Question 1

A follower of liberalism would not support a redistribution of income but rather would focus on equalizing opportunities.

Accepted Answer

A) True 
 B)False

Question 2

When the government redistributes income to achieve greater equality, it

Accepted Answer

A)  distorts incentives. 
B)  improves efficiency. 
C)  focuses on middle income brackets. 
D)  relies on foreign aid to help balance the budget. 
A)  distorts incentives. 
B)  improves efficiency. 
C)  focuses on middle income brackets. 
D)  relies on foreign aid to help balance the budget.

Question 3

Scenario 20-3
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 families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over
$35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of libertarianism 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

Question 4

Table 20-1
The following table shows the distribution of income in Marysville.  
-Refer to Table 20-1. If the poverty line was $31,852, what would be the poverty rate?

Accepted Answer

A)  less than 25% 
B)  between 25% and 50% 
C)  between 50% and 75% 
D)  There is insufficient information to answer this question. 
A)  less than 25% 
B)  between 25% and 50% 
C)  between 50% and 75% 
D)  There is insufficient information to answer this question.

Question 5

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 6

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 $150,000 owe?

Accepted Answer

A)  $34,000 
B)  $42,000 
C)  $50,000 
D)  $68,000 
A)  $34,000 
B)  $42,000 
C)  $50,000 
D)  $68,000

Question 7

The poverty line is an absolute standard and is based on the cost of providing an adequate diet.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a society consists of only two people, John and Jane. A utilitarian would say that the proper role of government in this society is to

Accepted Answer

A)  equalize the incomes of John and Jane. 
B)  equalize John's utility and Jane's utility. 
C)  equalize John's marginal utility and Jane's marginal utility. 
D)  maximize the sum of John's utility and Jane's utility. 
A)  equalize the incomes of John and Jane. 
B)  equalize John's utility and Jane's utility. 
C)  equalize John's marginal utility and Jane's marginal utility. 
D)  maximize the sum of John's utility and Jane's utility.

Question 9

Which of the following statements is correct?

Accepted Answer

A)  Less than three percent of families are categorized as poor for eight years or more. 
B)  In the United States, the grandson of a millionaire is much more likely to be rich than the grandson of an average-income person. 
C)  The majority of millionaires in the United States inherited their wealth. 
D)  Most workers have about the same income (adjusted for inflation) when they are young as when they are middle-aged. 
A)  Less than three percent of families are categorized as poor for eight years or more. 
B)  In the United States, the grandson of a millionaire is much more likely to be rich than the grandson of an average-income person. 
C)  The majority of millionaires in the United States inherited their wealth. 
D)  Most workers have about the same income (adjusted for inflation) when they are young as when they are middle-aged.

Question 10

Figure 20-3  
-Refer to Figure 20-3. In 1968, the percent of adults aged 18 to 64 years 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)  lower than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
D)  lower than the percentage of children under age 18 but is higher than 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)  lower than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
D)  lower than the percentage of children under age 18 but is higher than the percentage of elderly aged 65 and over in poverty.

Question 11

The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of income?

Accepted Answer

A)  20 percent 
B)  35 percent 
C)  50 percent 
D)  80 percent 
A)  20 percent 
B)  35 percent 
C)  50 percent 
D)  80 percent

Question 12

The percentage of the population whose family income falls below an absolute level is call the

Accepted Answer

The answer of The percentage of the population whose family...

Question 13

Table 20-8   Source: U.S. Bureau of Census
-Refer to Table 20-8. In 2011, the bottom 40% of families has

Accepted Answer

A)  about 13% of total income in the U.S. 
B)  about 28% of total income in the U.S. 
C)  about 51% of total income in the U.S. 
D)  about 72% of total income in the U.S. 
A)  about 13% of total income in the U.S. 
B)  about 28% of total income in the U.S. 
C)  about 51% of total income in the U.S. 
D)  about 72% of total income in the U.S.

Question 14

Table 20-1
The following table shows the distribution of income in Marysville.  
-Refer to Table 20-1. If the poverty line were $23,021, what would be the poverty rate?

Accepted Answer

A)  less than 25% 
B)  between 25% and 50% 
C)  between 50% and 75% 
D)  There is insufficient information to answer this question. 
A)  less than 25% 
B)  between 25% and 50% 
C)  between 50% and 75% 
D)  There is insufficient information to answer this question.

Question 15

Many Democrats support raising the U.S. minimum wage. Critics of raising the minimum wage argue that minimum-wage laws are

Accepted Answer

A)  too expensive for local governments to fund. 
B)  too expensive for local governments to administer. 
C)  imprecise in their ability to help the working poor. 
D)  easy for businesses to pay. 
A)  too expensive for local governments to fund. 
B)  too expensive for local governments to administer. 
C)  imprecise in their ability to help the working poor. 
D)  easy for businesses to pay.

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol. 
B)  An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled. 
C)  An advantage of a negative income tax program is that the poor must work to be eligible. 
D)  Minimum wage laws result in higher unemployment among those groups of workers affected by the minimum wage. 
A)  An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol. 
B)  An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled. 
C)  An advantage of a negative income tax program is that the poor must work to be eligible. 
D)  Minimum wage laws result in higher unemployment among those groups of workers affected by the minimum wage.

Question 17

The maximin criterion is the idea that the government should aim to maximize the well-being of the worst-off person in society.

Accepted Answer

A) True 
 B)False

Question 18

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.   Source: US Census Bureau
-Refer to Table 20-14. The trend in income inequality from 1980 to 2010 is .

Accepted Answer

The answer of Table 20-14
Income Inequality in the United States
The...

Question 19

The poverty rate is the percentage of the population whose family income falls below the poverty line.

Accepted Answer

A) True 
 B)False

Question 20

Robert Nozick criticizes Rawls's concept of justice by using an example of

Accepted Answer

A)  minimum wage laws. 
B)  the grade distribution in a class. 
C)  a leaky bucket. 
D)  the price of tea in China. 
A)  minimum wage laws. 
B)  the grade distribution in a class. 
C)  a leaky bucket. 
D)  the price of tea in China.

Exam 20: Income Inequality and Poverty

A follower of liberalism would not support a redistribution of income but rather would focus on equalizing opportunities.

When the government redistributes income to achieve greater equality, it

Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. If the poverty line was $31,852, what would be the poverty rate?

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?

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 $150,000 owe?

The poverty line is an absolute standard and is based on the cost of providing an adequate diet.

Suppose a society consists of only two people, John and Jane. A utilitarian would say that the proper role of government in this society is to

Which of the following statements is correct?

Figure 20-3 -Refer to Figure 20-3. In 1968, the percent of adults aged 18 to 64 years in poverty is

The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of income?

The percentage of the population whose family income falls below an absolute level is call the

Table 20-8 Source: U.S. Bureau of Census -Refer to Table 20-8. In 2011, the bottom 40% of families has

Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. If the poverty line were $23,021, what would be the poverty rate?

Many Democrats support raising the U.S. minimum wage. Critics of raising the minimum wage argue that minimum-wage laws are

Which of the following statements is not correct?

The maximin criterion is the idea that the government should aim to maximize the well-being of the worst-off person in society.

Table 20-14 Income Inequality in the United States The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau -Refer to Table 20-14. The trend in income inequality from 1980 to 2010 is .

The poverty rate is the percentage of the population whose family income falls below the poverty line.

Robert Nozick criticizes Rawls's concept of justice by using an example of

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

Six Debates Over Macroeconomic Policy

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