Question 1

Under the negative income tax program, a family will always receive some amount of transfer from the government, irrespective of its income level.

Accepted Answer

A) True 
 B)False

Question 2

Why does the census data overstate inequality?

Accepted Answer

A) They overestimate the non cash transfers received by the people from the government. 
B) They take into account the after-tax incomes. 
C) They take into account the gifts and transfer receipts from friends and relatives staying abroad. 
D) They do not consider the in-kind transfers received by the people from the government. 
E) They overestimate the medical benefits received by the people from the government.

Question 3

A negative income tax implies that:

Accepted Answer

A) higher the income of an individual, higher will be the tax. 
B) higher the income of an individual, lower will be the tax. 
C) lower the income of an individual, lower will be the transfer income. 
D) lower the income of an individual, higher will be the transfer income. 
E) the transfer income received by all will be equal irrespective of the income level.

Question 4

For the negative income tax to eradicate poverty:

Accepted Answer

A) the guaranteed level of income has to be equal to the poverty line. 
B) the break-even income has to be equal to the poverty line. 
C) the negative income tax rate has to equal 50 percent. 
D) the guaranteed level of income has to be equal to the break-even income. 
E) the guaranteed level of income has to be equal to the tax paid.

Question 5

If everyone had the same income, then the Lorenz curve would:

Accepted Answer

A) be the line of income equality. 
B) bow down below the line of income equality. 
C) be a parallel line lying below the line of income equality. 
D) bow up above the line of income equality. 
E) be a curve that intersects the line of income equality at its mid-point.

Question 6

Suppose all families of four, who earn nothing, are guaranteed a transfer payment of $20, 000 and the government levies a negative tax rate of 20 percent.Calculate the income level below which all such families will receive some income benefits.

Accepted Answer

A) $100, 000 
B) $50, 000 
C) $150, 000 
D) $40, 000 
E) $80, 000

Question 7

Which of the following is an absolute measure of poverty?

Accepted Answer

A) Gini co-efficient 
B) Per capita income 
C) HiLo ratio 
D) Hoover index 
E) Theil index

Question 8

Experiences of Russia and China prove that, greater the governmental intervention in the market, more equal will be the income distribution in the economy.

Accepted Answer

A) True 
 B)False

Question 9

If everyone in an economy had equal income, the Lorenz curve would be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income.

Accepted Answer

A) True 
 B)False

Question 10

The welfare programs undertaken by the U.S.government has been universally successful in reducing poverty and fostering economic growth.

Accepted Answer

A) True 
 B)False

Question 11

Government policies designed to change the distribution of income to one that is more equal involve taking from the rich and giving to the poor.

Accepted Answer

A) True 
 B)False

Question 12

Those who argue that welfare programs are a drag on the economy are of the view that welfare programs funded by taxes:

Accepted Answer

A) reduce the opportunity cost of labor. 
B) raise the incidence of poverty and income inequality. 
C) raise the incentive to work. 
D) reduce the tax-liability of the tax-payers. 
E) reduce the demand for labor.

Question 13

The world Lorenz curve coincides with the line of income equality because the average income of the different countries are more or less equal.

Accepted Answer

A) True 
 B)False

Question 14

If an individual who earns $20, 000 pays $2, 000 in taxes and another individual who earns $100, 000 pays $10, 000 in taxes, then these individuals are being taxed under a _______ tax system.

Accepted Answer

A) toll 
B) regressive 
C) progressive 
D) proportional 
E) negative income

Question 15

_____ are the primary population group with poverty-level incomes in the USA.

Accepted Answer

A) Single-income households 
B) Households headed by males 
C) College graduates 
D) People who do not have high school education 
E) Retired individuals

Question 16

Assume that any given percentage of the population earns an equal percentage of real GDP.This percentage of population will be represented by:

Accepted Answer

A) a point below the line of income equality. 
B) a line lying below the line of income equality. 
C) a point on the line of income equality. 
D) a line lying above the line of income equality. 
E) a point above the line of income equality.

Question 17

A proportional tax is a tax whose rate increases as the tax base widens.

Accepted Answer

A) True 
 B)False

Question 18

Gini co-efficient is the:

Accepted Answer

A) area between the Lorenz curve and the vertical axis divided by the area under the Lorenz curve. 
B) area between the Lorenz curve and the horizontal axis divided by the area above the Lorenz curve. 
C) area between the Lorenz curve and the line of perfect equality divided by the area under the line of income equality. 
D) area between the Lorenz curve and the line of perfect equality divided by the area above the line of perfect equality. 
E) area between the line of perfect equality and the horizontal axis divided by the area between the Lorenz curve and the horizontal axis.

Question 19

If those who are poor at any one time are poor only temporarily, then their plight is only temporary.This statement is based on which of the following assumptions?

Accepted Answer

A) Many spells of poverty are relatively short-lived. 
B) Government spending in the economy is inadequate. 
C) All phases of the business cycle are temporary. 
D) Education infrastructure in the economy is poor. 
E) Once people fall below the poverty line, it is almost impossible for them to rise above it.

Question 20

Measures which aim at eliminating the income disparity between the rich and the poor affect incentives to work, innovate, take risks, acquire education, and so on.

Accepted Answer

A) True 
 B)False

Exam 34: Income Distribution, Poverty and Government Policy

Under the negative income tax program, a family will always receive some amount of transfer from the government, irrespective of its income level.

Why does the census data overstate inequality?

A negative income tax implies that:

For the negative income tax to eradicate poverty:

If everyone had the same income, then the Lorenz curve would:

Suppose all families of four, who earn nothing, are guaranteed a transfer payment of $20, 000 and the government levies a negative tax rate of 20 percent.Calculate the income level below which all such families will receive some income benefits.

Which of the following is an absolute measure of poverty?

Experiences of Russia and China prove that, greater the governmental intervention in the market, more equal will be the income distribution in the economy.

If everyone in an economy had equal income, the Lorenz curve would be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income.

The welfare programs undertaken by the U.S.government has been universally successful in reducing poverty and fostering economic growth.

Government policies designed to change the distribution of income to one that is more equal involve taking from the rich and giving to the poor.

Those who argue that welfare programs are a drag on the economy are of the view that welfare programs funded by taxes:

The world Lorenz curve coincides with the line of income equality because the average income of the different countries are more or less equal.

If an individual who earns $20, 000 pays $2, 000 in taxes and another individual who earns $100, 000 pays $10, 000 in taxes, then these individuals are being taxed under a _______ tax system.

_____ are the primary population group with poverty-level incomes in the USA.

Assume that any given percentage of the population earns an equal percentage of real GDP.This percentage of population will be represented by:

A proportional tax is a tax whose rate increases as the tax base widens.

Gini co-efficient is the:

If those who are poor at any one time are poor only temporarily, then their plight is only temporary.This statement is based on which of the following assumptions?

Measures which aim at eliminating the income disparity between the rich and the poor affect incentives to work, innovate, take risks, acquire education, and so on.