Question 1

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Accepted Answer

A)  filed tax returns and thus all their income were known.
B)  were different with regard to their age and size characteristics.
C)  were more similar with regard to size, age, education, and other major factors that are linked to income.
D)  were more similar with regard to their hair color, height, and weight.E) C) and D)
F) B) and D)

Question 2

When there is only a weak link between work effort and reward

Accepted Answer

A)  individuals will undertake fewer projects that create income.
B)  taxing the rich and distributing the money to the poor becomes the best way to increase the size of the economic pie.
C)  corporations will profit more.
D)  individuals have a strong incentive to undertake projects that generate income.E) A) and D)
F) None of the above

Question 3

If a family earned $10,000 and, as a consequence, sustained a reduction of $4,000 in government benefits, the family's implicit marginal tax rate would be

Accepted Answer

A)  10 percent.
B)  40 percent.
C)  60 percent.
D)  75 percent.E) A) and B)
F) A) and D)

Question 4

In a market economy,

Accepted Answer

A)  there is a fixed economic pie to be divided among individuals.
B)  differences in incomes provide individuals with an incentive to supply resources that are highly valued by others.
C)  a central distributing agency carves up the economic pie and allocates slices to individuals.
D)  both a and b above are true.E) A) and D)
F) A) and C)

Question 5

The idea that transfer benefits to the poor encourage behavior that increases the risk of poverty is known as the

Accepted Answer

A)  Samaritan's dilemma.
B)  rule of inverse benefits.
C)  implicit marginal tax law.
D)  Smith paradox.E) A) and D)
F) B) and C)

Question 6

Assume that Peter is a single parent who is in poverty. He receives food stamps and Medicaid. For every $100 that he earns, Peter loses $35 of his food stamp benefits and $20 in his Medicaid benefits. Also, Peter's income is taxed at a rate of 10 percent. Then, Peter's effective marginal tax rate is

Accepted Answer

A)  45 percent.
B)  55 percent.
C)  65 percent.
D)  70 percent.E) A) and D)
F) A) and C)

Question 7

In a market economy, individuals have a strong incentive to develop their skills and provide others with resources, goods, and services that they value because these activities generally

Accepted Answer

A)  improve the overall efficiency of the economy.
B)  increase aggregate output.
C)  lead to a higher personal income.
D)  provide additional tax revenue for the government.E) B) and C)
F) B) and D)

Question 8

Figure 15-4
 
-Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Of the three countries shown,

Accepted Answer

A)  country III has the most unequal income distribution.
B)  country II has the most unequal income distribution.
C)  country I has the most unequal income distribution.
D)  country III has the most equal income distribution.
E)  country II has a more equal income distribution than Country I.F) B) and E)
G) A) and D) A

Question 9

The sharp reduction in marginal tax rates during the 1980s

Accepted Answer

A)  reduced the incentive of high-income Americans to work.
B)  increased the incentive of high-income Americans to utilize tax shelters.
C)  increased the unemployment rate of high-income Americans.
D)  increased the visible income of high-income Americans.E) A) and C)
F) B) and C)

Question 10

The poverty threshold income level is

Accepted Answer

A)  an absolute amount that applies to all families equally (i.e., $20,000 household earnings for 2009) .
B)  variable with respect to family size and composition.
C)  adjusted once each decade, with the census numbers.
D)  all of the above.E) C) and D)
F) A) and B)

Question 11

The poverty threshold income level equals the

Accepted Answer

A)  average income of the bottom one-tenth of all income recipients.
B)  cost of an economical and nutritional food plan for a family multiplied by six.
C)  cost of an economical and nutritional food plan for a family multiplied by three.
D)  average income of a family headed by a worker who has been unemployed for six months or more.E) A) and D)
F) A) and C)

Question 12

The poverty threshold income level is

Accepted Answer

A)  adjusted annually for increases in real per capita income.
B)  adjusted annually for changes in prices.
C)  invariant to differences in the size and composition of families.
D)  the highest income level that would leave one in the bottom quintile of income recipients.E) A) and B)
F) A) and D)

Question 13

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

Accepted Answer

Benefits in-kind address the paternal aspects of government. The government's general policy is to provide food, shelter, health care, etc. to low-income people and not money, so people can purchase these items themselves. There is a suspicion that these individuals would not use the money to purchase items that they should value and instead would buy items they should value less.

Question 14

Which of the following is true concerning the distribution of income?

Accepted Answer

A)  Various measures of income inequality can be used to objectively determine the fairness of an income distribution.
B)  When the political process is democratic, income transfer programs will redistribute income from the rich to the poor.
C)  The fairness of an income distribution is a normative concept; it cannot be determined objectively by economic criteria.
D)  Income inequality is the fairest method to allocate income.E) C) and D)
F) All of the above

Question 15

Figure 15-2
 
-According to the Lorenz curve shown in Figure 15-2, what percentage of total income is earned by the richest 20 percent of families?

Accepted Answer

A)  20 percent.
B)  40 percent.
C)  60 percent.
D)  80 percent.E) A) and C)
F) A) and B) B

Question 16

Which of the following is false about data on the inequality of annual family (or household)  incomes?

Accepted Answer

A)  The degree of inequality is reduced when transfers and taxes are considered.
B)  The inequality in annual income data understates the true degree of inequality in lifetime income.
C)  Differences in age and family characteristics contribute to the degree of inequality.
D)  The inequality in consumption spending across households is smaller than the inequality in annual income.E) A) and D)
F) A) and C)

Question 17

Economic analysis indicates that

Accepted Answer

A)  unorganized groups of taxpayers and consumers will be better able to secure redistribution through the political process than well-organized interest groups.
B)  rent-seeking activities are beneficial to a nation's prosperity because they alter public policy.
C)  most income transfers in the United States are directed toward the poor.
D)  market adjustments and competition for transfers will erode much of the gain of transfer recipients.E) B) and C)
F) A) and B)

Question 18

Compared to those with lower incomes, families with higher incomes are more likely to be headed by a

Accepted Answer

A)  person age 65 years and older.
B)  husband and wife team with one but not the other in the labor force.
C)  single-parent.
D)  college graduate.E) B) and D)
F) All of the above

Question 19

(I)  In 2009, a family of four making $22,050 would be considered living in poverty. (II)  The poverty threshold level of income is adjusted for family size and for inflation (price level changes)  through time.

Accepted Answer

A)  Both I and II are true.
B)  Both I and II are false.
C)  I is true; II is false.
D)  II is true; I is false.E) B) and C)
F) None of the above

Question 20

This year, Bob earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

Accepted Answer

A)  zero.
B)  25 percent.
C)  50 percent.
D)  100 percent.E) A) and C)
F) None of the above

Exam 15: Income Inequality and Poverty

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Correct Answer
verified

When there is only a weak link between work effort and reward

Correct Answer
verified

If a family earned $10,000 and, as a consequence, sustained a reduction of $4,000 in government benefits, the family's implicit marginal tax rate would be

Correct Answer
verified

In a market economy,

Correct Answer
verified

The idea that transfer benefits to the poor encourage behavior that increases the risk of poverty is known as the

Correct Answer
verified

Assume that Peter is a single parent who is in poverty. He receives food stamps and Medicaid. For every $100 that he earns, Peter loses $35 of his food stamp benefits and $20 in his Medicaid benefits. Also, Peter's income is taxed at a rate of 10 percent. Then, Peter's effective marginal tax rate is

Correct Answer
verified

In a market economy, individuals have a strong incentive to develop their skills and provide others with resources, goods, and services that they value because these activities generally

Correct Answer
verified

Figure 15-4 -Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Of the three countries shown,

Correct Answer
verified
A

The sharp reduction in marginal tax rates during the 1980s

Correct Answer
verified

The poverty threshold income level is

Correct Answer
verified

The poverty threshold income level equals the

Correct Answer
verified

The poverty threshold income level is

Correct Answer
verified

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

Which of the following is true concerning the distribution of income?

Correct Answer
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Figure 15-2 -According to the Lorenz curve shown in Figure 15-2, what percentage of total income is earned by the richest 20 percent of families?

Correct Answer
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B

Which of the following is false about data on the inequality of annual family (or household) incomes?

Correct Answer
verified

Economic analysis indicates that

Correct Answer
verified

Compared to those with lower incomes, families with higher incomes are more likely to be headed by a

Correct Answer
verified

(I) In 2009, a family of four making $22,050 would be considered living in poverty. (II) The poverty threshold level of income is adjusted for family size and for inflation (price level changes) through time.

Correct Answer
verified

This year, Bob earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

Correct Answer
verified

Exam 15: Income Inequality and Poverty

It would be more reasonable to use annual income data as an index of economic inequality if all of the households

Correct AnswerverifiedShow Answer

When there is only a weak link between work effort and reward

Correct AnswerverifiedShow Answer

If a family earned $10,000 and, as a consequence, sustained a reduction of $4,000 in government benefits, the family's implicit marginal tax rate would be

Correct AnswerverifiedShow Answer

In a market economy,

Correct AnswerverifiedShow Answer

The idea that transfer benefits to the poor encourage behavior that increases the risk of poverty is known as the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a market economy, individuals have a strong incentive to develop their skills and provide others with resources, goods, and services that they value because these activities generally

Correct AnswerverifiedShow Answer

Figure 15-4 -Figure 15-4 shows the Lorenz Curve for three countries, I, II, and III. Of the three countries shown,

Correct AnswerverifiedA

The sharp reduction in marginal tax rates during the 1980s

Correct AnswerverifiedShow Answer

The poverty threshold income level is

Correct AnswerverifiedShow Answer

The poverty threshold income level equals the

Correct AnswerverifiedShow Answer

The poverty threshold income level is

Correct AnswerverifiedShow Answer

Why does the government provide benefits in-kind? Why don't we just give money to low-income people?

Which of the following is true concerning the distribution of income?

Correct AnswerverifiedShow Answer

Figure 15-2 -According to the Lorenz curve shown in Figure 15-2, what percentage of total income is earned by the richest 20 percent of families?

Correct AnswerverifiedB

Which of the following is false about data on the inequality of annual family (or household) incomes?

Correct AnswerverifiedShow Answer

Economic analysis indicates that

Correct AnswerverifiedShow Answer

Compared to those with lower incomes, families with higher incomes are more likely to be headed by a

Correct AnswerverifiedShow Answer

(I) In 2009, a family of four making $22,050 would be considered living in poverty. (II) The poverty threshold level of income is adjusted for family size and for inflation (price level changes) through time.

Correct AnswerverifiedShow Answer

This year, Bob earned a total of $9,000. As a result, he received $9,000 less in government transfers. Therefore, his implicit marginal tax rate is

Correct AnswerverifiedShow Answer

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A

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B

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