Question 1

Economic mobility complicates measurement of income inequality because

Accepted Answer

A) fewer than 3 percent of families are poor for 8 or more years. 
B) over 5 million households in the United States had net worth (assets minus liabilities) that exceeded $1 million. 
C) four of five of millionaires inherit their wealth. 
D) All of the above are correct.

Question 2

A binding minimum wage

Accepted Answer

A) affects employees but not employers. 
B) lowers the productivity of workers. 
C) raises the cost of labor to firms. 
D) All of the above are correct.

Question 3

In the United States,labor earnings are what percent of total income?

Accepted Answer

A) 75 percent 
B) 70 percent 
C) 65 percent 
D) 50 percent

Question 4

Suppose that Jamal is moving to a state where personal incomes are distributed randomly.If Jamal believes in liberalism,he would prefer

Accepted Answer

A) an income distribution that is relatively equal. 
B) that everyone has the same work opportunities and market-determined wage rates. 
C) that private property be transformed to government property to safeguard people's incomes. 
D) less economic assistance to the poor because it distorts the price system.

Question 5

Which of the following programs to alleviate poverty would be most favored by philosopher Robert Nozick and why?

Accepted Answer

A) A negative income tax because it would maximize the minimum income of members of society. 
B) An Earned Income Tax Credit (EIT
C)  because a policy that rewards the working poor would be the most just. 
C) An in-kind transfer program because it would maximize the total utility of all members of society. 
D) None of the programs would be favored because each of them forcibly redistributes income that was fairly, if not equally, earned.

Question 6

Worldwide economic growth has

Accepted Answer

A) reduced poverty, even in very poor countries. 
B) led to rising literacy rates and falling child labor rates. 
C) reduced inequality among individuals worldwide. 
D) All of the above are correct.

Question 7

Anti-poverty programs

Accepted Answer

A) encourage saving among recipient groups. 
B) impose a very low marginal tax rate on income. 
C) are only made available to those with no other source of income. 
D) impose disincentives to work.

Question 8

If a government could successfully achieve the maximin criterion,each member of society would have an equal income.

Accepted Answer

A) True 
 B)False

Question 9

The percentage of families with incomes below the poverty line

Accepted Answer

A) is defined as the 10 percent of U.S.households with the lowest incomes. 
B) is known as the poverty rate. 
C) is known as the unemployment rate. 
D) rises as the general income level rises.

Question 10

The poverty line is

Accepted Answer

A) an absolute level of income set by the federal government below which a family is considered to be in poverty. 
B) approximately equal to three times the cost of providing an adequate diet. 
C) adjusted annually to reflect changes in price levels. 
D) All of the above are correct.

Question 11

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 × Income)- 10,000.If a family doesn't earn any income,how does the negative income tax affect them?

Accepted Answer

A) They will receive an income subsidy of $1,000. 
B) They will receive an income subsidy of $3,000. 
C) They will receive an income subsidy of $10,000. 
D) They will not be affected at all, since the negative income tax requires a family to earn income.

Question 12

Given the table shown,which country has a more equal income distribution? Explain your answer.

Accepted Answer

The answer of Given the table shown,which country has a...

Question 13

About half of black and Hispanic children in female-headed households live in poverty.

Accepted Answer

A) True 
 B)False

Question 14

A common criticism of welfare programs is that they

Accepted Answer

A) create incentives for people to become "needy." 
B) break up families. 
C) encourage illegitimate births. 
D) All of the above are correct.

Question 15

Which of the following represents a problem in measuring inequality?

Accepted Answer

A) Measurements of income distributions typically include in-kind transfers, which distort the measure of inequality. 
B) A normal life-cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards. 
C) Transitory income is a better measure of inequality than permanent income. 
D) Both a and b are correct.

Question 16

The regular pattern of income variation over a person's life is called

Accepted Answer

A) the earned income cycle. 
B) the substitution effect. 
C) the life cycle. 
D) the pattern of change.

Question 17

What percent of families are poor for eight or more years?

Accepted Answer

A) more than 20 percent 
B) between 15 and 20 percent 
C) approximately 10 percent 
D) less than 3 percent

Question 18

Bill earns more than Donna.A benevolent legislator has proposed taxing Bill in order to supplement Donna's income.A libertarian would view this proposal as

Accepted Answer

A) a way to increase social justice. 
B) a way to enhance Donna's income in a socially responsible way. 
C) validation of the superiority of a libertarian maximin criterion over Rawlsian social justice. 
D) an inappropriate role for government, since government cannot morally redistribute income that is not its own.

Question 19

Which political philosophy believes in balancing the gains from greater equality against the losses from distorted incentives?

Accepted Answer

A) utilitarianism 
B) liberalism 
C) libertarianism 
D) All of the above are correct.

Question 20

A family's ability to buy goods and services depends largely on its

Accepted Answer

A) in-kind transfers. 
B) annual income. 
C) transitory income. 
D) permanent income.

Exam 20: Income Inequality and Poverty