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

The measures of absolute poverty:

Accepted Answer

A) are inversely related to the degree of income equality in a country. 
B) are directly related to the degree of income equality in a country. 
C) depend on the prosperity of the poorest 50 percent of population. 
D) determine the degree of income inequality. 
E) are completely independent of the degree of income inequality. 
A) are inversely related to the degree of income equality in a country. 
B) are directly related to the degree of income equality in a country. 
C) depend on the prosperity of the poorest 50 percent of population. 
D) determine the degree of income inequality. 
E) are completely independent of the degree of income inequality.

Question 3

At each point on the line of income equality, the percentage of total population and the percentage of total income are equal.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Which of the following statements in the context of poverty in the U.S.is true?

Accepted Answer

A) Families headed by males are likely to be poor. 
B) Caucasian Americans carry a much heavier burden of poverty compared to the native Americans. 
C) Education and technical skills do not affect employment in the United States of America. 
D) Females tend to have a greater literacy rate than males in the United States of America. 
E) Minorities, young and disabled have a higher likelihood to fall into poverty 
A) Families headed by males are likely to be poor. 
B) Caucasian Americans carry a much heavier burden of poverty compared to the native Americans. 
C) Education and technical skills do not affect employment in the United States of America. 
D) Females tend to have a greater literacy rate than males in the United States of America. 
E) Minorities, young and disabled have a higher likelihood to fall into poverty

Question 6

The figure given below shows the Lorenz curves of two countries (Country A and Country B). Figure 19.2
Total income (cumulative percentage)   Total population (cumuative percentage)
In Figure 19.2, the richest 20 percent of the population in Country B receive:

Accepted Answer

A) 20 percent of the national income. 
B) 60 percent of the national income. 
C) 50 percent of the national income. 
D) 40 percent of the national income. 
E) 80 percent of the national income. 
A) 20 percent of the national income. 
B) 60 percent of the national income. 
C) 50 percent of the national income. 
D) 40 percent of the national income. 
E) 80 percent of the national income.

Question 7

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

Question 8

The table given below shows the annual incomes of a family of four and the corresponding transfer incomes. Table 19.3
  Refer to Table 19.3.Suppose the family's annual earnings increases from $1, 000 to $5, 000.What is the resulting reduction in income transfer?

Accepted Answer

A) $5, 000 
B) $1, 000 
C) $4, 750 
D) $3, 750 
E) $2, 000 
A) $5, 000 
B) $1, 000 
C) $4, 750 
D) $3, 750 
E) $2, 000

Question 9

In Country X, the highest 10 percent of families account for 70 percent of income.In Country Y, the highest 10 percent of families account for 20 percent of income.In this example:

Accepted Answer

A) Country Y would be located on the line of perfect inequality. 
B) income is more equally distributed in Country Y. 
C) income is more equally distributed in Country X. 
D) Country X would be located on the line of perfect equality. 
E) the degree of income inequality is equal in both the countries. 
A) Country Y would be located on the line of perfect inequality. 
B) income is more equally distributed in Country Y. 
C) income is more equally distributed in Country X. 
D) Country X would be located on the line of perfect equality. 
E) the degree of income inequality is equal in both the countries.

Question 10

In order to ensure that the poor countries experience higher levels of economic growth, private property rights and title to property have to be created.

Accepted Answer

A) True 
 B)False

Question 11

Identify the correct statement.

Accepted Answer

A) The break-even income is directly related to the negative income tax. 
B) The break-even income is inversely related to the income floor. 
C) The break-even income is inversely related to the negative income tax. 
D) The break-even income is less than the guaranteed income. 
E) The break-even income is always equal to the guaranteed income. 
A) The break-even income is directly related to the negative income tax. 
B) The break-even income is inversely related to the income floor. 
C) The break-even income is inversely related to the negative income tax. 
D) The break-even income is less than the guaranteed income. 
E) The break-even income is always equal to the guaranteed income.

Question 12

Which of the following tax structures helps in reducing income inequality?

Accepted Answer

A) Proportional tax structure 
B) Regressive tax structure 
C) Indirect tax structure 
D) Progressive tax structure 
E) A combination of proportional and regressive tax structure. 
A) Proportional tax structure 
B) Regressive tax structure 
C) Indirect tax structure 
D) Progressive tax structure 
E) A combination of proportional and regressive tax structure.

Question 13

The programs which transfer income from the richer nations to the poorer nations are referred to as:

Accepted Answer

A) transfer payments. 
B) foreign aid. 
C) foreign portfolio investment. 
D) outsourcing and offshoring. 
E) external borrowing. 
A) transfer payments. 
B) foreign aid. 
C) foreign portfolio investment. 
D) outsourcing and offshoring. 
E) external borrowing.

Question 14

The figure below shows two Lorenz curves, Y and Z. Figure 19.1   In Figure 19.1, which of the following could occur in the short run given the introduction of a regressive income tax?

Accepted Answer

A) The Lorenz curve OZB would shift to OYB. 
B) The Lorenz curve OYB would coincide with the line OXB. 
C) The Lorenz curve OZB would coincide with the line OXB. 
D) The Lorenz curve OYB would coincide with the horizontal axis. 
E) The Lorenz curve would shift from OYB to OZB. 
A) The Lorenz curve OZB would shift to OYB. 
B) The Lorenz curve OYB would coincide with the line OXB. 
C) The Lorenz curve OZB would coincide with the line OXB. 
D) The Lorenz curve OYB would coincide with the horizontal axis. 
E) The Lorenz curve would shift from OYB to OZB.

Question 15

The table below shows the monthly income of a family and the fuel assistance received from the government. Table 19.4
  Refer to Table 19.4.If the family's monthly income rises from $300 to $400, the marginal penalty on working (in terms of reduced fuel assistance)is:

Accepted Answer

A) $80 
B) $40 
C) $50 
D) $90 
E) $100 
A) $80 
B) $40 
C) $50 
D) $90 
E) $100

Exam 34: Income Distribution, Poverty and Government Policy

Income inequality is indicated by a Lorenz curve that:

The measures of absolute poverty:

At each point on the line of income equality, the percentage of total population and the percentage of total income are equal.

A major problem with household data is that:

Which of the following statements in the context of poverty in the U.S.is true?

The figure given below shows the Lorenz curves of two countries (Country A and Country B). Figure 19.2 Total income (cumulative percentage) Total population (cumuative percentage) In Figure 19.2, the richest 20 percent of the population in Country B receive:

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

The table given below shows the annual incomes of a family of four and the corresponding transfer incomes. Table 19.3 Refer to Table 19.3.Suppose the family's annual earnings increases from $1, 000 to $5, 000.What is the resulting reduction in income transfer?

In Country X, the highest 10 percent of families account for 70 percent of income.In Country Y, the highest 10 percent of families account for 20 percent of income.In this example:

In order to ensure that the poor countries experience higher levels of economic growth, private property rights and title to property have to be created.

Identify the correct statement.

Which of the following tax structures helps in reducing income inequality?

The programs which transfer income from the richer nations to the poorer nations are referred to as:

The figure below shows two Lorenz curves, Y and Z. Figure 19.1 In Figure 19.1, which of the following could occur in the short run given the introduction of a regressive income tax?

The table below shows the monthly income of a family and the fuel assistance received from the government. Table 19.4 Refer to Table 19.4.If the family's monthly income rises from $300 to $400, the marginal penalty on working (in terms of reduced fuel assistance)is:

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

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

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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