Question 1

If complete equality of income were legislated,which of the following would economics predict?

Accepted Answer

A) People would become richer. 
B) Society would gain utility from the extra goods produced. 
C) Individuals would willingly work longer hours and thus produce more. 
D) The incentive to produce and perform efficiently would be virtually eliminated. 
A) People would become richer. 
B) Society would gain utility from the extra goods produced. 
C) Individuals would willingly work longer hours and thus produce more. 
D) The incentive to produce and perform efficiently would be virtually eliminated. D

Question 2

Compared to low-income families,a larger proportion of high-income families

Accepted Answer

A) is headed by a person with a college degree. 
B) has both a husband and a wife who work full time. 
C) is headed by a person between the ages of 35 and 64. 
D) is all of the above. 
A) is headed by a person with a college degree. 
B) has both a husband and a wife who work full time. 
C) is headed by a person between the ages of 35 and 64. 
D) is all of the above. D

Question 3

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. B

Question 4

Figure 15-3
  
-As shown in Figure 15-3,20 percent of families earned a cumulative share of about ____ percent of income.

Accepted Answer

A) 5 
B) 10 
C) 30 
D) 50 
A) 5 
B) 10 
C) 30 
D) 50

Question 5

According to the official measure of poverty,in 2009 the poverty rate of families in the United States was

Accepted Answer

A) 4.2 percent. 
B) 11.1 percent. 
C) 18.5 percent. 
D) 22 percent 
A) 4.2 percent. 
B) 11.1 percent. 
C) 18.5 percent. 
D) 22 percent

Question 6

In a market economy,

Accepted Answer

A) there is a fixed economic pie to be divided among individuals. 
B) differences in incomes provide individuals with an incentive to supply resources that are highly valued by others. 
C) a central distributing agency carves up the economic pie and allocates slices to individuals. 
D) both a and b above are true. 
A) there is a fixed economic pie to be divided among individuals. 
B) differences in incomes provide individuals with an incentive to supply resources that are highly valued by others. 
C) a central distributing agency carves up the economic pie and allocates slices to individuals. 
D) both a and b above are true.

Question 7

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

Accepted Answer

Benefits in-kind address the paternal as

Question 8

(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 9

Welfare data show that in the United States

Accepted Answer

A) most welfare recipients receive benefits only for a short time. 
B) welfare encourages young women to have children. 
C) children brought up on welfare tend to remain on welfare as adults. 
D) having poor parents does not increase the chances of a child's being on welfare as an adult. 
E) children of poor parents have a 50 percent chance of being middle-income adults. 
A) most welfare recipients receive benefits only for a short time. 
B) welfare encourages young women to have children. 
C) children brought up on welfare tend to remain on welfare as adults. 
D) having poor parents does not increase the chances of a child's being on welfare as an adult. 
E) children of poor parents have a 50 percent chance of being middle-income adults.

Question 10

This year,Tammy earned $15,000 and she paid 15 percent in income and payroll taxes.She qualified for Medicaid and food stamps.For every $100 that she earns,Tammy loses $35 in Medicaid benefits and $15 in food stamps.Tammy faces an effective marginal tax rate of

Accepted Answer

A) 15 percent. 
B) 35 percent. 
C) 50 percent. 
D) 65 percent. 
A) 15 percent. 
B) 35 percent. 
C) 50 percent. 
D) 65 percent.

Question 11

Why not designate the poorest 10 percent of the population as the official measure of poverty?

Accepted Answer

This relative measure would imply that p

Question 12

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 13

Suppose you had the choice of attending two universities.University A pays all of its professors the same wage and awards the same raises.University B pays each professor according to market wages and productivity.Which university would you rather attend and why?

Accepted Answer

It would appear that the professors at u

Question 14

Redistribution through the public sector tends to lower economic prosperity because

Accepted Answer

A) it weakens the link between productive activity and the reward derived from it. 
B) it encourages resources to flow into wasteful rent-seeking activities. 
C) the higher tax rates required to finance redistribution result in resources being devoted toward tax avoidance activities. 
D) all of the above are true. 
A) it weakens the link between productive activity and the reward derived from it. 
B) it encourages resources to flow into wasteful rent-seeking activities. 
C) the higher tax rates required to finance redistribution result in resources being devoted toward tax avoidance activities. 
D) all of the above are true.

Question 15

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.

Question 16

Figure 15-1
  
-As shown in Figure 15-1,the distance between points B and D means that 60 percent of families earn less of total income than required for perfect equality.

Accepted Answer

A) 30 percent 
B) 60 percent 
C) 90 percent 
D) insufficient information to answer question. 
A) 30 percent 
B) 60 percent 
C) 90 percent 
D) insufficient information to answer question.

Question 17

Data indicate that the large increase in government spending on income transfers that started with the War on Poverty during the latter half of the 1960s has resulted in

Accepted Answer

A) a substantial reduction in the poverty rate. 
B) a more equal distribution of income. 
C) fewer single-parent families because a married couple receives benefits twice as large. 
D) little change in the official poverty rate. 
A) a substantial reduction in the poverty rate. 
B) a more equal distribution of income. 
C) fewer single-parent families because a married couple receives benefits twice as large. 
D) little change in the official poverty rate.

Question 18

When determining whether an income places a family or individual in poverty,the official poverty rate excludes

Accepted Answer

A) money income derived from sources other than labor. 
B) money income received from transfer programs. 
C) noncash benefits derived from programs supplying recipients with food,housing,and medical benefits. 
D) noncash benefits that are provided the non-elderly,but it counts these benefits when they are supplied to the elderly. 
A) money income derived from sources other than labor. 
B) money income received from transfer programs. 
C) noncash benefits derived from programs supplying recipients with food,housing,and medical benefits. 
D) noncash benefits that are provided the non-elderly,but it counts these benefits when they are supplied to the elderly.

Question 19

In the United States the degree of individual income mobility (that is,the degree to which people move from higher to lower or lower to higher income groupings)is

Accepted Answer

A) rigid in both directions. 
B) flexible in both directions. 
C) flexible upward but rigid downward since high income perpetuates itself from generation to generation. 
D) flexible downward but rigid upward since most low-income people never rise significantly above the poverty level. 
A) rigid in both directions. 
B) flexible in both directions. 
C) flexible upward but rigid downward since high income perpetuates itself from generation to generation. 
D) flexible downward but rigid upward since most low-income people never rise significantly above the poverty level.

Question 20

Economic analysis indicates that

Accepted Answer

A) unorganized groups of taxpayers and consumers will be better able to secure redistribution through the political process than well-organized interest groups. 
B) rent-seeking activities are beneficial to a nation's prosperity because they alter public policy. 
C) most income transfers in the United States are directed toward the poor. 
D) market adjustments and competition for transfers will erode much of the gain of transfer recipients. 
A) unorganized groups of taxpayers and consumers will be better able to secure redistribution through the political process than well-organized interest groups. 
B) rent-seeking activities are beneficial to a nation's prosperity because they alter public policy. 
C) most income transfers in the United States are directed toward the poor. 
D) market adjustments and competition for transfers will erode much of the gain of transfer recipients.

Exam 28: Income Inequality and Poverty

If complete equality of income were legislated,which of the following would economics predict?

Compared to low-income families,a larger proportion of high-income families

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

Figure 15-3 -As shown in Figure 15-3,20 percent of families earned a cumulative share of about ____ percent of income.

According to the official measure of poverty,in 2009 the poverty rate of families in the United States was

In a market economy,

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

(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.

Welfare data show that in the United States

This year,Tammy earned $15,000 and she paid 15 percent in income and payroll taxes.She qualified for Medicaid and food stamps.For every $100 that she earns,Tammy loses $35 in Medicaid benefits and $15 in food stamps.Tammy faces an effective marginal tax rate of

Why not designate the poorest 10 percent of the population as the official measure of poverty?

Data on income inequality in the United States indicate that

Suppose you had the choice of attending two universities.University A pays all of its professors the same wage and awards the same raises.University B pays each professor according to market wages and productivity.Which university would you rather attend and why?

Redistribution through the public sector tends to lower economic prosperity because

The official poverty rate of elderly families

Figure 15-1 -As shown in Figure 15-1,the distance between points B and D means that 60 percent of families earn less of total income than required for perfect equality.

Data indicate that the large increase in government spending on income transfers that started with the War on Poverty during the latter half of the 1960s has resulted in

When determining whether an income places a family or individual in poverty,the official poverty rate excludes

In the United States the degree of individual income mobility (that is,the degree to which people move from higher to lower or lower to higher income groupings)is

Economic analysis indicates that

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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