Question 1

The 2010 U.S. Federal Personal Income six tax brackets range from 10 percent for individuals earning less than $8,025 to 35 percent for those earning over $357,700 whereas the Lithuanian tax rate for all citizens' income is 24 percent. The Lithuanian income tax system is a ________ tax and the U.S. income tax system is a ________ tax.

Accepted Answer

A)  progressive; proportional 
B)  regressive; progressive 
C)  proportional; regressive 
D)  proportional; progressive

Question 2

How do income and wealth change over a person's lifetime? How does this affect the distribution of income at a point in time?

Accepted Answer

The answer of How do income and wealth change over...

Question 3

The "big tradeoff" refers to the point that governmental redistribution of income causes

Accepted Answer

A)  less efficiency because it weakens incentives to work. 
B)  less efficiency because it strengthens incentives to work. 
C)  more efficiency because it weakens incentives to work. 
D)  more efficiency because it strengthens incentives to work.

Question 4

If one person has all the income and everyone else has none, the Gini ratio is 1.

Accepted Answer

A) True 
 B)False

Question 5

-The above table shows the distribution of wealth and income in Miseria. The Lorenz curve for wealth would

Accepted Answer

A)  be parallel to the line of equality. 
B)  lie to the left of the Lorenz curve for income. 
C)  become flatter when moving from left to right. 
D)  intersect the horizontal axis at twenty percent.

Question 6

-In the figure above, the second richest 20 percent of households receive ________ of total income.

Accepted Answer

A)  55 percent 
B)  35 percent 
C)  25 percent 
D)  45 percent

Question 7

For the United States, Lorenz curves show that

Accepted Answer

A)  income is more equally distributed than wealth. 
B)  income is less equally distributed than wealth. 
C)  incomes have increased over time. 
D)  blacks and Hispanics became better off in the 1990s.

Question 8

The lifetime income distribution of income is a ________ accurate indicator of the degree of economic inequality than the distribution of ________.

Accepted Answer

A)  less; of annual income 
B)  more; of annual income 
C)  less; of wealth 
D)  less; annual Lorenz curves

Question 9

-The above figure shows the demand and supply curves for high-skilled and low-skilled labor. The wage rate

Accepted Answer

A)  of high-skilled labor is $7.00 and of low-skilled labor is $6.00. 
B)  of high-skilled labor is $9.00 and of low-skilled labor is $7.00. 
C)  of high-skilled labor is $6.00 and of low-skilled labor is $4.00. 
D)  of high-skilled labor is $9.00 and of low-skilled labor is $4.00.

Question 10

Education

Accepted Answer

A)  does not really add to one's human capital. 
B)  does not really affect one's income. 
C)  is a major factor affecting one's income. 
D)  explains all the differences in male-female incomes.

Question 11

-A Lorenz curve graphs the

Accepted Answer

A)  percentage of income or wealth against the percentage of households. 
B)  cumulative percentage of income or wealth against the cumulative percentage of households. 
C)  cumulative value of income against the cumulative percentage of households. 
D)  percentage of wealth against the percentage of income.

Question 12

-A Lorenz curve measures

Accepted Answer

A)  the benefits received through welfare programs. 
B)  the actual income distribution and compares it to an equal income distribution. 
C)  the degree to which income taxes are regressive. 
D)  the effect of flat taxes on income distribution.

Question 13

The income distribution in the United States is

Accepted Answer

A)  positively skewed. 
B)  negatively skewed. 
C)  bell-shaped 
D)  uniform.

Question 14

-An economy has the income shares information in the table above. Which of the following is TRUE?

Accepted Answer

A)  The information in the table represents the income distribution in the United States. 
B)  Income in the U.S. economy is more equally distributed than that represented in the table. 
C)  Income in the U.S. economy is less equally distributed than that represented in the table. 
D)  The information in the table represents the wealth distribution in the United States.

Question 15

Computers and laser scanners are ________ for low-skilled labor and ________ for high-skilled labor. The introduction of these technologies ________ the wage rate of high-skilled workers and ________ the wage rate of low-skilled workers.

Accepted Answer

A)  complements; substitutes; raises; lowers 
B)  substitutes; complements; lowers; raises 
C)  substitutes; complements; raises; lowers 
D)  complements; substitutes; lowers; raises

Question 16

-The "big tradeoff" refers to the tradeoff between

Accepted Answer

A)  work and leisure. 
B)  equity and efficiency. 
C)  public goods and private goods. 
D)  taxes and transfers.

Question 17

-In the above figure, point ________ shows an equal distribution of income, while point ________ shows an unequal distribution of income.

Accepted Answer

A)  a, b 
B)  b, c 
C)  b, a 
D)  a, d

Question 18

-The above figure shows two Lorenz curves. Suppose both Lorenz curves measure wealth. Then, the curves show that wealth is

Accepted Answer

A)  greater along Lorenz curve A. 
B)  greater along Lorenz curve B. 
C)  distributed more equally along Lorenz curve A. 
D)  distributed more equally along Lorenz curve B.

Question 19

In the United States, measured wealth is distributed more unequally than income.

Accepted Answer