Question 1

The maximin criterion suggests that the focus of social policy would be to:

Accepted Answer

A)  elevate the wellbeing of all workers 
B)  elevate the wellbeing of those at the bottom of the income distribution 
C)  ensure an egalitarian distribution of income 
D)  expropriate the factors of production from the capitalist class 
A)  elevate the wellbeing of all workers 
B)  elevate the wellbeing of those at the bottom of the income distribution 
C)  ensure an egalitarian distribution of income 
D)  expropriate the factors of production from the capitalist class

Question 2

There are 100 people in society and they have to decide on an income distribution from behind the veil of ignorance. Use the maximin principle to decide which of the following income distributions would be selected by a Rawlsian liberal. Explain your answer.
In state A, 25 people earn $5m, 74 people earn $2m and 1 person earns $1m.
In state B, 5 people earn $5m and 95 people earn $2m.

Accepted Answer

The maximin principle is based on maximi

Question 3

If cash is transferred to the poor, this is known as an in-kind transfer.

Accepted Answer

A) True 
 B)False

Question 4

According to the Henderson Commission, the poverty line in Australia was set at:

Accepted Answer

A)  25 per cent of average weekly earnings 
B)  56.5 per cent of average weekly earnings 
C)  65.5 per cent of average weekly earnings 
D)  75 per cent of average weekly earnings 
A)  25 per cent of average weekly earnings 
B)  56.5 per cent of average weekly earnings 
C)  65.5 per cent of average weekly earnings 
D)  75 per cent of average weekly earnings

Question 5

Evidence suggests that the women's movement has:

Accepted Answer

A)  decreased income inequality across households 
B)  increased income inequality across households 
C)  had no effect on the distribution of income across households 
D)  decreased the importance of traditional measures of income inequality 
A)  decreased income inequality across households 
B)  increased income inequality across households 
C)  had no effect on the distribution of income across households 
D)  decreased the importance of traditional measures of income inequality

Question 6

When incentives to earn income are distorted by income redistribution programs:

Accepted Answer

A)  total income in an economy can fall 
B)  total aggregate utility in society can fall 
C)  losses can exceed potential gains from greater equality of income 
D)  all of the above can occur 
A)  total income in an economy can fall 
B)  total aggregate utility in society can fall 
C)  losses can exceed potential gains from greater equality of income 
D)  all of the above can occur

Question 7

One way to measure the poverty rate is by calculating the percentage of the population whose family income is below the poverty line.

Accepted Answer

A) True 
 B)False

Question 8

Poverty is correlated with race, age and family composition.

Accepted Answer

A) True 
 B)False

Question 9

What would be the qualification(s) to receive government assistance under a negative income tax? (i) being enrolled in job training
(ii) having preschool children
(iii) having a low income

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (ii) only 
D)  (iii) only 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (ii) only 
D)  (iii) only

Question 10

A permanent income theory suggests that a person's income is composed of predictable life cycle variation and:

Accepted Answer

A)  permanent changes that reflect the seasonal capacity of the economy 
B)  structural change in the economy 
C)  aggregate variation resulting from predictable business cycles 
D)  random and transitory forces in the economy 
A)  permanent changes that reflect the seasonal capacity of the economy 
B)  structural change in the economy 
C)  aggregate variation resulting from predictable business cycles 
D)  random and transitory forces in the economy

Question 11

Evidence suggests that:

Accepted Answer

A)  the best way to deter immigrants is to make legal aliens ineligible for many welfare benefits 
B)  legislation designed to limit the time a family can be on welfare will never be passed 
C)  welfare dependency is embraced by over 80 per cent of new welfare recipients 
D)  the longer a family is on welfare, the harder it is to get off welfare 
A)  the best way to deter immigrants is to make legal aliens ineligible for many welfare benefits 
B)  legislation designed to limit the time a family can be on welfare will never be passed 
C)  welfare dependency is embraced by over 80 per cent of new welfare recipients 
D)  the longer a family is on welfare, the harder it is to get off welfare

Question 12

Suppose the government proposes a negative income tax that calculates taxes owed according to the formula TAXES OWED = (1/3 * INCOME)- 10 000. Suppose a family only earns $12 000. How much tax would they pay?

Accepted Answer

A)  they will pay a tax of $4000 
B)  they will pay a tax of $6000 
C)  they will receive a net income subsidy of $6000 
D)  they will receive a net income subsidy of $4000 
A)  they will pay a tax of $4000 
B)  they will pay a tax of $6000 
C)  they will receive a net income subsidy of $6000 
D)  they will receive a net income subsidy of $4000

Question 13

If anti-poverty programs generate high marginal tax rates they may end up discouraging people from working.

Accepted Answer

A) True 
 B)False

Question 14

Under a negative income tax, it is likely for a person who does not earn income to receive assistance from the government.

Accepted Answer

A) True 
 B)False

Question 15

If a time limit is not used on recipient benefits, then the effect may be to: (i) force mothers to work outside the home
(ii) encourage child abuse by absent fathers
(iii) encourage dependency on government programs

Accepted Answer

A)  (i) and (ii) 
B)  (i) and (iii) 
C)  (ii) and (iii) 
D)  (iii) only 
A)  (i) and (ii) 
B)  (i) and (iii) 
C)  (ii) and (iii) 
D)  (iii) only

Question 16

Suppose a government enacts policies that redistribute income. Which of the following statements is true? (i) incentives will be distorted
(ii) people are likely to alter their market behaviour
(iii) a fair distribution of income is ensured

Accepted Answer

A)  (i) only 
B)  (i) and (ii) 
C)  (ii) and (iii) 
D)  (i) and (iii) 
A)  (i) only 
B)  (i) and (ii) 
C)  (ii) and (iii) 
D)  (i) and (iii)

Question 17

Assume that the government proposes a negative income tax that calculates taxes owed by the formula TAXES OWED = (1/3 * INCOME) - $10 000. Compute the tax that would be owed given each of the following levels of income.
a. $120 000
b. $90 000
c. $60 000
d. $30 000
e. zero

Accepted Answer

a. $30 000
b. $20 00

Question 18

Measuring poverty using an absolute income scale (like the poverty line) is likely to be deceptive because:

Accepted Answer

A)  income is not correlated with job satisfaction 
B)  the poor are not likely to participate in the labour market 
C)  income measures don't include the value of in-kind transfers 
D)  money is more highly valued by the poor than by the rich 
A)  income is not correlated with job satisfaction 
B)  the poor are not likely to participate in the labour market 
C)  income measures don't include the value of in-kind transfers 
D)  money is more highly valued by the poor than by the rich

Question 19

Explain the concept of diminishing marginal utility and describe the role that it plays in the utilitarian argument for redistribution of income.

Accepted Answer

In this context, diminishing marginal ut

Question 20

A school voucher system introduced in the United States has lead to:

Accepted Answer

A)  less low income households sending their children to private schools 
B)  more low income households sending their children to private schools 
C)  no change in the number of low income households sending their children to private schools 
D)  decrease in the number of private school schools 
A)  less low income households sending their children to private schools 
B)  more low income households sending their children to private schools 
C)  no change in the number of low income households sending their children to private schools 
D)  decrease in the number of private school schools

Exam 21: Income Inequity and Poverty

The maximin criterion suggests that the focus of social policy would be to:

If cash is transferred to the poor, this is known as an in-kind transfer.

According to the Henderson Commission, the poverty line in Australia was set at:

Evidence suggests that the women's movement has:

When incentives to earn income are distorted by income redistribution programs:

One way to measure the poverty rate is by calculating the percentage of the population whose family income is below the poverty line.

Poverty is correlated with race, age and family composition.

What would be the qualification(s) to receive government assistance under a negative income tax? (i) being enrolled in job training (ii) having preschool children (iii) having a low income

A permanent income theory suggests that a person's income is composed of predictable life cycle variation and:

Evidence suggests that:

Suppose the government proposes a negative income tax that calculates taxes owed according to the formula TAXES OWED = (1/3 * INCOME)- 10 000. Suppose a family only earns $12 000. How much tax would they pay?

If anti-poverty programs generate high marginal tax rates they may end up discouraging people from working.

Under a negative income tax, it is likely for a person who does not earn income to receive assistance from the government.

If a time limit is not used on recipient benefits, then the effect may be to: (i) force mothers to work outside the home (ii) encourage child abuse by absent fathers (iii) encourage dependency on government programs

Suppose a government enacts policies that redistribute income. Which of the following statements is true? (i) incentives will be distorted (ii) people are likely to alter their market behaviour (iii) a fair distribution of income is ensured

Assume that the government proposes a negative income tax that calculates taxes owed by the formula TAXES OWED = (1/3 * INCOME) - $10 000. Compute the tax that would be owed given each of the following levels of income. a. $120 000 b. $90 000 c. $60 000 d. $30 000 e. zero

Measuring poverty using an absolute income scale (like the poverty line) is likely to be deceptive because:

Explain the concept of diminishing marginal utility and describe the role that it plays in the utilitarian argument for redistribution of income.

A school voucher system introduced in the United States has lead to:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions 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 Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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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