Question 1

An example of an in-kind transfer to the poor is

Accepted Answer

A)  the negative income tax.
B)  the Earned Income Tax Credit (EIT
C)  .
C)  Medicaid.
D)  Temporary Assistance for Needy Families (TANF) .E) A) and B)
F) B) and D)

Question 2

Based on U.S. income data from 2011, the top fifth of all families received

Accepted Answer

A)  about 3.8 percent more than the bottom fifth.
B)  about 49 percent more than the bottom fifth.
C)  approximately 5 times more income than the bottom fifth.
D)  more than 12 times more income than the bottom fifth.E) A) and B)
F) B) and D)

Question 3

Since the early 1970s, average incomes have

Accepted Answer

A)  increased, which has reduced the poverty rate.
B)  increased, while the poverty rate increased slightly.
C)  decreased, while the poverty rate has remained unchanged.
D)  remained unchanged, while the poverty rate has decreased.E) None of the above
F) A) and D)

Question 4

A government policy aimed at protecting people against the risk of adverse events is called .

Accepted Answer

The answer of A government policy aimed at protecting people...

Question 5

According to utilitarians, the ultimate objective of public actions should be to

Accepted Answer

A)  ensure the poor can afford an adequate diet.
B)  distribute income uniformly.
C)  maximize the sum of individual utility.
D)  prevent all people from experiencing diminishing marginal utility.E) All of the above
F) B) and D)

Question 6

When the government taxes income as part of a redistribution program,

Accepted Answer

A)  the poor pay higher taxes.
B)  the rich always benefit more than the poor.
C)  the poor are encouraged to work.
D)  incentives to earn income are diminished.E) A) and C)
F) All of the above

Question 7

For a typical worker, her income will be lower when she is younger, peak around age 50, and decrease drastically when she retires. This pattern of changes in income for a typical worker is called

Accepted Answer

A)  the life cycle.
B)  permanent income.
C)  transitory income.
D)  in-kind transfers.E) None of the above
F) B) and D)

Question 8

Which of the following explains the rise in income inequality in the United States from 1970 to 2011?

Accepted Answer

A)  An increase in minimum wages.
B)  An increase in the demand for skilled labor.
C)  An increase in the demand for unskilled labor.
D)  Reduced international trade with low-wage countries.E) None of the above
F) A) and D)

Question 9

The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows:  The poverty rate in Dismal is

Accepted Answer

A)  16.7 percent.
B)  33.3 percent.
C)  50 percent.
D)  83.3 percent.E) B) and D)
F) A) and B)

Question 10

According to the maximin criterion, income should be transferred from the rich to the poor as long as it

Accepted Answer

A)  raises the well-being of the least fortunate.
B)  does not alter incentives to work and save.
C)  promotes an equal distribution of income.
D)  does not lower the welfare of the elderly.E) B) and D)
F) All of the above

Question 11

Which of the following is not correct?

Accepted Answer

A)  Poverty is long-term problem for relatively few families.
B)  Measurements of income inequality usually do not include in-kind transfers.
C)  Measurements of income inequality use lifetime incomes rather than annual incomes.
D)  Measurements of income inequality would be more meaningful if they reflected permanent rather than current income.E) B) and D)
F) B) and C)

Question 12

Table 20-3
The Distribution of Income in Edgerton 
-Refer to Table 20-3. If the poverty rate is 26%, where is the poverty line in Edgerton?

Accepted Answer

A)  under $28,000
B)  between $28,000 and $43,999
C)  between $44,000 and $75,999
D)  between $76,000 and $87,999E) A) and C)
F) A) and D)

Question 13

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) All of the above
F) B) and D)

Question 14

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: taxes owed equal 30% of income less 12,000. A family that earns an income of $60,000 will

Accepted Answer

A)  pay $6,000 in taxes.
B)  receive an income subsidy of $6,000.
C)  receive an income subsidy of $12,000.
D)  have an after-tax income of $48,000.E) None of the above
F) All of the above

Question 15

When John F. Kennedy said, "A rising tide lifts all boats," to what was he referring?

Accepted Answer

A)  With government intervention, all citizens receive a greater allocation of resources.
B)  With market forces working independently, everyone receives an equitable share of resources.
C)  With economic growth, more families are pushed above the poverty line.
D)  None of the above are correct.E) None of the above
F) A) and C)

Question 16

Which of the following statements is characteristic of utilitarianism?

Accepted Answer

A)  An extra dollar of income provides higher marginal utility to a poor person than to a rich person.
B)  Social policies should be created behind a "veil of ignorance."
C)  Society should strive to maximize the utility of its wealthiest member.
D)  Equality of opportunity is more important than equality of incomes.E) All of the above
F) A) and C)

Question 17

When the government provides poor families with antipoverty programs such as welfare, Medicaid, food stamps, and the Earned Income Tax Credit which are all tied to income,

Accepted Answer

A)  the government creates an egalitarian distribution of income.
B)  the recipients can usually receive benefits for an unlimited amount of time.
C)  it is common for families to face very high effective marginal tax rates.
D)  the incentive to work and earn more income remains unchanged.E) None of the above
F) All of the above

Question 18

Utilitarians believe

Accepted Answer

A)  that the government should choose just policies as evaluated by an impartial observer behind a "veil of ignorance."
B)  in the assumption of diminishing marginal utility.
C)  that everyone in society should have equal utility.
D)  that the government should not redistribute income.E) A) and D)
F) A) and C)

Question 19

Figure 20-3 
-Refer to Figure 20-3. In 1968, the percent of adults aged 18 to 64 years in poverty is

Accepted Answer

A)  higher than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty.
B)  higher than the percentage of children under age 18 but is lower than the percentage of elderly aged 65 and over in poverty.
C)  lower than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty.
D)  lower than the percentage of children under age 18 but is higher than the percentage of elderly aged 65 and over in poverty.E) All of the above
F) A) and B)

Question 20

A negative income tax system is designed to

Accepted Answer

A)  provide in-kind benefits to the poor.
B)  provide a minimum income to the poor.
C)  reduce taxes on the rich when their incomes surpass the maximum income tax bracket.
D)  subsidize food consumption in poor families.E) B) and C)
F) A) and D)

Exam 20: Income Inequality and Poverty

Table 20-3 The Distribution of Income in Edgerton -Refer to Table 20-3. If the poverty rate is 26%, where is the poverty line in Edgerton?

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For a typical worker, her income will be lower when she is younger, peak around age 50, and decrease drastically when she retires. This pattern of changes in income for a typical worker is called

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Utilitarians believe

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A negative income tax system is designed to

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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 explains the rise in income inequality in the United States from 1970 to 2011?

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When John F. Kennedy said, "A rising tide lifts all boats," to what was he referring?

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According to utilitarians, the ultimate objective of public actions should be to

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According to the maximin criterion, income should be transferred from the rich to the poor as long as it

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An example of an in-kind transfer to the poor is

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Figure 20-3 -Refer to Figure 20-3. In 1968, the percent of adults aged 18 to 64 years in poverty is

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Which of the following is not correct?

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Based on U.S. income data from 2011, the top fifth of all families received

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When the government provides poor families with antipoverty programs such as welfare, Medicaid, food stamps, and the Earned Income Tax Credit which are all tied to income,

Correct AnswerverifiedShow Answer

Since the early 1970s, average incomes have

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A government policy aimed at protecting people against the risk of adverse events is called .

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Which of the following statements is characteristic of utilitarianism?

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The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows: The poverty rate in Dismal is

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When the government taxes income as part of a redistribution program,

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Assume that the government proposes a negative income tax that calculates the taxes owed as follows: taxes owed equal 30% of income less 12,000. A family that earns an income of $60,000 will

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