Question 1

Which of the following programs would be favored by philosopher John Rawls and why?

Accepted Answer

A) A negative income tax because it maximizes the income of the poorest member of society. 
B) The Supplemental Security Income (SSI) program because it does not encourage illegitimate births or break up two-parent families. 
C) A minimum-wage law because it benefits unskilled workers regardless of their income levels. 
D) None of the programs would be favored because each of them forcibly redistributes income that was fairly, if not equally, earned. 
A) A negative income tax because it maximizes the income of the poorest member of society. 
B) The Supplemental Security Income (SSI) program because it does not encourage illegitimate births or break up two-parent families. 
C) A minimum-wage law because it benefits unskilled workers regardless of their income levels. 
D) None of the programs would be favored because each of them forcibly redistributes income that was fairly, if not equally, earned.

Question 2

In-kind transfers are politically popular because

Accepted Answer

A) they provide high quality food and shelter. 
B) they provide cash. 
C) allow resale of food stamps for cash, if needed. 
D) the public believes that the aid is not going to support addictions. 
A) they provide high quality food and shelter. 
B) they provide cash. 
C) allow resale of food stamps for cash, if needed. 
D) the public believes that the aid is not going to support addictions.

Question 3

The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

Accepted Answer

A) True 
 B)False

Question 4

Saving and borrowing is indicative of a family that

Accepted Answer

A) is most likely to be poor. 
B) has a difficult time balancing its standard of living. 
C) adjusts its standard of living to reflect transitory changes in income. 
D) is most likely millionaires. 
A) is most likely to be poor. 
B) has a difficult time balancing its standard of living. 
C) adjusts its standard of living to reflect transitory changes in income. 
D) is most likely millionaires.

Question 5

Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

Accepted Answer

A) in-kind transfers 
B) negative income tax 
C) transitory versus permanent income 
D) economic mobility 
A) in-kind transfers 
B) negative income tax 
C) transitory versus permanent income 
D) economic mobility

Question 6

Government programs that take money from high-income people and give it to low-income people typically

Accepted Answer

A) improve economic efficiency by reducing poverty. 
B) reduce economic efficiency because they distort incentives. 
C) have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D) sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency. 
A) improve economic efficiency by reducing poverty. 
B) reduce economic efficiency because they distort incentives. 
C) have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D) sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Question 7

Poverty is found to be correlated with

Accepted Answer

A) age and race but not family composition. 
B) race only. 
C) race and family composition but not age. 
D) age, race, and family composition. 
A) age and race but not family composition. 
B) race only. 
C) race and family composition but not age. 
D) age, race, and family composition.

Question 8

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Accepted Answer

A) True 
 B)False

Question 9

The poverty rate is based on a family's

Accepted Answer

A) income, in-kind transfers, and other government aid. 
B) income and in-kind transfers. 
C) in-kind transfers only. 
D) income only. 
A) income, in-kind transfers, and other government aid. 
B) income and in-kind transfers. 
C) in-kind transfers only. 
D) income only.

Question 10

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Accepted Answer

A) utilitarianism 
B) liberalism 
C) libertarianism 
D) None of the above is correct. 
A) utilitarianism 
B) liberalism 
C) libertarianism 
D) None of the above is correct.

Question 11

Since the early 1970s,welfare benefits have declined,

Accepted Answer

A) which is largely due to the success of the negative income tax program. 
B) which is largely due to the success of private charities. 
C) yet the percentage of children living with only one parent has increased. 
D) and the percentage of children living with only one parent has decreased. 
A) which is largely due to the success of the negative income tax program. 
B) which is largely due to the success of private charities. 
C) yet the percentage of children living with only one parent has increased. 
D) and the percentage of children living with only one parent has decreased.

Question 12

When a government policy alters the distribution of income to achieve greater income equality,which of the following will happen?

Accepted Answer

A) Incentives for earning income are distorted. 
B) Consumers alter their behavior in response to the policy. 
C) The new allocation of resources is less efficient than the pre-policy allocation. 
D) All of the above are correct. 
A) Incentives for earning income are distorted. 
B) Consumers alter their behavior in response to the policy. 
C) The new allocation of resources is less efficient than the pre-policy allocation. 
D) All of the above are correct.

Question 13

Table 20-2
Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years
[Dollars]
   
Source: U. S. Bureau of the Census, Current Population Survey.
-Refer to Table 20-2.What is the poverty line for a family of three with one child?

Accepted Answer

A) $12,072 
B) $12,400 
C) $14,480 
D) $14,494 
A) $12,072 
B) $12,400 
C) $14,480 
D) $14,494

Question 14

Because people can borrow when they are young,the life cycle theory would suggest that one's standard of living depends on

Accepted Answer

A) lifetime income rather than annual income. 
B) aggregate income rather than annual personal income. 
C) annual extended family income rather than annual personal income. 
D) income averaged across seasons rather than across years. 
A) lifetime income rather than annual income. 
B) aggregate income rather than annual personal income. 
C) annual extended family income rather than annual personal income. 
D) income averaged across seasons rather than across years.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Table 20-2
Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years
[Dollars]
   
Source: U. S. Bureau of the Census, Current Population Survey.
-Refer to Table 20-2.What is the poverty line for a family of six with three children?

Accepted Answer

A) $21,469 
B) $24,797 
C) $25,738 
D) $28,718 
A) $21,469 
B) $24,797 
C) $25,738 
D) $28,718

Question 17

Which of the following statements is not correct?

Accepted Answer

A) Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits. 
B) The Earned Income Tax Credit (EIT
C)  is very similar to a negative income tax. 
C) Minimum wage laws will likely increase unemployment. 
D) The elderly are more likely to be poor than single mothers. 
A) Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits. 
B) The Earned Income Tax Credit (EIT
C)  is very similar to a negative income tax. 
C) Minimum wage laws will likely increase unemployment. 
D) The elderly are more likely to be poor than single mothers.

Question 18

Which of the following is not a question that economists try to answer when measuring the distribution of income?

Accepted Answer

A) How much inequality is there in our society? 
B) How many people live in poverty? 
C) How often do people receive raises? 
D) What problems arise in measuring the amount of inequality? 
A) How much inequality is there in our society? 
B) How many people live in poverty? 
C) How often do people receive raises? 
D) What problems arise in measuring the amount of inequality?

Question 19

Figure 20-3
  
-Refer to Figure 20-3.An effective minimum wage would be set at a level

Accepted Answer

A) above Wₒ, and employment would rise above Qₒ. 
B) above Wₒ, and employment would fall below Qₒ. 
C) below Wₒ, and employment would rise above Qₒ. 
D) below Wₒ, and employment would fall below Qₒ. 
A) above Wₒ, and employment would rise above Qₒ. 
B) above Wₒ, and employment would fall below Qₒ. 
C) below Wₒ, and employment would rise above Qₒ. 
D) below Wₒ, and employment would fall below Qₒ.

Question 20

A government's policy of redistributing income makes the income distribution more equitable,

Accepted Answer

A) distorts incentives, and makes the allocation of resources more efficient. 
B) alters behavior, and makes the allocation of resources more efficient. 
C) distorts incentives but does not alter behavior. 
D) distorts incentives, and makes the allocation of resources less efficient. 
A) distorts incentives, and makes the allocation of resources more efficient. 
B) alters behavior, and makes the allocation of resources more efficient. 
C) distorts incentives but does not alter behavior. 
D) distorts incentives, and makes the allocation of resources less efficient.

Exam 20: Income Inequality and Poverty

Which of the following programs would be favored by philosopher John Rawls and why?

In-kind transfers are politically popular because

The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

Saving and borrowing is indicative of a family that

Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

Government programs that take money from high-income people and give it to low-income people typically

Poverty is found to be correlated with

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

The poverty rate is based on a family's

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Since the early 1970s,welfare benefits have declined,

When a government policy alters the distribution of income to achieve greater income equality,which of the following will happen?

Table 20-2 Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-2.What is the poverty line for a family of three with one child?

Because people can borrow when they are young,the life cycle theory would suggest that one's standard of living depends on

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

Table 20-2 Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-2.What is the poverty line for a family of six with three children?

Which of the following statements is not correct?

Which of the following is not a question that economists try to answer when measuring the distribution of income?

Figure 20-3 -Refer to Figure 20-3.An effective minimum wage would be set at a level

A government's policy of redistributing income makes the income distribution more equitable,

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings 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 Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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