way of thinking called liberalism, argued that government policies should be aimed at maximizing the sum of utility of everyone in society.

Accepted Answer

A) True 
 B)False

Question 13

The regular pattern of income variation over a person's life is called the .

Accepted Answer

The answer of The regular pattern of income variation over...

Question 14

The poverty rate is the percentage of the population whose family income falls below an absolute level called the .

Accepted Answer

The answer of The poverty rate is the percentage of...

Question 15

A disadvantage of the Earned Income Tax Credit (EITC) program is that it does not help alleviate poverty due to unemployment, sickness, or other inability to work.

Accepted Answer

A) True 
 B)False

Question 16

About four out of five millionaires in the United States earned their money rather than inherited it.

Accepted Answer

A) True 
 B)False

Question 17

The poverty line is based on the percentage of people who cannot afford an adequate diet.

Accepted Answer

A) True 
 B)False

Question 18

Table 20-1
The following table shows the distribution of income in Choochooville.
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Group } & \text { Annual Family Income } \
\hline \text { Bottom Quartile } ( 25 \% ) & \$ 23,000 \text { and below } \
\hline \text { Third Quartile } & \$ 23,000 \text { to } \$ 52,999 \
\hline \text { Second Quartile } & \$ 53,000 \text { to } \$ 82,999 \
\hline \text { Top Quartile } & \$ 83,000 \text { and above } \
\hline
\end{array}$$ ​
-Refer to Table 20-1. Twenty-five percent of all families have incomes below what level?

Accepted Answer

A) $53,000 
B) $83,000 
C) $23,000 
D) There is insufficient information to answer this question. 
A) $53,000 
B) $83,000 
C) $23,000 
D) There is insufficient information to answer this question.

Question 19

In a typical 10-year period, about one in four families falls below the poverty line in at least one year. What percentage of families are poor for eight or more years?

Accepted Answer

The answer of In a typical 10-year period, about one...

Question 20

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.

Exam 20: Income Inequality and Poverty

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Over the past 50 years, the U.S. poverty rate was at its lowest level in

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

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

When designing public policies, which income group would philosopher John Rawls argue needs the most attention?

Among all countries in the world, the United States has the most income inequality.

John Rawls, who developed the way of thinking called liberalism, argued that government policies should be aimed at maximizing the sum of utility of everyone in society.

The regular pattern of income variation over a person's life is called the .

The poverty rate is the percentage of the population whose family income falls below an absolute level called the .

A disadvantage of the Earned Income Tax Credit (EITC) program is that it does not help alleviate poverty due to unemployment, sickness, or other inability to work.

About four out of five millionaires in the United States earned their money rather than inherited it.

The poverty line is based on the percentage of people who cannot afford an adequate diet.

In a typical 10-year period, about one in four families falls below the poverty line in at least one year. What percentage of families are poor for eight or more years?

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

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 Nations 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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