Question 1

Measuring poverty using an absolute income scale like the poverty line can be misleading because

Accepted Answer

A)  income measures do not include the value of in-kind transfers. 
B)  money is valued less highly by the poor than by the rich. 
C)  the poor are not likely to participate in the labor market. 
D)  income measures are adjusted for the effects of labor-market discrimination. 
A)  income measures do not include the value of in-kind transfers. 
B)  money is valued less highly by the poor than by the rich. 
C)  the poor are not likely to participate in the labor market. 
D)  income measures are adjusted for the effects of labor-market discrimination.

Question 2

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

Accepted Answer

A)  15 percent. 
B)  25 percent. 
C)  40 percent. 
D)  75 percent. 
A)  15 percent. 
B)  25 percent. 
C)  40 percent. 
D)  75 percent.

Question 3

Income mobility studies suggest that poverty

Accepted Answer

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

Question 4

Data suggest that the large increase in government spending on income transfers over the past three decades has been accompanied by

Accepted Answer

A)  a reduced poverty rate for the nonelderly. 
B)  a more equal distribution of income. 
C)  fewer single-parent families because a married couple receives benefits twice as large. 
D)  none of the above. 
A)  a reduced poverty rate for the nonelderly. 
B)  a more equal distribution of income. 
C)  fewer single-parent families because a married couple receives benefits twice as large. 
D)  none of the above.

Question 5

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

Accepted Answer

A)  been virtually unchanged. 
B)  increased. 
C)  decreased. 
D)  fluctuated in a random pattern. 
A)  been virtually unchanged. 
B)  increased. 
C)  decreased. 
D)  fluctuated in a random pattern.

Question 6

Even if lifetime incomes were equal, there still might be substantial inequality in annual income data because

Accepted Answer

A)  wage rates might differ substantially. 
B)  some might have inherited their wealth. 
C)  some might have retired, whereas others are prime-age earners. 
D)  educational levels might differ substantially. 
A)  wage rates might differ substantially. 
B)  some might have inherited their wealth. 
C)  some might have retired, whereas others are prime-age earners. 
D)  educational levels might differ substantially.

Question 7

The level of money income below which a family is considered poor is called the

Accepted Answer

A)  bottom 20 percent of the income distribution. 
B)  poverty threshold income level. 
C)  guaranteed income level. 
D)  subsistence income level. 
A)  bottom 20 percent of the income distribution. 
B)  poverty threshold income level. 
C)  guaranteed income level. 
D)  subsistence income level.

Question 8

Data on income inequality in the United States indicate that

Accepted Answer

A)  rich families stay rich and poor families stay poor through time. 
B)  there is substantial movement among income groupings in the United States through time. 
C)  most poor families never significantly rise above the poverty level, but rich families tend to become less wealthy over time. 
D)  most rich families remain rich, but most poor families move up in the income distribution through time. 
A)  rich families stay rich and poor families stay poor through time. 
B)  there is substantial movement among income groupings in the United States through time. 
C)  most poor families never significantly rise above the poverty level, but rich families tend to become less wealthy over time. 
D)  most rich families remain rich, but most poor families move up in the income distribution through time.

Question 9

If a family earned an additional $6,000 and, as a consequence, sustained a reduction of $3,600 in government benefits, the implicit marginal tax rate for this family would be

Accepted Answer

A)  zero. 
B)  45 percent. 
C)  60 percent. 
D)  75 percent. 
A)  zero. 
B)  45 percent. 
C)  60 percent. 
D)  75 percent.

Question 10

Figure 15-1  
As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

Accepted Answer

A)  5 percent 
B)  15 percent 
C)  30 percent 
D)  50 percent 
A)  5 percent 
B)  15 percent 
C)  30 percent 
D)  50 percent

Question 11

If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Accepted Answer

A)  zero. 
B)  30 percent. 
C)  50 percent. 
D)  100 percent. 
A)  zero. 
B)  30 percent. 
C)  50 percent. 
D)  100 percent.

Question 12

Compared to low-income families, upper-income families are likely to

Accepted Answer

A)  be larger in size. 
B)  be headed by an adult of prime working age (between 35 years and 64 years). 
C)  have more than one family member working. 
D)  be all of the above. 
A)  be larger in size. 
B)  be headed by an adult of prime working age (between 35 years and 64 years). 
C)  have more than one family member working. 
D)  be all of the above.

Question 13

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.

Question 14

Income supplements large enough to significantly increase the economic status of poor people will

Accepted Answer

A)  encourage behavior that increases the risk of poverty. 
B)  create high implicit marginal tax rates that reduce the incentive of transfer recipients to earn. 
C)  provide low-income recipients with a strong incentive to work and increase their earnings so they will not be dependent on income transfers. 
D)  do both a and b. 
A)  encourage behavior that increases the risk of poverty. 
B)  create high implicit marginal tax rates that reduce the incentive of transfer recipients to earn. 
C)  provide low-income recipients with a strong incentive to work and increase their earnings so they will not be dependent on income transfers. 
D)  do both a and b.

Question 15

Data on the distribution of income among individuals and families in the United States indicate that

Accepted Answer

A)  the power of labor unions and corporations is the major determinant of income inequality. 
B)  the rich stay rich and the poor stay poor from one generation to another. 
C)  much of the inequality in annual income emanates from differences in education, age, hours worked, and family size. 
D)  the difference in annual income emanating from ownership of capital assets is the major source of economic inequality. 
A)  the power of labor unions and corporations is the major determinant of income inequality. 
B)  the rich stay rich and the poor stay poor from one generation to another. 
C)  much of the inequality in annual income emanates from differences in education, age, hours worked, and family size. 
D)  the difference in annual income emanating from ownership of capital assets is the major source of economic inequality.

Question 16

Compared to high-income families, low-income families tend to have

Accepted Answer

A)  more earners per family. 
B)  fewer persons per family. 
C)  more full-time workers per family. 
D)  both b and c. 
A)  more earners per family. 
B)  fewer persons per family. 
C)  more full-time workers per family. 
D)  both b and c.

Question 17

Which of the following is true?

Accepted Answer

A)  There is a fixed size of economic pie available for the government to allocate among individuals. 
B)  In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly valued by others. 
C)  Taxes and transfers do not affect the amount of income that is created. 
D)  How income is distributed exerts little impact on the total amount of income generated. 
A)  There is a fixed size of economic pie available for the government to allocate among individuals. 
B)  In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly valued by others. 
C)  Taxes and transfers do not affect the amount of income that is created. 
D)  How income is distributed exerts little impact on the total amount of income generated.

Question 18

The phenomenon that describes how transfer programs, which significantly reduce the adversities of poverty, also reduce the opportunity cost of choices that often lead to poverty is known as

Accepted Answer

A)  the implicit marginal tax rate. 
B)  Gibson's paradox. 
C)  the Phillips curve 
D)  the Samaritan's dilemma. 
A)  the implicit marginal tax rate. 
B)  Gibson's paradox. 
C)  the Phillips curve 
D)  the Samaritan's dilemma.

Question 19

Which of the following is true?

Accepted Answer

A)  With time, most of those with low incomes at a point in time move up the income ladder only to be replaced by others who are youthful, inexperienced, or the victim of current misfortune. 
B)  Recent studies indicate that there is virtually no relationship between the relative income position of grandparents and their grandchildren. 
C)  Both a and b are true. 
D)  Neither a nor b is true. 
A)  With time, most of those with low incomes at a point in time move up the income ladder only to be replaced by others who are youthful, inexperienced, or the victim of current misfortune. 
B)  Recent studies indicate that there is virtually no relationship between the relative income position of grandparents and their grandchildren. 
C)  Both a and b are true. 
D)  Neither a nor b is true.

Question 20

The official poverty rate of elderly families

Accepted Answer

A)  has been virtually unchanged for the last four decades. 
B)  increased as the elderly became a larger proportion of the U.S. population during the 1970s. 
C)  rose prior to the War on Poverty programs of the late 1960s, but it has declined steadily since. 
D)  has declined during the last four decades. 
A)  has been virtually unchanged for the last four decades. 
B)  increased as the elderly became a larger proportion of the U.S. population during the 1970s. 
C)  rose prior to the War on Poverty programs of the late 1960s, but it has declined steadily since. 
D)  has declined during the last four decades.

Measuring poverty using an absolute income scale like the poverty line can be misleading because

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

Income mobility studies suggest that poverty

Data suggest that the large increase in government spending on income transfers over the past three decades has been accompanied by

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

Even if lifetime incomes were equal, there still might be substantial inequality in annual income data because

The level of money income below which a family is considered poor is called the

Data on income inequality in the United States indicate that

If a family earned an additional $6,000 and, as a consequence, sustained a reduction of $3,600 in government benefits, the implicit marginal tax rate for this family would be

Figure 15-1 As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Compared to low-income families, upper-income families are likely to

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?

Income supplements large enough to significantly increase the economic status of poor people will

Data on the distribution of income among individuals and families in the United States indicate that

Compared to high-income families, low-income families tend to have

Which of the following is true?

The phenomenon that describes how transfer programs, which significantly reduce the adversities of poverty, also reduce the opportunity cost of choices that often lead to poverty is known as

Which of the following is true?

The official poverty rate of elderly families

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

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Exam 15: Income Inequality and Poverty

Measuring poverty using an absolute income scale like the poverty line can be misleading because

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

Income mobility studies suggest that poverty

Data suggest that the large increase in government spending on income transfers over the past three decades has been accompanied by

Since 1980, income inequality (as measured by the income share of the highest 20 percent of income earners relative to the lowest 20 percent) has

Even if lifetime incomes were equal, there still might be substantial inequality in annual income data because

The level of money income below which a family is considered poor is called the

Data on income inequality in the United States indicate that

If a family earned an additional $6,000 and, as a consequence, sustained a reduction of $3,600 in government benefits, the implicit marginal tax rate for this family would be

Figure 15-1 As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income.

If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Compared to low-income families, upper-income families are likely to

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?

Income supplements large enough to significantly increase the economic status of poor people will

Data on the distribution of income among individuals and families in the United States indicate that

Compared to high-income families, low-income families tend to have

Which of the following is true?

The phenomenon that describes how transfer programs, which significantly reduce the adversities of poverty, also reduce the opportunity cost of choices that often lead to poverty is known as

Which of the following is true?

The official poverty rate of elderly families

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