Question 1

Relative to direct cash payments, in-kind transfers have the advantage of being

Accepted Answer

A)  more politically popular.
B)  more efficient.
C)  more respectful of the poor.
D)  of a higher dollar value than cash payments.E) A) and B)
F) A) and C)

Question 2

Would the maximin criterion achieve perfect income equality?

Accepted Answer

A)  Yes. There would be no way to reallocate resources to raise the utility of the poor.
B)  Yes. The maximin criterion would eliminate poverty.
C)  No. It is impossible for complete equality to benefit the worst-off people in society.
D)  No. Complete equality would reduce incentives to work, which would reduce total income, which would reduce the incomes of the worst-off people in society.E) B) and C)
F) All of the above

Question 3

An example of a transitory change in income is the

Accepted Answer

A)  annual cost of living adjustment to your salary.
B)  increase in income that results from a job promotion linked to your education.
C)  increase in income of California orange growers that results from an orange-killing frost in Florida.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 4

Measuring poverty using an absolute income scale like the poverty line can be misleading because

Accepted Answer

A)  income measures do not include the value of in-kind transfers.
B)  money is more highly valued by the rich than by the poor.
C)  the poor are not likely to participate in the labor market.
D)  income measures are not adjusted for the effects of labor-market discrimination.E) B) and D)
F) None of the above

Question 5

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

Accepted Answer

A)  not closely related.
B)  negatively related.
C)  directly related.
D)  equal.E) B) and D)
F) B) and C)

Question 6

Economists Cox and Alm compared the gap between rich and poor and found that the richest 20% was about 2 times better off than the poorest 20% when they compared what data?

Accepted Answer

consumptio...

Question 7

Table 20-3
The Distribution of Income in Edgerton 
-Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a poverty rate of 40 percent?

Accepted Answer

A)  $28,000
B)  $44,000
C)  $76,000
D)  $88,000E) B) and C)
F) A) and D)

Question 8

Figure 20-1
Number of Poor 
-Refer to Figure 20-1. The absolute number of people in poverty

Accepted Answer

A)  is higher in 2011 than in 1959.
B)  is lower in 2011 than in 1959.
C)  has not changed between 1959 and 2011.
D)  has steadily decreased between 1959 and 2011.E) None of the above
F) A) and B)

Question 9

"Only individual members of society earn income, not society itself." This statement is most closely associated with the political philosophy of a

Accepted Answer

A)  utilitarian.
B)  liberal.
C)  libertarian.
D)  None of the above is correct.E) A) and B)
F) None of the above

Question 10

Economic mobility in the United States is so great that fewer than

Accepted Answer

A)  3 percent of families are poor for 8 or more years.
B)  5 percent of families are poor for 8 or more years.
C)  8 percent of families are poor for 8 or more years.
D)  10 percent of families are poor for 8 or more years.E) All of the above
F) B) and C)

Question 11

Scenario 20-5
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income)  - $10,000
-Refer to Scenario 20-5. This negative income tax would guarantee what minimum level of income to every family?

Accepted Answer

A)  $5,000
B)  $10,000
C)  $15,000
D)  $25,000E) None of the above
F) A) and C)

Question 12

Since 1970, has the distribution of income in the US become more equal, less equal, or remained unchanged?

Accepted Answer

The answer of Since 1970, has the distribution of income...

Question 13

Which of the following is not correct?

Accepted Answer

A)  Toys for Tots, a program that collects new toys to distribute to poor children at Christmas, is an example of an in-kind transfer.
B)  Supporters advocate the use of in-kind transfers because they restrict the ability of recipients to purchase alcohol and drugs.
C)  Critics argue that in-kind transfers are inefficient and disrespectful.
D)  For a program to qualify as an in-kind transfer, it must have government approval.E) B) and D)
F) B) and C)

Question 14

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

Accepted Answer

A)  economic mobility.
B)  place in the economic life cycle.
C)  transitory income.
D)  permanent income.E) A) and B)
F) B) and C)

Question 15

Governments enact policies to

Accepted Answer

A)  make the distribution of income more efficient.
B)  make the distribution of income more equal.
C)  maximize the use of the welfare system.
D)  minimize the use of in-kind transfers.E) All of the above
F) B) and D)

Question 16

In the US, is it more likely that someone will become a millionaire by making money on his/her own or by inheriting a fortune?

Accepted Answer

Making mon...

Question 17

Which of the following is an example of a welfare program?

Accepted Answer

A)  Temporary Assistance for Needy Families (TANF) .
B)  Capital Gains Tax (CGT) .
C)  Life Cycle Transfers (LCT) .
D)  North American Free Trade Agreement (NAFT
A)  .E) None of the above
F) A) and D)

Question 18

Table 20-6 
-Refer to Table 20-6. In both 2011 and 2012, approximately 25% of the population earned less than

Accepted Answer

A)  $15,000.
B)  $25,000.
C)  $50,000.
D)  $100,000.E) A) and C)
F) C) and D)

Question 19

Table 20-4  Source: U.S. Bureau of Census
-Refer to Table 20-4. In 2011, the bottom 60% of families have

Accepted Answer

A)  about 13% of total income in the U.S.
B)  about 28% of total income in the U.S.
C)  about 51% of total income in the U.S.
D)  about 74% of total income in the U.S.E) A) and B)
F) B) and D)

Question 20

"The government should choose policies deemed to be just, as evaluated by an impartial observer behind a 'veil of ignorance.'" This statement is most closely associated with which political philosophy?

Accepted Answer

A)  liberalism
B)  utilitarianism
C)  libertarianism
D)  welfarismE) None of the above
F) B) and C)

Exam 20: Income Inequality and Poverty

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

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Figure 20-1 Number of Poor -Refer to Figure 20-1. The absolute number of people in poverty

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Table 20-3 The Distribution of Income in Edgerton -Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a poverty rate of 40 percent?

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"Only individual members of society earn income, not society itself." This statement is most closely associated with the political philosophy of a

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Table 20-6 -Refer to Table 20-6. In both 2011 and 2012, approximately 25% of the population earned less than

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Would the maximin criterion achieve perfect income equality?

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Table 20-4 Source: U.S. Bureau of Census -Refer to Table 20-4. In 2011, the bottom 60% of families have

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"The government should choose policies deemed to be just, as evaluated by an impartial observer behind a 'veil of ignorance.'" This statement is most closely associated with which political philosophy?

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Measuring poverty using an absolute income scale like the poverty line can be misleading because

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Which of the following is not correct?

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In the US, is it more likely that someone will become a millionaire by making money on his/her own or by inheriting a fortune?

Correct AnswerverifiedMaking mon...View AnswerShow Answer

An example of a transitory change in income is the

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Relative to direct cash payments, in-kind transfers have the advantage of being

Correct AnswerverifiedShow Answer

Which of the following is an example of a welfare program?

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Economic mobility in the United States is so great that fewer than

Correct AnswerverifiedShow Answer

Since 1970, has the distribution of income in the US become more equal, less equal, or remained unchanged?

Correct AnswerverifiedShow Answer

Governments enact policies to

Correct AnswerverifiedShow Answer

Economists Cox and Alm compared the gap between rich and poor and found that the richest 20% was about 2 times better off than the poorest 20% when they compared what data?

Correct Answerverifiedconsumptio...View AnswerShow Answer

Scenario 20-5 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/4 of income) - $10,000 -Refer to Scenario 20-5. This negative income tax would guarantee what minimum level of income to every family?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Making mon...
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consumptio...
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