Question 1

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

Accepted Answer

A)  The high implicit marginal tax rates that accompany the current income transfer programs reduce the incentive of the poor to earn. 
B)  The transfer programs encourage the poor to marry and form dual-earner families. 
C)  The transfer programs tend to increase the wages that employers are required by law to pay for low-skill labor. 
D)  The transfer programs reduce the likelihood of single-parent families. 
A)  The high implicit marginal tax rates that accompany the current income transfer programs reduce the incentive of the poor to earn. 
B)  The transfer programs encourage the poor to marry and form dual-earner families. 
C)  The transfer programs tend to increase the wages that employers are required by law to pay for low-skill labor. 
D)  The transfer programs reduce the likelihood of single-parent families. A

Question 2

How do the high implicit marginal tax rates that often occur when transfer payments are inversely linked to earnings affect the incentive of poor people to work and earn?

Accepted Answer

A)  A poor person's incentive to earn is increased. 
B)  A poor person's incentive to earn is reduced. 
C)  The incentive of the poor to earn is unaffected. 
D)  The incentive of the poor to earn reported income is increased, but the incentive to earn unreported income is reduced. 
A)  A poor person's incentive to earn is increased. 
B)  A poor person's incentive to earn is reduced. 
C)  The incentive of the poor to earn is unaffected. 
D)  The incentive of the poor to earn reported income is increased, but the incentive to earn unreported income is reduced. B

Question 3

Which one of the following groups has a below-average incidence of poverty?

Accepted Answer

A)  divorced or separated persons 
B)  African Americans and other minorities 
C)  families headed by a female 
D)  persons between the ages of 35 and 54 
A)  divorced or separated persons 
B)  African Americans and other minorities 
C)  families headed by a female 
D)  persons between the ages of 35 and 54 D

Question 4

Which of the following is true?

Accepted Answer

A)  The distribution of income after taxes and transfers is considered more equal than when they are excluded. 
B)  The distribution of lifetime income tends to be more unequal than the distribution of annual income. 
C)  The distribution of income has become more equal in recent years. 
D)  Developed, industrialized countries generally tend to have higher income inequality than less-developed countries. 
A)  The distribution of income after taxes and transfers is considered more equal than when they are excluded. 
B)  The distribution of lifetime income tends to be more unequal than the distribution of annual income. 
C)  The distribution of income has become more equal in recent years. 
D)  Developed, industrialized countries generally tend to have higher income inequality than less-developed countries.

Question 5

In 2009, high-income families (the top 20 percent) in the United States earned approximately ____ percent of the total before-tax income.

Accepted Answer

A)  34 
B)  48 
C)  62 
D)  79 
A)  34 
B)  48 
C)  62 
D)  79

Question 6

Data on income inequality in the United States indicate that

Accepted Answer

A)  rich families stay rich and poor families stay poor. 
B)  most poor families never significantly rise above the poverty level, but rich families tend to become less wealthy over time. 
C)  there is substantial movement among income groupings in the United States. 
D)  the inequality between the rich and poor in annual consumption expenditures is greater than the parallel inequality in annual income. 
A)  rich families stay rich and poor families stay poor. 
B)  most poor families never significantly rise above the poverty level, but rich families tend to become less wealthy over time. 
C)  there is substantial movement among income groupings in the United States. 
D)  the inequality between the rich and poor in annual consumption expenditures is greater than the parallel inequality in annual income.

Question 7

This year Bill earned $3,000 more than last year. As a result, he received $2,500 less in government transfers. Therefore, Bill's implicit marginal tax rate is about

Accepted Answer

A)  16 percent 
B)  25 percent 
C)  66 percent 
D)  83 percent 
A)  16 percent 
B)  25 percent 
C)  66 percent 
D)  83 percent

Question 8

Figure 15-2  
If this economy's distribution of income becomes more equal, then the Lorenz curve shown in Figure 15-2 will

Accepted Answer

A)  move closer to the 45 ° line. 
B)  become more bowed outward. 
C)  lie above the 45 ° line. 
D)  shift down and to the right. 
A)  move closer to the 45 ° line. 
B)  become more bowed outward. 
C)  lie above the 45 ° line. 
D)  shift down and to the right.

Question 9

Transfers that are limited to persons or families with an income below a certain cut-off point are referred to as

Accepted Answer

A)  means-tested income transfers. 
B)  poverty transfers. 
C)  Social Security transfers. 
D)  cash income transfers. 
A)  means-tested income transfers. 
B)  poverty transfers. 
C)  Social Security transfers. 
D)  cash income transfers.

Question 10

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Accepted Answer

If poverty is only measured based on cas

Question 11

Means-tested income transfers refer to

Accepted Answer

A)  the average amount of the annual governmental transfers. 
B)  transfers that are limited to families with an income below a certain cutoff point. 
C)  income transfers that are specifically paid for by the top 1 percent (wealthiest) of tax payers. 
D)  none of the above. 
A)  the average amount of the annual governmental transfers. 
B)  transfers that are limited to families with an income below a certain cutoff point. 
C)  income transfers that are specifically paid for by the top 1 percent (wealthiest) of tax payers. 
D)  none of the above.

Question 12

When deciding whether to classify a family as in poverty, official figures

Accepted Answer

A)  count all transfer and welfare benefits received by the family as income. 
B)  do not count in-kind benefits in the calculation of the family's income. 
C)  do not count cash benefits in the calculation of the family's income. 
D)  do not count any transfer or welfare benefits as income. 
A)  count all transfer and welfare benefits received by the family as income. 
B)  do not count in-kind benefits in the calculation of the family's income. 
C)  do not count cash benefits in the calculation of the family's income. 
D)  do not count any transfer or welfare benefits as income.

Question 13

(I) Opponents to government action to reduce income inequality argue that the pattern of economic outcomes is more important than the process that generates the outcomes. (II) Opponents of government action to reduce income inequality argue that the proposed solutions will retard economic growth.

Accepted Answer

A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true. 
A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true.

Question 14

The poverty threshold income level is

Accepted Answer

A)  adjusted annually for increases in real per capita income. 
B)  adjusted annually for changes in prices. 
C)  invariant to differences in the size and composition of families. 
D)  the highest income level that would leave one in the bottom quintile of income recipients. 
A)  adjusted annually for increases in real per capita income. 
B)  adjusted annually for changes in prices. 
C)  invariant to differences in the size and composition of families. 
D)  the highest income level that would leave one in the bottom quintile of income recipients.

Question 15

Which of the following is true?

Accepted Answer

A)  Taxes and transfers generally increase the income share of the bottom quintile of income recipients, while reducing the share of the top group of earners. 
B)  In a market economy, the distribution of income is determined by the quantity and value of the resources supplied by the various individuals, and nearly half the value of resources owned by the rich was inherited. 
C)  Between 1980 and 2009, the income share received by the highest quintile of earners fell, while the share received by the bottom quintile of earners rose. 
D)  All of the above are true. 
A)  Taxes and transfers generally increase the income share of the bottom quintile of income recipients, while reducing the share of the top group of earners. 
B)  In a market economy, the distribution of income is determined by the quantity and value of the resources supplied by the various individuals, and nearly half the value of resources owned by the rich was inherited. 
C)  Between 1980 and 2009, the income share received by the highest quintile of earners fell, while the share received by the bottom quintile of earners rose. 
D)  All of the above are true.

Question 16

Income mobility

Accepted Answer

A)  is a term used to characterize the ease of establishing residence or a business in a new area of the country. 
B)  has increased in recent years because of reductions in transportation cost. 
C)  is the term used to describe the movements up and down the economic ladder. 
D)  is present only when the general level of prices is rising. 
A)  is a term used to characterize the ease of establishing residence or a business in a new area of the country. 
B)  has increased in recent years because of reductions in transportation cost. 
C)  is the term used to describe the movements up and down the economic ladder. 
D)  is present only when the general level of prices is rising.

Question 17

During 1959 through 2009, the percent of poor families headed by an elderly person

Accepted Answer

A)  rose. 
B)  steadily declined. 
C)  remained virtually unchanged. 
D)  steadily increased until 1980 when it began to decline. 
A)  rose. 
B)  steadily declined. 
C)  remained virtually unchanged. 
D)  steadily increased until 1980 when it began to decline.

Question 18

Most studies indicate that the degree of income inequality in the United States has

Accepted Answer

A)  been increasing in recent decades. 
B)  been declining in recent decades. 
C)  been constant since 1970. 
D)  fluctuated widely from year to year. 
A)  been increasing in recent decades. 
B)  been declining in recent decades. 
C)  been constant since 1970. 
D)  fluctuated widely from year to year.

Question 19

Which of the following has contributed to the rising income inequality in the United States?

Accepted Answer

A)  The proportion of single-parent families has increased. 
B)  The proportion of dual-earner families has increased. 
C)  Earnings differentials between skilled and less-skilled workers have increased. 
D)  all of the above 
A)  The proportion of single-parent families has increased. 
B)  The proportion of dual-earner families has increased. 
C)  Earnings differentials between skilled and less-skilled workers have increased. 
D)  all of the above

Question 20

Over the past several decades, family incomes in the United States have

Accepted Answer

A)  become less equal. 
B)  become more equal. 
C)  maintained the same level of inequality. 
D)  declined substantially for all families. 
A)  become less equal. 
B)  become more equal. 
C)  maintained the same level of inequality. 
D)  declined substantially for all families.

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

How do the high implicit marginal tax rates that often occur when transfer payments are inversely linked to earnings affect the incentive of poor people to work and earn?

Which one of the following groups has a below-average incidence of poverty?

Which of the following is true?

In 2009, high-income families (the top 20 percent) in the United States earned approximately ____ percent of the total before-tax income.

Data on income inequality in the United States indicate that

This year Bill earned $3,000 more than last year. As a result, he received $2,500 less in government transfers. Therefore, Bill's implicit marginal tax rate is about

Figure 15-2 If this economy's distribution of income becomes more equal, then the Lorenz curve shown in Figure 15-2 will

Transfers that are limited to persons or families with an income below a certain cut-off point are referred to as

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Means-tested income transfers refer to

When deciding whether to classify a family as in poverty, official figures

(I) Opponents to government action to reduce income inequality argue that the pattern of economic outcomes is more important than the process that generates the outcomes. (II) Opponents of government action to reduce income inequality argue that the proposed solutions will retard economic growth.

The poverty threshold income level is

Which of the following is true?

Income mobility

During 1959 through 2009, the percent of poor families headed by an elderly person

Most studies indicate that the degree of income inequality in the United States has

Which of the following has contributed to the rising income inequality in the United States?

Over the past several decades, family incomes in the United States have

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

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Exam 15: Income Inequality and Poverty

Which of the following limits the ability of the current system of transfer programs to increase the incomes of the able-bodied poor?

How do the high implicit marginal tax rates that often occur when transfer payments are inversely linked to earnings affect the incentive of poor people to work and earn?

Which one of the following groups has a below-average incidence of poverty?

Which of the following is true?

In 2009, high-income families (the top 20 percent) in the United States earned approximately ____ percent of the total before-tax income.

Data on income inequality in the United States indicate that

This year Bill earned $3,000 more than last year. As a result, he received $2,500 less in government transfers. Therefore, Bill's implicit marginal tax rate is about

Figure 15-2 If this economy's distribution of income becomes more equal, then the Lorenz curve shown in Figure 15-2 will

Transfers that are limited to persons or families with an income below a certain cut-off point are referred to as

The mythical country of Quitar has just established a policy to give very generous in-kind benefits to the nation's poor, currently defined as those earning less than $10,000 a year. Several years later, the poverty rate has not fallen. Why not?

Means-tested income transfers refer to

When deciding whether to classify a family as in poverty, official figures

(I) Opponents to government action to reduce income inequality argue that the pattern of economic outcomes is more important than the process that generates the outcomes. (II) Opponents of government action to reduce income inequality argue that the proposed solutions will retard economic growth.

The poverty threshold income level is

Which of the following is true?

Income mobility

During 1959 through 2009, the percent of poor families headed by an elderly person

Most studies indicate that the degree of income inequality in the United States has

Which of the following has contributed to the rising income inequality in the United States?

Over the past several decades, family incomes in the United States have

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Applying the Basics: Special Topics in Economics

Filters