Question 1

Which of the following is not correct?

Accepted Answer

A) Incomes tend to be low for young workers. 
B) Incomes tend to fall sharply at retirement. 
C) Incomes tend to peak at around age 50. 
D) All of the above are correct. 
A) Incomes tend to be low for young workers. 
B) Incomes tend to fall sharply at retirement. 
C) Incomes tend to peak at around age 50. 
D) All of the above are correct.

Question 2

In comparison to the average poverty rate,

Accepted Answer

A) children and the elderly are more likely to be poor. 
B) Children and the elderly are less likely to be poor. 
C) Children are more likely to be poor, but the elderly are less likely to be poor. 
D) Children are less likely to be poor, but the elderly are more likely to be poor. 
A) children and the elderly are more likely to be poor. 
B) Children and the elderly are less likely to be poor. 
C) Children are more likely to be poor, but the elderly are less likely to be poor. 
D) Children are less likely to be poor, but the elderly are more likely to be poor.

Question 3

In the United States approximately 80 percent of millionaires did not inherit their wealth.This statement is an example of

Accepted Answer

A) transitory income. 
B) the effectiveness of government anti-poverty programs. 
C) economic mobility. 
D) All of the above are correct. 
A) transitory income. 
B) the effectiveness of government anti-poverty programs. 
C) economic mobility. 
D) All of the above are correct.

Question 4

Measures of poverty that fail to account for the value of in-kind transfers

Accepted Answer

A) understate the actual poverty rate. 
B) have little effect on the validity of reported poverty rates. 
C) are generally more reliable measures of actual poverty rates. 
D) overstate the actual poverty rate. 
A) understate the actual poverty rate. 
B) have little effect on the validity of reported poverty rates. 
C) are generally more reliable measures of actual poverty rates. 
D) overstate the actual poverty rate.

Question 5

In 2003,what percentage of U.S.families had income levels above $98,200?

Accepted Answer

A) 5 percent 
B) 20 percent 
C) 80 percent 
D) 95 percent 
A) 5 percent 
B) 20 percent 
C) 80 percent 
D) 95 percent

Question 6

Why is it difficult to compare household income distributions among countries?

Accepted Answer

A) Countries collect data in different ways. 
B) Some countries collect data on expenditures instead of incomes. 
C) The task is not difficult because international agreements require countries to standardize their income accounting procedures. 
D) Both a and b are correct. 
A) Countries collect data in different ways. 
B) Some countries collect data on expenditures instead of incomes. 
C) The task is not difficult because international agreements require countries to standardize their income accounting procedures. 
D) Both a and b are correct.

Question 7

The poverty line in the country of Spencerville is $20,000.The distribution of income for Spencerville is as follows:  
The poverty rate in Spencerville is

Accepted Answer

A) 15 percent. 
B) 33.3 percent. 
C) 50 percent. 
D) 66.7 percent. 
A) 15 percent. 
B) 33.3 percent. 
C) 50 percent. 
D) 66.7 percent.

Question 8

Which of the following is not an advantage of the Earned Income Tax Credit (EITC)?

Accepted Answer

A) It does not discourage recipients from working. 
B) It is less distortionary than other anti-poverty programs. 
C) It helps the disabled who cannot work. 
D) It applies only to the working poor. 
A) It does not discourage recipients from working. 
B) It is less distortionary than other anti-poverty programs. 
C) It helps the disabled who cannot work. 
D) It applies only to the working poor.

Question 9

Which of the following is not an example of in-kind transfers?

Accepted Answer

A) food stamps 
B) Medicare 
C) the Earned Income Tax Credit 
D) housing vouchers 
A) food stamps 
B) Medicare 
C) the Earned Income Tax Credit 
D) housing vouchers

Question 10

On average,the distribution of income tends to be

Accepted Answer

A) less equal in richer countries than in poorer countries. 
B) more equal in richer countries than in poorer countries. 
C) similar between richer and poorer countries. 
D) random across richer and poorer countries. 
A) less equal in richer countries than in poorer countries. 
B) more equal in richer countries than in poorer countries. 
C) similar between richer and poorer countries. 
D) random across richer and poorer countries.

Question 11

A negative income tax system would

Accepted Answer

A) make taxes more regressive. 
B) sever the link between tax policy and income distribution. 
C) collect from high-income households and give transfers to low-income households. 
D) eliminate progressive tax rates. 
A) make taxes more regressive. 
B) sever the link between tax policy and income distribution. 
C) collect from high-income households and give transfers to low-income households. 
D) eliminate progressive tax rates.

Question 12

If the value of in-kind transfers are taken into account,the number of families living in poverty in the United States would

Accepted Answer

A) increase by about 1 percent. 
B) decrease by about 1 percent. 
C) decrease by about 5 percent. 
D) decrease by about 10 percent. 
A) increase by about 1 percent. 
B) decrease by about 1 percent. 
C) decrease by about 5 percent. 
D) decrease by about 10 percent.

Question 13

Economic mobility in the United States means that fewer than

Accepted Answer

A) 3 percent of families are poor for 8 or more years. 
B) 5 percent of families are poor for 8 or more years. 
C) 8 percent of families are poor for 8 or more years. 
D) 10 percent of families are poor for 8 or more years. 
A) 3 percent of families are poor for 8 or more years. 
B) 5 percent of families are poor for 8 or more years. 
C) 8 percent of families are poor for 8 or more years. 
D) 10 percent of families are poor for 8 or more years.

Question 14

When the government enacts policies to make the distribution of income more equitable,it distorts incentives,alters behavior,and makes the allocation of resources less efficient.

Accepted Answer

A) True 
 B)False

Question 15

The government enacts policies to

Accepted Answer

A) make the distribution of income more efficient. 
B) make the distribution of income more fair. 
C) maximize the use of the welfare system. 
D) minimize the use of in-kind transfers. 
A) make the distribution of income more efficient. 
B) make the distribution of income more fair. 
C) maximize the use of the welfare system. 
D) minimize the use of in-kind transfers.

Question 16

The United States has relatively greater income

Accepted Answer

A) inequality than developing countries but greater equality than other developed countries. 
B) inequality than both developing and other developed countries. 
C) equality than developing countries but greater inequality than other developed countries. 
D) equality than both developing and other developed countries. 
A) inequality than developing countries but greater equality than other developed countries. 
B) inequality than both developing and other developed countries. 
C) equality than developing countries but greater inequality than other developed countries. 
D) equality than both developing and other developed countries.

Question 17

Utilitarianism is

Accepted Answer

A) a liberal religion that focuses on individual rights. 
B) a political philosophy that believes the government should choose policies deemed to be just by an impartial observer. 
C) a political philosophy that believes the government should not redistribute income. 
D) a political philosophy that believes the government should choose policies to maximize the total utility of society. 
A) a liberal religion that focuses on individual rights. 
B) a political philosophy that believes the government should choose policies deemed to be just by an impartial observer. 
C) a political philosophy that believes the government should not redistribute income. 
D) a political philosophy that believes the government should choose policies to maximize the total utility of society.

Question 18

The table below reflects the levels of total utility received from income for each of four members of a society.
   
a.Assume that the society has the following income distribution:
Peter $3
Paul $7
Mary $5
Jane $3
Is it possible for the government to increase total aggregate utility by redistributing income among members of society? Explain your answer.
b.Assume that the government has $19 to allocate among the four members of society.(Assume that no one has any income to start with.) If the government is interested in distributing income in a way that maximizes aggregate total utility, how should it distribute the $19 of income?
c.Does the table above describe a situation characterized by diminishing marginal utility? Explain your answer.

Accepted Answer

a. No.If a dollar is taken from anyone,t

Question 19

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

Accepted Answer

A) not closely related. 
B) negatively related. 
C) directly related. 
D) equal. 
A) not closely related. 
B) negatively related. 
C) directly related. 
D) equal.

Question 20

Suppose that income is subject to constant marginal utility.From a utilitarian perspective,

Accepted Answer

A) some income redistribution from rich to poor would increase social welfare. 
B) some income redistribution from poor to rich would increase social welfare. 
C) any income redistribution would probably reduce social welfare. 
D) any income redistribution would probably increase social welfare. 
A) some income redistribution from rich to poor would increase social welfare. 
B) some income redistribution from poor to rich would increase social welfare. 
C) any income redistribution would probably reduce social welfare. 
D) any income redistribution would probably increase social welfare.

Exam 20: Income Inequality and Poverty

Which of the following is not correct?

In comparison to the average poverty rate,

In the United States approximately 80 percent of millionaires did not inherit their wealth.This statement is an example of

Measures of poverty that fail to account for the value of in-kind transfers

In 2003,what percentage of U.S.families had income levels above $98,200?

Why is it difficult to compare household income distributions among countries?

The poverty line in the country of Spencerville is $20,000.The distribution of income for Spencerville is as follows: The poverty rate in Spencerville is

Which of the following is not an advantage of the Earned Income Tax Credit (EITC)?

Which of the following is not an example of in-kind transfers?

On average,the distribution of income tends to be

A negative income tax system would

If the value of in-kind transfers are taken into account,the number of families living in poverty in the United States would

Economic mobility in the United States means that fewer than

When the government enacts policies to make the distribution of income more equitable,it distorts incentives,alters behavior,and makes the allocation of resources less efficient.

The government enacts policies to

The United States has relatively greater income

Utilitarianism is

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

Suppose that income is subject to constant marginal utility.From a utilitarian perspective,

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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