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Exam 20: Income Inequality and Poverty

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Question 61

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Scenario 20-4 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) - $14,000 -Refer to Scenario 20-4. The government does not have to pay a subsidy to any family through this negative income tax if the family with the lowest income earns $50,000.

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Question 62

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About four out of five millionaires in the United States earned their money rather than inherited it.

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B) False

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Question 63

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A disadvantage associated with in-kind transfers to reduce poverty is that they

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

In a typical 10-year period, about one in four families falls below the poverty line in at least one year. What percentage of families are poor for eight or more years?

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

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Among all countries in the world, the United States has the most income inequality.

Over the past 50 years, the U.S. poverty rate was at its lowest level in

A disadvantage of the Earned Income Tax Credit (EITC) program is that it does not help alleviate poverty due to unemployment, sickness, or other inability to work.

Table 20-1 The following table shows the distribution of income in Choochooville. ​ ​ $\begin{array} { | c | c | } \hline \text { Group } & \text { Annual Family Income } \\\hline \text { Bottom Quartile } ( 25 \% ) & \$ 23,000 \text { and below } \\\hline \text { Third Quartile } & \$ 23,000 \text { to } \$ 52,999 \\\hline \text { Second Quartile } & \$ 53,000 \text { to } \$ 82,999 \\\hline \text { Top Quartile } & \$ 83,000 \text { and above } \\\hline\end{array}$ ​ -Refer to Table 20-1. Twenty-five percent of all families have incomes below what level?

The poverty rate is the percentage of the population whose family income falls below an absolute level called the .

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

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer. Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Washington. Which of the following is correct?

The poverty line is based on the percentage of people who cannot afford an adequate diet.

Scenario 20-4 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) - $14,000 -Refer to Scenario 20-4. The government does not receive any tax revenue through this negative income tax if the family with the highest income earns $56,000.

John Rawls, who developed the way of thinking called liberalism, argued that government policies should be aimed at maximizing the sum of utility of everyone in society.

Scenario 20-1 ​ The government is proposing switching from a progressive tax system in which families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35% of any income over $100,000 to a tax system in which every family pays 20% of their income minus $20,000. -Refer to Scenario 20-1. What would libertarians think of the tax two policies?

When designing public policies, which income group would philosopher John Rawls argue needs the most attention?

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.