Question 1

Income inequality is indicated by a Lorenz curve that:

Accepted Answer

A) bows up, away from the line of income equality. 
B) bows down, away from the line of income equality. 
C) lies parallel to the line of income equality. 
D) coincides with the line of income equality. 
E) approaches the vertical axis. 
A) bows up, away from the line of income equality. 
B) bows down, away from the line of income equality. 
C) lies parallel to the line of income equality. 
D) coincides with the line of income equality. 
E) approaches the vertical axis.

Question 2

If the income floor is set at $6, 000 and the negative income tax rate is 20 percent, a family which earns nothing will have a total income (including the income tax transfer)of _____.

Accepted Answer

A) $1, 500 
B) $7, 500 
C) $4, 500 
D) $6, 000 
E) $1, 200 
A) $1, 500 
B) $7, 500 
C) $4, 500 
D) $6, 000 
E) $1, 200

Question 3

The rule which is used to compare economic growth among the nations is:

Accepted Answer

A) the per se rule. 
B) the rule of 72. 
C) the rule of thumb. 
D) the rule of thirds. 
E) the rule of 70. 
A) the per se rule. 
B) the rule of 72. 
C) the rule of thumb. 
D) the rule of thirds. 
E) the rule of 70.

Question 4

Suppose all families of four, who earn nothing, are guaranteed a transfer payment of $20, 000 and the government levies a negative tax rate of 20 percent.Calculate the income level below which all such families will receive some income benefits.

Accepted Answer

A) $100, 000 
B) $50, 000 
C) $150, 000 
D) $40, 000 
E) $80, 000 
A) $100, 000 
B) $50, 000 
C) $150, 000 
D) $40, 000 
E) $80, 000

Question 5

The farther the Lorenz curve from the line of perfect equality the lower is the income inequality.

Accepted Answer

A) True 
 B)False

Question 6

A negative income tax system transfers increasing amounts of income to households earning incomes below some specified level as their income declines.

Accepted Answer

A) True 
 B)False

Question 7

The table given below shows the annual incomes of a family of four and the corresponding transfer incomes. Table 33.3
  Refer to Table 33.3.What is the guaranteed income floor?

Accepted Answer

A) $20, 000 
B) $7, 000 
C) $1, 000 
D) $5, 000 
E) $8, 750 
A) $20, 000 
B) $7, 000 
C) $1, 000 
D) $5, 000 
E) $8, 750

Question 8

The table given below shows the absolute tax amounts under five different tax policies for respective income levels. Table 33.2
  Refer to Table 33.2.Which of the following tax policies is regressive by nature?

Accepted Answer

A) Alpha 
B) Beta 
C) Gamma 
D) Delta 
E) Eta 
A) Alpha 
B) Beta 
C) Gamma 
D) Delta 
E) Eta

Question 9

Empirical observations validate that the Gini co-efficient for the U.S.economy was between 0.35 and 0.37 until the 1990s, after which it has increased and reached 0.469.Which of the following can be inferred from this?

Accepted Answer

A) The distribution of national income in the U.S.has become slightly more equal since the 1990s. 
B) The government spending on poverty alleviation has increased since 1990. 
C) More jobs have been created in the U.S.since 1990. 
D) The distribution of national income in the U.S.has become slightly more unequal since the 1990s. 
E) The government has replaced the existing regressive tax structure with a progressive tax structure. 
A) The distribution of national income in the U.S.has become slightly more equal since the 1990s. 
B) The government spending on poverty alleviation has increased since 1990. 
C) More jobs have been created in the U.S.since 1990. 
D) The distribution of national income in the U.S.has become slightly more unequal since the 1990s. 
E) The government has replaced the existing regressive tax structure with a progressive tax structure.

Question 10

If everyone in an economy had equal income, the Lorenz curve would be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income.

Accepted Answer

A) True 
 B)False

Question 11

The income tax structure in the United States is regressive in nature.

Accepted Answer

A) True 
 B)False

Question 12

The greater the negative income tax imposed on a family, greater is the family's incentive to earn more.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following transfer programs in the U.S.is funded by a national tax but administered by state governments?

Accepted Answer

A) Social security 
B) Veterans' Administration Benefit program 
C) Unemployment insurance 
D) Food stamps 
E) National Guard activities 
A) Social security 
B) Veterans' Administration Benefit program 
C) Unemployment insurance 
D) Food stamps 
E) National Guard activities

Question 14

The extent to which people move from one income quintile to another over time is called _____.

Accepted Answer

A) migrancy 
B) moveability 
C) mobility 
D) exchangeability 
E) transferability 
A) migrancy 
B) moveability 
C) mobility 
D) exchangeability 
E) transferability

Question 15

If the negative income tax rate is 25 percent and the break-even income of a family of four is $50, 000, the guaranteed income floor is:

Accepted Answer

A) $10, 000. 
B) $15, 000. 
C) $10, 500. 
D) $12, 500. 
E) $15, 500. 
A) $10, 000. 
B) $15, 000. 
C) $10, 500. 
D) $12, 500. 
E) $15, 500.

Question 16

In a progressive tax structure:

Accepted Answer

A) both the tax rate and absolute tax amount increases with increase in income. 
B) the tax rate remains constant, but the absolute tax amount increases with increase in income. 
C) both the tax rate and absolute tax amount declines with increase in income. 
D) the tax rate falls, but the absolute tax amount increases with increase in income. 
E) the tax rate increases, but the absolute tax amount decreases with increase in income. 
A) both the tax rate and absolute tax amount increases with increase in income. 
B) the tax rate remains constant, but the absolute tax amount increases with increase in income. 
C) both the tax rate and absolute tax amount declines with increase in income. 
D) the tax rate falls, but the absolute tax amount increases with increase in income. 
E) the tax rate increases, but the absolute tax amount decreases with increase in income.

Question 17

A major problem with household data is that:

Accepted Answer

A) the income of the households vary greatly. 
B) the households usually vary in their consumption patterns. 
C) the households usually comprise of only one individual. 
D) collecting data from the households is highly inconvenient. 
E) the number of persons per household varies greatly. 
A) the income of the households vary greatly. 
B) the households usually vary in their consumption patterns. 
C) the households usually comprise of only one individual. 
D) collecting data from the households is highly inconvenient. 
E) the number of persons per household varies greatly.

Question 18

Which of the following results from the market system of resource allocation?

Accepted Answer

A) Equitable distribution of resources 
B) High opportunity cost of production 
C) Excess supply of goods and services resulting in decreased profits 
D) Unequal distribution of income and wealth 
E) Allocation of the goods and services to them who need them the most 
A) Equitable distribution of resources 
B) High opportunity cost of production 
C) Excess supply of goods and services resulting in decreased profits 
D) Unequal distribution of income and wealth 
E) Allocation of the goods and services to them who need them the most

Question 19

If an individual who earns $20, 000 pays $2, 000 in taxes and another individual who earns $100, 000 pays $10, 000 in taxes, then these individuals are being taxed under a _______ tax system.

Accepted Answer

A) toll 
B) regressive 
C) progressive 
D) proportional 
E) negative income 
A) toll 
B) regressive 
C) progressive 
D) proportional 
E) negative income

Question 20

Foreign aid should be given to all poor countries without considering if the aid reaches the poor and the needy.

Accepted Answer

A) True 
 B)False

Exam 54: Income Distribution, Poverty and Government Policy

Income inequality is indicated by a Lorenz curve that:

If the income floor is set at $6, 000 and the negative income tax rate is 20 percent, a family which earns nothing will have a total income (including the income tax transfer)of _____.

The rule which is used to compare economic growth among the nations is:

Suppose all families of four, who earn nothing, are guaranteed a transfer payment of $20, 000 and the government levies a negative tax rate of 20 percent.Calculate the income level below which all such families will receive some income benefits.

The farther the Lorenz curve from the line of perfect equality the lower is the income inequality.

A negative income tax system transfers increasing amounts of income to households earning incomes below some specified level as their income declines.

The table given below shows the annual incomes of a family of four and the corresponding transfer incomes. Table 33.3 Refer to Table 33.3.What is the guaranteed income floor?

The table given below shows the absolute tax amounts under five different tax policies for respective income levels. Table 33.2 Refer to Table 33.2.Which of the following tax policies is regressive by nature?

Empirical observations validate that the Gini co-efficient for the U.S.economy was between 0.35 and 0.37 until the 1990s, after which it has increased and reached 0.469.Which of the following can be inferred from this?

If everyone in an economy had equal income, the Lorenz curve would be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income.

The income tax structure in the United States is regressive in nature.

The greater the negative income tax imposed on a family, greater is the family's incentive to earn more.

Which of the following transfer programs in the U.S.is funded by a national tax but administered by state governments?

The extent to which people move from one income quintile to another over time is called _____.

If the negative income tax rate is 25 percent and the break-even income of a family of four is $50, 000, the guaranteed income floor is:

In a progressive tax structure:

A major problem with household data is that:

Which of the following results from the market system of resource allocation?

If an individual who earns $20, 000 pays $2, 000 in taxes and another individual who earns $100, 000 pays $10, 000 in taxes, then these individuals are being taxed under a _______ tax system.

Foreign aid should be given to all poor countries without considering if the aid reaches the poor and the needy.

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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