Question 1

Since the early 1970s,welfare benefits have declined,

Accepted Answer

A)  which is largely due to the success of the negative income tax program. 
B)  which is largely due to the success of private charities. 
C)  yet the percentage of children living with only one parent has increased. 
D)  and the percentage of children living with only one parent has decreased. 
A)  which is largely due to the success of the negative income tax program. 
B)  which is largely due to the success of private charities. 
C)  yet the percentage of children living with only one parent has increased. 
D)  and the percentage of children living with only one parent has decreased.

Question 2

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

Accepted Answer

A)  A more efficient allocation of resources. 
B)  A distortion of incentives. 
C)  Unchanged behavior. 
D)  All of the above are correct. 
A)  A more efficient allocation of resources. 
B)  A distortion of incentives. 
C)  Unchanged behavior. 
D)  All of the above are correct.

Question 3

Liberalism is founded on a premise that behind a "veil of ignorance,"

Accepted Answer

A)  justice cannot be agreed upon. 
B)  everyone's income should be equal. 
C)  everyone would agree to "just" rules to reallocate income. 
D)  society should maximize the sum of individual utilities. 
A)  justice cannot be agreed upon. 
B)  everyone's income should be equal. 
C)  everyone would agree to "just" rules to reallocate income. 
D)  society should maximize the sum of individual utilities.

Question 4

Since the early 1970s,average incomes have

Accepted Answer

A)  increased,which has reduced the poverty rate. 
B)  increased,while the poverty rate increased slightly. 
C)  decreased,while the poverty rate has remained unchanged. 
D)  remained unchanged,while the poverty rate has decreased. 
A)  increased,which has reduced the poverty rate. 
B)  increased,while the poverty rate increased slightly. 
C)  decreased,while the poverty rate has remained unchanged. 
D)  remained unchanged,while the poverty rate has decreased.

Question 5

Unemployment insurance benefits is a type of

Accepted Answer

A)  in-kind transfer. 
B)  negative income tax payment. 
C)  property income. 
D)  welfare payment. 
A)  in-kind transfer. 
B)  negative income tax payment. 
C)  property income. 
D)  welfare payment.

Question 6

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?

Accepted Answer

Life-cycle variation in income suggests

Question 7

Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

Accepted Answer

A)  In-kind transfers. 
B)  Negative income tax. 
C)  Transitory versus permanent income. 
D)  Economic mobility. 
A)  In-kind transfers. 
B)  Negative income tax. 
C)  Transitory versus permanent income. 
D)  Economic mobility.

Question 8

According to a libertarian,if income were to be distributed equally,

Accepted Answer

A)  productivity would increase. 
B)  social utility would increase. 
C)  the marginal productivity of the poor would fall,whereas the marginal productivity of the rich would rise. 
D)  productivity would decrease. 
A)  productivity would increase. 
B)  social utility would increase. 
C)  the marginal productivity of the poor would fall,whereas the marginal productivity of the rich would rise. 
D)  productivity would decrease.

Question 9

In 2005 the top fifth of income earners accounted for over 50% of all income received by United States' families.

Accepted Answer

A) True 
 B)False

Question 10

In the United States,a typical worker's income peaks around age

Accepted Answer

A)  70 
B)  60 
C)  60. 
D)  40 
A)  70 
B)  60 
C)  60. 
D)  40

Question 11

Economic mobility in the United States is so great 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 12

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Accepted Answer

A)  Utilitarianism. 
B)  Liberalism. 
C)  Libertarianism. 
D)  Welfarism. 
A)  Utilitarianism. 
B)  Liberalism. 
C)  Libertarianism. 
D)  Welfarism.

Question 13

Which of the following statements is correct?

Accepted Answer

A)  A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers. 
B)  A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit. 
C)  A disadvantage of an Earned Income Tax Credit (EIT
C) is that a person who is unable to work due to a disability does not benefit from the program. 
D)  All of the above are correct. 
A)  A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not low-income workers. 
B)  A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit. 
C)  A disadvantage of an Earned Income Tax Credit (EIT
C) is that a person who is unable to work due to a disability does not benefit from the program. 
D)  All of the above are correct.

Question 14

The U.S.welfare system was revised by a 1996 law that

Accepted Answer

A)  consolidated all of the previous assistance programs into a single program. 
B)  limited the amount of time that people could receive assistance. 
C)  said it was no longer necessary for poor people to demonstrate an additional "need," such as small children or a disability,to qualify for assistance. 
D)  turned all federally-run welfare programs over to the states. 
A)  consolidated all of the previous assistance programs into a single program. 
B)  limited the amount of time that people could receive assistance. 
C)  said it was no longer necessary for poor people to demonstrate an additional "need," such as small children or a disability,to qualify for assistance. 
D)  turned all federally-run welfare programs over to the states.

Question 15

Fewer than three percent of families are poor for eight or more years.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer.Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Florida.Which of the following is correct?

Accepted Answer

A)  Both Family A and Family B's spending habits suggest that they base their purchasing decisions on transitory income. 
B)  Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C)  Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D)  Both Family A and Family B's spending habits suggest that they base their purchasing decisions on permanent income. 
A)  Both Family A and Family B's spending habits suggest that they base their purchasing decisions on transitory income. 
B)  Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C)  Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D)  Both Family A and Family B's spending habits suggest that they base their purchasing decisions on permanent income.

Question 17

A U.S.family earning $80,000 would be in the top 20 percent of income distribution in 2005.

Accepted Answer

A) True 
 B)False

Question 18

The top 5 percent of U.S.annual family income in 2005 was $184,500 or more.

Accepted Answer

A) True 
 B)False

Question 19

In general,which of the following would libertarians argue is more important than equal outcomes?

Accepted Answer

A)  Equal opportunities. 
B)  Equal incomes. 
C)  Providing a social safety net. 
D)  Assuring fair compensation for workers. 
A)  Equal opportunities. 
B)  Equal incomes. 
C)  Providing a social safety net. 
D)  Assuring fair compensation for workers.

Question 20

Which of the following statements is correct?

Accepted Answer

A)  The poverty line is a relative standard. 
B)  Economic growth that raises all incomes will decrease the number of families in poverty. 
C)  Increasing income inequality reduces poverty. 
D)  Economic growth,by definition,affects all families equally. 
A)  The poverty line is a relative standard. 
B)  Economic growth that raises all incomes will decrease the number of families in poverty. 
C)  Increasing income inequality reduces poverty. 
D)  Economic growth,by definition,affects all families equally.

Exam 20: Income Inequality and Poverty

Since the early 1970s,welfare benefits have declined,

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

Liberalism is founded on a premise that behind a "veil of ignorance,"

Since the early 1970s,average incomes have

Unemployment insurance benefits is a type of

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?

Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

According to a libertarian,if income were to be distributed equally,

In 2005 the top fifth of income earners accounted for over 50% of all income received by United States' families.

In the United States,a typical worker's income peaks around age

Economic mobility in the United States is so great that fewer than

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Which of the following statements is correct?

The U.S.welfare system was revised by a 1996 law that

Fewer than three percent of families are poor for eight or more years.

A U.S.family earning $80,000 would be in the top 20 percent of income distribution in 2005.

The top 5 percent of U.S.annual family income in 2005 was $184,500 or more.

In general,which of the following would libertarians argue is more important than equal outcomes?

Which of the following statements is correct?

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

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