Question 1

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. A

Question 2

Economic mobility in the United States is

Accepted Answer

A)  uncommon.Over 50 percent of poor families remain poor for 8 or more years. 
B)  uncommon.Over 75 percent of poor families remain poor for 8 or more years. 
C)  common.Fewer than 3 percent of poor families remain poor for 8 or more years. 
D)  common.Fewer than 1 percent of poor families remain poor for 8 or more years. 
A)  uncommon.Over 50 percent of poor families remain poor for 8 or more years. 
B)  uncommon.Over 75 percent of poor families remain poor for 8 or more years. 
C)  common.Fewer than 3 percent of poor families remain poor for 8 or more years. 
D)  common.Fewer than 1 percent of poor families remain poor for 8 or more years. C

Question 3

Data for the United States suggests that about how many millionaires inherited their fortunes?

Accepted Answer

A)  One in seven. 
B)  One in five. 
C)  One in three. 
D)  One in two. 
A)  One in seven. 
B)  One in five. 
C)  One in three. 
D)  One in two. B

Question 4

The philosopher John Rawls argued that

Accepted Answer

A)  people would choose a more equal distribution of income if they had to determine an economic distribution system before knowing their place in it. 
B)  people would choose income inequality to allow the maximum use of their individual talents. 
C)  government has a role to ensure income equality to prevent social unrest. 
D)  people would choose income equality because it is morally right. 
A)  people would choose a more equal distribution of income if they had to determine an economic distribution system before knowing their place in it. 
B)  people would choose income inequality to allow the maximum use of their individual talents. 
C)  government has a role to ensure income equality to prevent social unrest. 
D)  people would choose income equality because it is morally right.

Question 5

Libertarians believe that the government should enforce individual rights to ensure that all people have the same opportunities to use their talents to achieve success.

Accepted Answer

A) True 
 B)False

Question 6

For which of the following programs can a person qualify solely by having a low income?

Accepted Answer

A)  both Temporary Assistance for Needy Families (TANF)and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF)but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI)but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF)nor Supplemental Security Income (SSI) 
A)  both Temporary Assistance for Needy Families (TANF)and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF)but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI)but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF)nor Supplemental Security Income (SSI)

Question 7

The poverty line is adjusted each year to reflect changes in the

Accepted Answer

A)  number of people currently on public assistance. 
B)  level of prices. 
C)  nutritional content of an "adequate" diet. 
D)  size of a family. 
A)  number of people currently on public assistance. 
B)  level of prices. 
C)  nutritional content of an "adequate" diet. 
D)  size of a family.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  The distribution of annual income accurately reflects the distribution of living standards. 
B)  Permanent incomes are more equally distributed than annual incomes. 
C)  Transitory changes in income generally have a significant impact on a family's standard of living. 
D)  Annual income is more equally distributed than permanent income. 
A)  The distribution of annual income accurately reflects the distribution of living standards. 
B)  Permanent incomes are more equally distributed than annual incomes. 
C)  Transitory changes in income generally have a significant impact on a family's standard of living. 
D)  Annual income is more equally distributed than permanent income.

Question 9

Many Democrats who campaigned in the 2006 elections supported raising the U.S.minimum wage.Supporters of raising the minimum wage argue that minimum-wage laws are

Accepted Answer

A)  a tax-free way to help the working poor;after all,business bear the burden of paying higher wages,not the government. 
B)  better that the Earned Income Tax Credit (EIT
C) in targeting the working poor;after all,the EITC may benefit teenagers from middle-class families who work summer jobs at the minimum wage. 
C)  better than in-kind transfers such as food stamps in providing food rather than unhealthy items such as drugs or alcohol. 
D)  a way to increase employment of those likely to make the minimum wage. 
A)  a tax-free way to help the working poor;after all,business bear the burden of paying higher wages,not the government. 
B)  better that the Earned Income Tax Credit (EIT
C) in targeting the working poor;after all,the EITC may benefit teenagers from middle-class families who work summer jobs at the minimum wage. 
C)  better than in-kind transfers such as food stamps in providing food rather than unhealthy items such as drugs or alcohol. 
D)  a way to increase employment of those likely to make the minimum wage.

Question 10

A society consists of three individuals: Arthur,Billie,and Chris.In terms of income and utility,Arthur is currently best-off,Billie ranks in the middle,and Chris is worst-off.Which of the following statements is correct?

Accepted Answer

A)  Utilitarianism suggests that government policies should strive to maximize Billie's utility. 
B)  Liberalism suggests that government policies should strive to maximize Chris's utility. 
C)  Libertarianism suggests that government policies should strive to maximize Arthur's utility. 
D)  Mobilism suggests that government policies should strive to make Chris better off than Billie. 
A)  Utilitarianism suggests that government policies should strive to maximize Billie's utility. 
B)  Liberalism suggests that government policies should strive to maximize Chris's utility. 
C)  Libertarianism suggests that government policies should strive to maximize Arthur's utility. 
D)  Mobilism suggests that government policies should strive to make Chris better off than Billie.

Question 11

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 12

Figure 20-3  
-Refer to Figure 20-3.If the government imposes a minimum wage above Wo,it is likely to

Accepted Answer

A)  increase employment to a level above Qo. 
B)  reduce employment to a level below Qo. 
C)  provide more income to the working poor than they collectively received before the minimum wage was set. 
D)  have no effect on employment. 
A)  increase employment to a level above Qo. 
B)  reduce employment to a level below Qo. 
C)  provide more income to the working poor than they collectively received before the minimum wage was set. 
D)  have no effect on employment.

Question 13

"Only individual members of society earn income,not society itself." This statement is most closely associated with the political philosophy of a

Accepted Answer

A)  utilitarian. 
B)  liberal. 
C)  libertarian. 
D)  None of the above is correct. 
A)  utilitarian. 
B)  liberal. 
C)  libertarian. 
D)  None of the above is correct.

Question 14

Although globalization has reduced income inequality,the number of people living in extreme poverty has remained unchanged.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that income is subject to increasing 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.

Question 16

The distribution of income for Grim is as follows:
 
Where would the government in Grim set the poverty line to establish a poverty rate of 50 percent?

Accepted Answer

A)  $5,000. 
B)  $10,000. 
C)  $15,000. 
D)  $20,000. 
A)  $5,000. 
B)  $10,000. 
C)  $15,000. 
D)  $20,000.

Question 17

Poor families are eligible for financial assistance,without having to demonstrate any additional "need,"

Accepted Answer

A)  under the current welfare system and under a negative income tax. 
B)  under the current welfare system but not under a negative income tax. 
C)  under a negative income tax but not under the current welfare system. 
D)  under neither the current welfare system nor under a negative income tax. 
A)  under the current welfare system and under a negative income tax. 
B)  under the current welfare system but not under a negative income tax. 
C)  under a negative income tax but not under the current welfare system. 
D)  under neither the current welfare system nor under a negative income tax.

Question 18

Which of the following formulas is most representative of a negative income tax proposal?

Accepted Answer

A)  Taxes Owed = (1/4 of Income)*$2 
B)  Taxes Owed = (1/2 of Income)*3/4 
C)  Taxes Owed = (1/2 of Income)+ $10,000 
D)  Taxes Owed = (1/3 of Income)- $10,000 
A)  Taxes Owed = (1/4 of Income)*$2 
B)  Taxes Owed = (1/2 of Income)*3/4 
C)  Taxes Owed = (1/2 of Income)+ $10,000 
D)  Taxes Owed = (1/3 of Income)- $10,000

Question 19

The poverty line in the country of Abbyville is $15,000.The distribution of income for Abbyville is as follows:
 
The poverty rate in Abbyville is

Accepted Answer

A)  12 percent. 
B)  32 percent. 
C)  50 percent. 
D)  68 percent. 
A)  12 percent. 
B)  32 percent. 
C)  50 percent. 
D)  68 percent.

Question 20

Scenario 20-1
Suppose that a society is made up of five families whose incomes are as follows:
$120,000;$90,000;$30,000;$30,000;and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where the poverty line is $35,000;families earning over $35,000 pay 10% of their income in taxes,and families earning less than $35,000 pay no income tax.
-Refer to Scenario 20-1.Assuming that utility is directly proportional to the cash value of after-tax income,which government policy would an advocate of liberalism prefer?

Accepted Answer

A)  Plan A 
B)  Plan B 
C)  either Plan A or Plan B 
D)  neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy 
A)  Plan A 
B)  Plan B 
C)  either Plan A or Plan B 
D)  neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy

Exam 20: Income Inequality and Poverty

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

Economic mobility in the United States is

Data for the United States suggests that about how many millionaires inherited their fortunes?

The philosopher John Rawls argued that

Libertarians believe that the government should enforce individual rights to ensure that all people have the same opportunities to use their talents to achieve success.

For which of the following programs can a person qualify solely by having a low income?

The poverty line is adjusted each year to reflect changes in the

Which of the following statements is correct?

Many Democrats who campaigned in the 2006 elections supported raising the U.S.minimum wage.Supporters of raising the minimum wage argue that minimum-wage laws are

A society consists of three individuals: Arthur,Billie,and Chris.In terms of income and utility,Arthur is currently best-off,Billie ranks in the middle,and Chris is worst-off.Which of the following statements is correct?

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

Figure 20-3 -Refer to Figure 20-3.If the government imposes a minimum wage above Wo,it is likely to

"Only individual members of society earn income,not society itself." This statement is most closely associated with the political philosophy of a

Although globalization has reduced income inequality,the number of people living in extreme poverty has remained unchanged.

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

The distribution of income for Grim is as follows: Where would the government in Grim set the poverty line to establish a poverty rate of 50 percent?

Poor families are eligible for financial assistance,without having to demonstrate any additional "need,"

Which of the following formulas is most representative of a negative income tax proposal?

The poverty line in the country of Abbyville is $15,000.The distribution of income for Abbyville is as follows: The poverty rate in Abbyville is

Ten Principles of 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

Monopolistic Competition

Oligopoly

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

Filters

Figure 20-3 -Refer to Figure 20-3.If the government imposes a minimum wage above W_o,it is likely to