Question 1

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 2

Table 20-3
The Distribution of Income in Edgerton  
-Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a poverty rate of 40 percent?

Accepted Answer

A)  $28,000 
B)  $44,000 
C)  $76,000 
D)  $88,000 
A)  $28,000 
B)  $44,000 
C)  $76,000 
D)  $88,000

Question 3

The political philosophy that views the redistribution of income as a form of social insurance is

Accepted Answer

A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  welfarism 
A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  welfarism

Question 4

The best government policy to reduce poverty is

Accepted Answer

A)  a minimum wage law because the resulting unemployment is small in comparison to the benefits to people it helps. 
B)  an expanded welfare program because people must have an additional "need" such as small children or a disability. 
C)  an in-kind transfer because it ensures that the poor receive what they need most such as food or shelter. 
D)  not obvious. Government programs to reduce poverty have many advantages but also many disadvantages. 
A)  a minimum wage law because the resulting unemployment is small in comparison to the benefits to people it helps. 
B)  an expanded welfare program because people must have an additional "need" such as small children or a disability. 
C)  an in-kind transfer because it ensures that the poor receive what they need most such as food or shelter. 
D)  not obvious. Government programs to reduce poverty have many advantages but also many disadvantages.

Question 5

For which of the following programs can a person qualify solely by having a low income?

Accepted Answer

A)  both Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF) but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI) but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security Income (SSI) 
A)  both Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF) but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI) but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security Income (SSI)

Question 6

Table 20-13
Distribution of Income in Imagination  
-Refer to Table 20-13. If the poverty rate in Imagination is 10%, what is the poverty line?

Accepted Answer

The answer of Table 20-13
Distribution of Income in Imagination ...

Question 7

The rule for redistribution proposed by John Rawls in his book A Theory of Justice is called the

Accepted Answer

A)  "optimal ignorance" rule. 
B)  libertarian justice rule. 
C)  maximin criterion. 
D)  egalitarian criterion. 
A)  "optimal ignorance" rule. 
B)  libertarian justice rule. 
C)  maximin criterion. 
D)  egalitarian criterion.

Question 8

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 9

Critics argue that a disadvantage of minimum-wage laws is that they do not effectively target the working poor because many minimum-wage workers are the teenage children of middle-income families.

Accepted Answer

A) True 
 B)False

Question 10

Goods and services given to the poor such as food stamps, housing vouchers, and medical services are called

Accepted Answer

The answer of Goods and services given to the poor...

Question 11

Which group would be the least upset by wide variation in the income distribution?

Accepted Answer

A)  utilitarians 
B)  liberals 
C)  libertarians 
D)  Each group would be equally upset. 
A)  utilitarians 
B)  liberals 
C)  libertarians 
D)  Each group would be equally upset.

Question 12

Suppose that young people often borrow and then repay the loans when they are older. These actions relate to which problem in measuring inequality?

Accepted Answer

A)  in-kind transfers 
B)  the economic life cycle 
C)  a negative income tax 
D)  economic mobility 
A)  in-kind transfers 
B)  the economic life cycle 
C)  a negative income tax 
D)  economic mobility

Question 13

The United States has greater income

Accepted Answer

A)  disparity than most other economically advanced countries, but a more equal income distribution than some developing countries. 
B)  disparity than both other economically advanced and all developing countries. 
C)  equality than most other economically advanced countries but greater income disparity than some developing countries. 
D)  equality than both other economically advanced and developing countries. 
A)  disparity than most other economically advanced countries, but a more equal income distribution than some developing countries. 
B)  disparity than both other economically advanced and all developing countries. 
C)  equality than most other economically advanced countries but greater income disparity than some developing countries. 
D)  equality than both other economically advanced and developing countries.

Question 14

The life cycle effect characterizes a lifetime income profile in which income

Accepted Answer

A)  tends to follow a seasonal pattern. 
B)  rises as a worker gains maturity and experience. 
C)  rises and falls in conjunction with the business cycle. 
D)  falls during the early years of market activity and peaks at retirement. 
A)  tends to follow a seasonal pattern. 
B)  rises as a worker gains maturity and experience. 
C)  rises and falls in conjunction with the business cycle. 
D)  falls during the early years of market activity and peaks at retirement.

Question 15

The US government sets the poverty line equal to approximately

Accepted Answer

A)  three times the cost of providing subsidized housing. 
B)  three times the cost of providing an adequate diet. 
C)  the minimum wage for a single person working 40 hours per week and 50 weeks per year. 
D)  the cost of providing food, shelter, and health care expenses for a family of four. 
A)  three times the cost of providing subsidized housing. 
B)  three times the cost of providing an adequate diet. 
C)  the minimum wage for a single person working 40 hours per week and 50 weeks per year. 
D)  the cost of providing food, shelter, and health care expenses for a family of four.

Question 16

The calculation of the poverty line includes adjustments for

Accepted Answer

A)  energy costs. 
B)  child care costs. 
C)  the level of prices. 
D)  the Earned Income Tax Credit. 
A)  energy costs. 
B)  child care costs. 
C)  the level of prices. 
D)  the Earned Income Tax Credit.

Question 17

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

Accepted Answer

A)  Utilitarianism suggests that government policies should strive to maximize Ulyana's utility. 
B)  Liberalism suggests that government policies should strive to increase Ulyana's utility. 
C)  Libertarianism suggests that government policies should strive to improve Tristan's utility at the cost of Sam's utility. 
D)  Libertarianism suggests that government policies should strive to make Sam, Tristan, and Ulyana equally well off. 
A)  Utilitarianism suggests that government policies should strive to maximize Ulyana's utility. 
B)  Liberalism suggests that government policies should strive to increase Ulyana's utility. 
C)  Libertarianism suggests that government policies should strive to improve Tristan's utility at the cost of Sam's utility. 
D)  Libertarianism suggests that government policies should strive to make Sam, Tristan, and Ulyana equally well off.

Question 18

Scenario 20-4
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/5 of income) - $15,000
-Refer to Scenario 20-4. A family earning $50,000 before taxes would have how much after-tax income?

Accepted Answer

A)  -$5,000 
B)  $40,000 
C)  $45,000 
D)  $55,000 
A)  -$5,000 
B)  $40,000 
C)  $45,000 
D)  $55,000

Question 19

Which of the following is correct?

Accepted Answer

A)  Governments can never improve market outcomes. 
B)  Governments can sometimes improve market outcomes. 
C)  Governments can always improve market outcomes. 
D)  Government can never make the income distribution more equal. 
A)  Governments can never improve market outcomes. 
B)  Governments can sometimes improve market outcomes. 
C)  Governments can always improve market outcomes. 
D)  Government can never make the income distribution more equal.

Question 20

The utilitarian case for redistributing income is based on the assumption of

Accepted Answer

A)  collective consensus. 
B)  a notion of fairness engendered by equality. 
C)  diminishing marginal utility. 
D)  rising marginal utility. 
A)  collective consensus. 
B)  a notion of fairness engendered by equality. 
C)  diminishing marginal utility. 
D)  rising marginal utility.

Exam 20: Income Inequality and Poverty

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

Table 20-3 The Distribution of Income in Edgerton -Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a poverty rate of 40 percent?

The political philosophy that views the redistribution of income as a form of social insurance is

The best government policy to reduce poverty is

For which of the following programs can a person qualify solely by having a low income?

Table 20-13 Distribution of Income in Imagination -Refer to Table 20-13. If the poverty rate in Imagination is 10%, what is the poverty line?

The rule for redistribution proposed by John Rawls in his book A Theory of Justice is called the

Which of the following statements is correct?

Critics argue that a disadvantage of minimum-wage laws is that they do not effectively target the working poor because many minimum-wage workers are the teenage children of middle-income families.

Goods and services given to the poor such as food stamps, housing vouchers, and medical services are called

Which group would be the least upset by wide variation in the income distribution?

Suppose that young people often borrow and then repay the loans when they are older. These actions relate to which problem in measuring inequality?

The United States has greater income

The life cycle effect characterizes a lifetime income profile in which income

The US government sets the poverty line equal to approximately

The calculation of the poverty line includes adjustments for

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

Scenario 20-4 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/5 of income) - $15,000 -Refer to Scenario 20-4. A family earning $50,000 before taxes would have how much after-tax income?

Which of the following is correct?

The utilitarian case for redistributing income is based on the assumption 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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