Question 1

In 2012, the largest share of health care costs was paid for by:

Accepted Answer

A)  the government. 
B)  private insurers. 
C)  private individuals. 
D)  charities.

Question 2

Health care expenditures in the United States are _____ than in other countries such as Canada and France, and the government share of health care in the United States is _____ than in those countries.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; lower 
D)  lower; higher

Question 3

In the United States, the government pays _____ of medical costs.

Accepted Answer

A)  100% 
B)  between 70% and 80% 
C)  approximately 50% 
D)  less than 20%

Question 4

An advantage of employment-based insurance is that it:

Accepted Answer

A)  reduces moral hazard. 
B)  helps reduce the problem of adverse selection. 
C)  increases government tax revenues. 
D)  guarantees better care than is provided by government insurance such as Medicare.

Question 5

Which of the following U.S. welfare programs is a monetary benefit that is NOT means-tested?

Accepted Answer

A)  Earned Income Tax Credit 
B)  Social Security 
C)  food stamps 
D)  Medicaid

Question 6

For the United States in 2012, a Gini coefficient of 0.47 suggests that:

Accepted Answer

A)  the United States has almost achieved income equality. 
B)  the average household income is $49,445. 
C)  compared to most European countries, the United States has unusually high levels of income inequality. 
D)  the median household income for the United States is $49,445.

Question 7

In the United States, the mobility between income groups is:

Accepted Answer

A)  relatively high. 
B)  not important because less than 1% of the population lives below the poverty line. 
C)  difficult because of public assistance programs. 
D)  very rare.

Question 8

Technological change in the United States over the past three decades has increased the demand for skilled labor and decreased the demand for unskilled labor.

Accepted Answer

A) True 
 B)False

Question 9

The negative income tax:

Accepted Answer

A)  describes a badly designed tax system. 
B)  is a system in which low incomes are taxed at a higher rate than high incomes. 
C)  is a program in which low-income working families receive income supplements rather than having to pay taxes. 
D)  is the minimum tax that must be paid by a business even if it has a negative income (or a loss).

Question 10

The problem with community rating is that it:

Accepted Answer

A)  causes moral hazard. 
B)  results in poor-quality health care. 
C)  is very unpopular with health care providers. 
D)  may cause adverse selection.

Question 11

The individual mandate is the requirement that:

Accepted Answer

A)  each health care provider must provide care for Medicare patients. 
B)  each health care provider must provide care for Medicaid patients. 
C)  each individual must purchase health insurance. 
D)  everyone must go to school for at least 12 years.

Question 12

The poverty threshold is the same regardless of the number of members in a household.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT a major cause of poverty in the United States?

Accepted Answer

A)  inadequate educational attainment 
B)  discrimination 
C)  lack of adequate health coverage 
D)  welfare

Question 14

A social insurance program is aimed at:

Accepted Answer

A)  keeping people from earning less than $10,000. 
B)  people who have encountered unexpected financial distress. 
C)  reducing the percentage of families living below the poverty line. 
D)  households with children.

Question 15

Increases in income inequality in the United States are partially attributed to:

Accepted Answer

A)  equal and rising increases in the salaries of low-wage workers. 
B)  the impact of technological innovation on the demand for labor. 
C)  a drop in international trade's effects on the economy. 
D)  stricter immigration policies.

Question 16

The mean household income is:

Accepted Answer

A)  the income of households lying at the exact middle of the income distribution. 
B)  the average income across all households. 
C)  the income level that policy makers wish to achieve for all households on average. 
D)  also the poverty threshold level.

Question 17

A sudden loss of income and a significant increase in costly medical expenses are examples of:

Accepted Answer

A)  economic insecurity. 
B)  economic inequality. 
C)  poverty thresholds. 
D)  the Great Compression.

Question 18

A factor that has been associated with the increase in income inequality in the United States is the:

Accepted Answer

A)  decrease in households headed by single women. 
B)  reduction in the percentage of the population over age 65. 
C)  increase in immigration. 
D)  slowdown in technological change.

Question 19

Critics of traditional welfare programs often cite a disincentive to work as a flaw in the policy. Why would these critics be in favor of the Earned Income Tax Credit (EITC)? And why is the EITC described as a negative income tax?

Accepted Answer

The answer of Critics of traditional welfare programs often cite...

Question 20

Which of the following transactions is a transfer payment?

Accepted Answer

A)  The government pays an employee by making a direct transfer to the employee's bank account. 
B)  An army officer transfers part of her pay to the government to pay her taxes. 
C)  A senior citizen receives a Social Security payment. 
D)  All of these are transfer payments.

Exam 18: The Economics of the Welfare