Question 1

Who said "The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries"?

Accepted Answer

The answer of Who said "The inherent vice of capitalism...

Question 2

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

Accepted Answer

A)  Utilitarianism suggests that government policies should strive to maximize the sum of all three individuals' utility. 
B)  Liberalism suggests that government policies should strive to maximize the sum of Larry's utility and Nina's utility. 
C)  Libertarianism suggests that government policies should strive to make Nina better off at the cost of Larry and Margaret. 
D)  Utilitarianism suggests that the government policies should strive to make Nina better off than Margaret. 
A)  Utilitarianism suggests that government policies should strive to maximize the sum of all three individuals' utility. 
B)  Liberalism suggests that government policies should strive to maximize the sum of Larry's utility and Nina's utility. 
C)  Libertarianism suggests that government policies should strive to make Nina better off at the cost of Larry and Margaret. 
D)  Utilitarianism suggests that the government policies should strive to make Nina better off than Margaret.

Question 3

Pietro is 40 years old and is laid off from his job at the paper plant and borrows from his savings for 8 months until he finds a new job. Pietro's

Accepted Answer

A)  transitory income likely exceeds his permanent income for that year. 
B)  borrowing is representative of a normal economic life cycle. 
C)  permanent income is largely unaffected by this one time change to his income. 
D)  economic mobility during this year is highly unusual, as US workers tend to stay in a particular income class. 
A)  transitory income likely exceeds his permanent income for that year. 
B)  borrowing is representative of a normal economic life cycle. 
C)  permanent income is largely unaffected by this one time change to his income. 
D)  economic mobility during this year is highly unusual, as US workers tend to stay in a particular income class.

Question 4

Economists study poverty and income inequality to answer which of the following questions?

Accepted Answer

A)  What are people's wages? 
B)  How does labor-force experience affect wages? 
C)  How much inequality is there in society? 
D)  How do people adjust their behavior due to taxation? 
A)  What are people's wages? 
B)  How does labor-force experience affect wages? 
C)  How much inequality is there in society? 
D)  How do people adjust their behavior due to taxation?

Question 5

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $20,000 owe?

Accepted Answer

A)  -$8,000 
B)  -$2,400 
C)  $0 
D)  $2,400 
A)  -$8,000 
B)  -$2,400 
C)  $0 
D)  $2,400

Question 6

A disadvantage associated with in-kind transfers to reduce poverty is that they

Accepted Answer

A)  alter peoples' incentives, whereas a negative income tax does not alter peoples' incentives. 
B)  do not allow poor families to make purchases based on their preferences. 
C)  can only be distributed by the federal government. 
D)  cannot restrict the group of recipients and some middle-class families may benefit from them. 
A)  alter peoples' incentives, whereas a negative income tax does not alter peoples' incentives. 
B)  do not allow poor families to make purchases based on their preferences. 
C)  can only be distributed by the federal government. 
D)  cannot restrict the group of recipients and some middle-class families may benefit from them.

Question 7

Figure 20-3  
-Refer to Figure 20-3. In 2011, the percent of adults between ages 18 and 64 in poverty is

Accepted Answer

A)  higher than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of children under age 18 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  is lower than the percentage of children under age 18 but is higher than the percentage of elderly aged 65 and over in poverty. 
D)  is lower than the percentage of children under age 18 and is equal to the percentage of elderly aged 65 and over in poverty. 
A)  higher than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of children under age 18 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  is lower than the percentage of children under age 18 but is higher than the percentage of elderly aged 65 and over in poverty. 
D)  is lower than the percentage of children under age 18 and is equal to the percentage of elderly aged 65 and over in poverty.

Question 8

U.S. income data over the last 75 years suggests that the distribution of income

Accepted Answer

A)  has gradually become more equal over the entire time period. 
B)  has gradually become less equal over the entire time period. 
C)  gradually became less equal until about 1970, then became more equal from 1970 to 2011. 
D)  gradually became more equal until about 1970, then became less equal from 1970 to 2011. 
A)  has gradually become more equal over the entire time period. 
B)  has gradually become less equal over the entire time period. 
C)  gradually became less equal until about 1970, then became more equal from 1970 to 2011. 
D)  gradually became more equal until about 1970, then became less equal from 1970 to 2011.

Question 9

Scenario 20-5
Suppose the government implemented a negative income tax and used the following formula to compute a family's
tax liability:
Taxes owed = (1/4 of income) - $10,000
-Refer to Scenario 20-5. A family earning $70,000 before taxes would have how much after-tax income?

Accepted Answer

A)  $7,500 
B)  $52,500 
C)  $62,500 
D)  $77,500 
A)  $7,500 
B)  $52,500 
C)  $62,500 
D)  $77,500

Question 10

The percentage of families with incomes below the poverty line

Accepted Answer

A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises. 
A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises.

Question 11

If the value of in-kind transfers are taken into account, the number of families living in poverty in the United States would

Accepted Answer

A)  increase by about 1 percent. 
B)  decrease by about 1 percent. 
C)  decrease by about 5 percent. 
D)  decrease by about 10 percent. 
A)  increase by about 1 percent. 
B)  decrease by about 1 percent. 
C)  decrease by about 5 percent. 
D)  decrease by about 10 percent.

Question 12

What is the term for a measure of happiness or satisfaction a person receives from his or her circumstances?

Accepted Answer

The answer of What is the term for a measure...

Question 13

In 2011, the poverty line for a family of four in the U.S. was

Accepted Answer

A)  $60,974. 
B)  $23,021. 
C)  $20,988. 
D)  $17,642. 
A)  $60,974. 
B)  $23,021. 
C)  $20,988. 
D)  $17,642.

Question 14

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 15

Table 20-10
   *A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
-Refer to Table 20-10. Which country has the most unequal income distribution?

Accepted Answer

A)  Latvia 
B)  Italy 
C)  France 
D)  Sweden 
A)  Latvia 
B)  Italy 
C)  France 
D)  Sweden

Question 16

In-kind transfers

Accepted Answer

A)  are cash payments given to the poor from the government. 
B)  are available to citizens of all income levels, but usually only sought by the poor. 
C)  are non-monetary items given to the poor. 
D)  include food stamps, but not housing vouchers or medical services. 
A)  are cash payments given to the poor from the government. 
B)  are available to citizens of all income levels, but usually only sought by the poor. 
C)  are non-monetary items given to the poor. 
D)  include food stamps, but not housing vouchers or medical services.

Question 17

Anti-poverty programs

Accepted Answer

A)  encourage saving among recipient groups. 
B)  impose a very low marginal tax rate on income. 
C)  are only made available to those with no other source of income. 
D)  may discourage the poor from escaping poverty on their own. 
A)  encourage saving among recipient groups. 
B)  impose a very low marginal tax rate on income. 
C)  are only made available to those with no other source of income. 
D)  may discourage the poor from escaping poverty on their own.

Question 18

Which philosopher claimed that the government should aim to maximize the well-being of the worst-off person in society?

Accepted Answer

The answer of Which philosopher claimed that the government should...

Question 19

Which of the following lists correctly ranks countries from most equal to least equal distribution of income?

Accepted Answer

A)  Nigeria, India, Mexico, Germany 
B)  Brazil, United States, India, Japan 
C)  United States, Ethiopia, Japan, South Africa 
D)  Japan, India, United States, Brazil 
A)  Nigeria, India, Mexico, Germany 
B)  Brazil, United States, India, Japan 
C)  United States, Ethiopia, Japan, South Africa 
D)  Japan, India, United States, Brazil

Question 20

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.

Exam 20: Income Inequality and Poverty

Who said "The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries"?

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

Pietro is 40 years old and is laid off from his job at the paper plant and borrows from his savings for 8 months until he finds a new job. Pietro's

Economists study poverty and income inequality to answer which of the following questions?

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $20,000 owe?

A disadvantage associated with in-kind transfers to reduce poverty is that they

Figure 20-3 -Refer to Figure 20-3. In 2011, the percent of adults between ages 18 and 64 in poverty is

U.S. income data over the last 75 years suggests that the distribution of income

Scenario 20-5 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/4 of income) - $10,000 -Refer to Scenario 20-5. A family earning $70,000 before taxes would have how much after-tax income?

The percentage of families with incomes below the poverty line

If the value of in-kind transfers are taken into account, the number of families living in poverty in the United States would

What is the term for a measure of happiness or satisfaction a person receives from his or her circumstances?

In 2011, the poverty line for a family of four in the U.S. was

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

In-kind transfers

Anti-poverty programs

Which philosopher claimed that the government should aim to maximize the well-being of the worst-off person in society?

Which of the following lists correctly ranks countries from most equal to least equal distribution of income?

Income mobility studies suggest that poverty

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