Question 1

This year,Bob earned a total of $9,000.As a result,he received $9,000 less in government transfers.Therefore,his implicit marginal tax rate is

Accepted Answer

A) zero. 
B) 25 percent. 
C) 50 percent. 
D) 100 percent. 
A) zero. 
B) 25 percent. 
C) 50 percent. 
D) 100 percent.

Question 2

Which of the following best explains why so many persons with incomes below the poverty threshold income level work very little or not at all?

Accepted Answer

A) They confront high implicit marginal tax rates. 
B) They do not enjoy income as much as other people. 
C) There are no jobs for low-skill workers. 
D) They often face very low explicit marginal tax rates. 
A) They confront high implicit marginal tax rates. 
B) They do not enjoy income as much as other people. 
C) There are no jobs for low-skill workers. 
D) They often face very low explicit marginal tax rates.

Question 3

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

Accepted Answer

A) have smaller family sizes (fewer persons per family). 
B) have more workers per family. 
C) be headed by a person who has not completed high school. 
D) supply fewer weeks of work per year. 
A) have smaller family sizes (fewer persons per family). 
B) have more workers per family. 
C) be headed by a person who has not completed high school. 
D) supply fewer weeks of work per year.

Question 4

Figure 15-3
  
-As shown in Figure 15-3,the perfect equality line is drawn between points

Accepted Answer

A) W and Y along the curve. 
B) X and Z. 
C) W and Y along the straight line. 
D) W and X. 
A) W and Y along the curve. 
B) X and Z. 
C) W and Y along the straight line. 
D) W and X.

Question 5

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 6

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 7

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.

Question 8

Evaluate this sentence,"The best way to get rid of poverty is to increase government expenditures on welfare programs."

Accepted Answer

A) This sentence is inherently true.By providing the poor with more money they will no longer remain in poverty. 
B) This sentence is true.Everyone would be better off if we increased government transfer programs. 
C) This sentence is false.Increasing transfer benefits like welfare will lower the opportunity cost of making decisions that can lead to poverty 
D) This sentence is false.Increasing government expenditures will only be harmful to those in poverty. 
A) This sentence is inherently true.By providing the poor with more money they will no longer remain in poverty. 
B) This sentence is true.Everyone would be better off if we increased government transfer programs. 
C) This sentence is false.Increasing transfer benefits like welfare will lower the opportunity cost of making decisions that can lead to poverty 
D) This sentence is false.Increasing government expenditures will only be harmful to those in poverty.

Question 9

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.

Question 10

Figure 15-2
  
-According to the Lorenz curve shown in Figure 15-2,what percentage of total income is earned by the richest 20 percent of families?

Accepted Answer

A) 20 percent. 
B) 40 percent. 
C) 60 percent. 
D) 80 percent. 
A) 20 percent. 
B) 40 percent. 
C) 60 percent. 
D) 80 percent.

Question 11

Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades.He concludes that the rich stay rich and the poor stay poor.Is this a valid conclusion,or has Andy missed something?

Accepted Answer

What Andy has missed is the possibility

Question 12

A valid argument against redistributing income to achieve complete equality is that

Accepted Answer

A) income equality would destroy the social cohesiveness that exists among different income groupings. 
B) this would eliminate the monetary incentives to work and produce. 
C) the cost of obtaining the equality would be so deflationary as to promote economic instability. 
D) income equality would imply class segregation based on factors such as sex or race since income would be constant. 
A) income equality would destroy the social cohesiveness that exists among different income groupings. 
B) this would eliminate the monetary incentives to work and produce. 
C) the cost of obtaining the equality would be so deflationary as to promote economic instability. 
D) income equality would imply class segregation based on factors such as sex or race since income would be constant.

Question 13

If the marginal productivity of labor was the sole determinant of household income in the U.S. ,then

Accepted Answer

A) no households would be poor according to the official government definition of poverty. 
B) no households would be poor according to a relative definition of poverty. 
C) the distribution of income would be unequal. 
D) every household would have sufficient income to meet biological needs. 
A) no households would be poor according to the official government definition of poverty. 
B) no households would be poor according to a relative definition of poverty. 
C) the distribution of income would be unequal. 
D) every household would have sufficient income to meet biological needs.

Question 14

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 15

Annual income data would be a better index of economic inequality if

Accepted Answer

A) all households filed tax returns revealing their real income. 
B) households were more different with regard to age and size characteristics. 
C) all households were more similar with regard to size,age,education,and other major factors that are linked to income. 
D) mathematicians could grasp the complexities of the calculations. 
A) all households filed tax returns revealing their real income. 
B) households were more different with regard to age and size characteristics. 
C) all households were more similar with regard to size,age,education,and other major factors that are linked to income. 
D) mathematicians could grasp the complexities of the calculations.

Question 16

Poor people,who receive income assistance from the government,often do not work because

Accepted Answer

A) they face very high implicit marginal tax rates. 
B) they are usually not physically able to work. 
C) they have no desire for additional money. 
D) the government forces them to stay at home and take care of their children. 
A) they face very high implicit marginal tax rates. 
B) they are usually not physically able to work. 
C) they have no desire for additional money. 
D) the government forces them to stay at home and take care of their children.

Question 17

The poverty threshold income level is

Accepted Answer

A) an absolute amount that applies to all families equally (i.e. ,$20,000 household earnings for 2009). 
B) variable with respect to family size and composition. 
C) adjusted once each decade,with the census numbers. 
D) all of the above. 
A) an absolute amount that applies to all families equally (i.e. ,$20,000 household earnings for 2009). 
B) variable with respect to family size and composition. 
C) adjusted once each decade,with the census numbers. 
D) all of the above.

Question 18

Which of the following is false about data on the inequality of annual family (or household)incomes?

Accepted Answer

A) The degree of inequality is reduced when transfers and taxes are considered. 
B) The inequality in annual income data understates the true degree of inequality in lifetime income. 
C) Differences in age and family characteristics contribute to the degree of inequality. 
D) The inequality in consumption spending across households is smaller than the inequality in annual income. 
A) The degree of inequality is reduced when transfers and taxes are considered. 
B) The inequality in annual income data understates the true degree of inequality in lifetime income. 
C) Differences in age and family characteristics contribute to the degree of inequality. 
D) The inequality in consumption spending across households is smaller than the inequality in annual income.

Question 19

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.

Question 20

Which of the following benefits is counted as income when the official poverty rate is calculated?

Accepted Answer

A) Medicaid benefits 
B) food stamps 
C) public housing benefits 
D) none of the above 
E) all of the above 
A) Medicaid benefits 
B) food stamps 
C) public housing benefits 
D) none of the above 
E) all of the above

Exam 28: Income Inequality and Poverty

This year,Bob earned a total of $9,000.As a result,he received $9,000 less in government transfers.Therefore,his implicit marginal tax rate is

Which of the following best explains why so many persons with incomes below the poverty threshold income level work very little or not at all?

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

Figure 15-3 -As shown in Figure 15-3,the perfect equality line is drawn between points

Income mobility studies suggest that poverty

The poverty threshold income level is

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

Evaluate this sentence,"The best way to get rid of poverty is to increase government expenditures on welfare programs."

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

Figure 15-2 -According to the Lorenz curve shown in Figure 15-2,what percentage of total income is earned by the richest 20 percent of families?

Andy observes that the income distribution between the richest and poorest people in the population has remained fixed for decades.He concludes that the rich stay rich and the poor stay poor.Is this a valid conclusion,or has Andy missed something?

A valid argument against redistributing income to achieve complete equality is that

If the marginal productivity of labor was the sole determinant of household income in the U.S. ,then

Income mobility

Annual income data would be a better index of economic inequality if

Poor people,who receive income assistance from the government,often do not work because

The poverty threshold income level is

Which of the following is false about data on the inequality of annual family (or household)incomes?

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

Which of the following benefits is counted as income when the official poverty rate is calculated?

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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