Question 1

Permanent income is distributed between income groups ________:

Accepted Answer

A) more evenly than current income 
B) less evenly than current income 
C) about the same as current income 
D) higher than current income 
A) more evenly than current income 
B) less evenly than current income 
C) about the same as current income 
D) higher than current income

Question 2

What would be the qualification(s) to receive government assistance under a negative income tax?
(i) being enrolled in job training
(ii) having preschool children
(iii) having a low income

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (ii) only 
D) (iii) only 
A) (i) and (ii) 
B) (ii) and (iii) 
C) (ii) only 
D) (iii) only

Question 3

Which of the following statements about a negative income tax system are true?
(i) it would eliminate tax progressivity
(ii) it would collect more tax from high-income households
(iii) it would give transfers to low-income households

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii) 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii)

Question 4

Some economists argue that because expenditure must be equal to income, the expenditure-based measure of income inequality is no better than the income-based measure of income inequality.

Accepted Answer

A) True 
 B)False

Question 5

According to the maximin criterion, income can be transferred from the rich to the poor as long as it:
(i) enhances the welfare of workers
(ii) promotes an egalitarian distribution of income
(iii) raises the wellbeing of the least fortunate

Accepted Answer

A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) (iii) only 
A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) (iii) only

Question 6

Evidence suggests that:

Accepted Answer

A) the best way to deter immigrants is to make legal aliens ineligible for many welfare benefits 
B) legislation designed to limit the time a family can be on welfare will never be passed 
C) welfare dependency is embraced by over 80 per cent of new welfare recipients 
D) the longer a family is on welfare, the harder it is to get off welfare 
A) the best way to deter immigrants is to make legal aliens ineligible for many welfare benefits 
B) legislation designed to limit the time a family can be on welfare will never be passed 
C) welfare dependency is embraced by over 80 per cent of new welfare recipients 
D) the longer a family is on welfare, the harder it is to get off welfare

Question 7

Using demand-supply analysis, show how the elasticity of demand of labour determines the magnitude of unemployment when an effective minimum wage is imposed.

Accepted Answer

Graph A shows a more inelastic demand fo

Question 8

Explain what is meant by 'in-kind transfer' programs.Briefly outline the pros and cons associated with an in-kind transfer program.

Accepted Answer

These programs transfer goods and servic

Question 9

The income distribution in a society is:

Accepted Answer

A) mostly determined by government taxation policies 
B) mostly determined by rental income 
C) mostly determined by the geographical location of taxpayers 
D) mostly determined by factors that determine wages 
A) mostly determined by government taxation policies 
B) mostly determined by rental income 
C) mostly determined by the geographical location of taxpayers 
D) mostly determined by factors that determine wages

Question 10

In Australia, the share of pre-tax income going to the bottom fifth of families in the income distribution has been:

Accepted Answer

A) rising 
B) falling 
C) roughly steady 
D) no data is available 
A) rising 
B) falling 
C) roughly steady 
D) no data is available

Question 11

One way to measure the poverty rate is by calculating the percentage of the population whose family income is below the poverty line.

Accepted Answer

A) True 
 B)False

Question 12

Discuss the life cycle hypothesis of income distribution.

Accepted Answer

The life cycle hypothesis takes into acc

Question 13

Economic mobility is higher in the USA than in Australia.

Accepted Answer

A) True 
 B)False

Question 14

If cash is transferred to the poor, this is known as an in-kind transfer.

Accepted Answer

A) True 
 B)False

Question 15

Explain the concept of diminishing marginal utility and describe the role that it plays in the utilitarian argument for redistribution of income.

Accepted Answer

In this context, diminishing marginal ut

Question 16

Poverty is correlated with race, age and family composition.

Accepted Answer

A) True 
 B)False

Question 17

Income mobility studies suggest that poverty:

Accepted Answer

A) is not a long-term problem for most families 
B) is a long-term problem for a relatively large number of families 
C) cannot be alleviated by government sponsored anti-poverty programs 
D) cannot be alleviated by privately sponsored anti-poverty programs 
A) is not a long-term problem for most families 
B) is a long-term problem for a relatively large number of families 
C) cannot be alleviated by government sponsored anti-poverty programs 
D) cannot be alleviated by privately sponsored anti-poverty programs

Question 18

Using the graph drawn above, what could occur if:
i) a government that advocates a flat tax rate to the income distribution.
ii) a government advocates a proportional tax where there are more tax brackets.

Accepted Answer

i) it would resemble

Question 19

What are some of the problems associated with measuring inequality?

Accepted Answer

What people care about is not their inco

Question 20

Which of the following are common criticisms of government programs designed to assist the poor?
(i) they create incentives for people to become 'needy'
(ii) those who receive assistance rarely meet the criterion for eligibility
(iii) they typically account for a majority of annual government expenditures

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii) 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii)

Exam 21: Income Inequity and Poverty

Permanent income is distributed between income groups ________:

What would be the qualification(s) to receive government assistance under a negative income tax? (i) being enrolled in job training (ii) having preschool children (iii) having a low income

Which of the following statements about a negative income tax system are true? (i) it would eliminate tax progressivity (ii) it would collect more tax from high-income households (iii) it would give transfers to low-income households

Some economists argue that because expenditure must be equal to income, the expenditure-based measure of income inequality is no better than the income-based measure of income inequality.

According to the maximin criterion, income can be transferred from the rich to the poor as long as it: (i) enhances the welfare of workers (ii) promotes an egalitarian distribution of income (iii) raises the wellbeing of the least fortunate

Evidence suggests that:

Using demand-supply analysis, show how the elasticity of demand of labour determines the magnitude of unemployment when an effective minimum wage is imposed.

Explain what is meant by 'in-kind transfer' programs.Briefly outline the pros and cons associated with an in-kind transfer program.

The income distribution in a society is:

In Australia, the share of pre-tax income going to the bottom fifth of families in the income distribution has been:

One way to measure the poverty rate is by calculating the percentage of the population whose family income is below the poverty line.

Discuss the life cycle hypothesis of income distribution.

Economic mobility is higher in the USA than in Australia.

If cash is transferred to the poor, this is known as an in-kind transfer.

Explain the concept of diminishing marginal utility and describe the role that it plays in the utilitarian argument for redistribution of income.

Poverty is correlated with race, age and family composition.

Income mobility studies suggest that poverty:

Using the graph drawn above, what could occur if: i) a government that advocates a flat tax rate to the income distribution. ii) a government advocates a proportional tax where there are more tax brackets.

What are some of the problems associated with measuring inequality?

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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