Question 1

Which of the following is true?

Accepted Answer

A)  Taxes and transfers generally increase the income share of the bottom quintile of income recipients, while reducing the share of the top group of earners.
B)  In a market economy, the distribution of income is determined by the quantity and value of the resources supplied by the various individuals, and nearly half the value of resources owned by the rich was inherited.
C)  Between 1980 and 2009, the income share received by the highest quintile of earners fell, while the share received by the bottom quintile of earners rose.
D)  All of the above are true.

Question 2

Why not designate the poorest 10 percent of the population as the official measure of poverty?

Accepted Answer

This relative measure would imply that p...

Question 3

This year Bill earned $3,000 more than last year. As a result, he received $2,500 less in government transfers. Therefore, Bill's implicit marginal tax rate is about

Accepted Answer

A)  16 percent
B)  25 percent
C)  66 percent
D)  83 percent

Question 4

The phenomenon that describes how transfer programs, which significantly reduce the adversities of poverty, also reduce the opportunity cost of choices that often lead to poverty is known as

Accepted Answer

A)  the implicit marginal tax rate.
B)  Gibson's paradox.
C)  the Phillips curve
D)  the Samaritan's dilemma.

Question 5

If complete equality of income were legislated, which of the following would economics predict?

Accepted Answer

A)  People would become richer.
B)  Society would gain utility from the extra goods produced.
C)  Individuals would willingly work longer hours and thus produce more.
D)  The incentive to produce and perform efficiently would be virtually eliminated.

Question 6

This year, Sue earned $2,000 more than last year. As a result, she received $500 less in government transfers. Therefore, Sue's implicit marginal tax rate is

Accepted Answer

A)  15 percent.
B)  25 percent.
C)  40 percent.
D)  75 percent.

Question 7

In 2009, the proportion of all poverty-level families headed by a female was

Accepted Answer

A)  approximately one-fourth.
B)  approximately one-third.
C)  approximately half.
D)  more than three-fourths.

Question 8

Which of the following has contributed to the rising income inequality in the United States?

Accepted Answer

A)  The proportion of single-parent families has increased.
B)  The proportion of dual-earner families has increased.
C)  Earnings differentials between skilled and less-skilled workers have increased.
D)  all of the above

Question 9

In the United States the degree of individual income mobility (that is, the degree to which people move from higher to lower or lower to higher income groupings)  is

Accepted Answer

A)  rigid in both directions.
B)  flexible in both directions.
C)  flexible upward but rigid downward since high income perpetuates itself from generation to generation.
D)  flexible downward but rigid upward since most low-income people never rise significantly above the poverty level.

Question 10

Compared to those with higher incomes, low-income families are more likely to

Accepted Answer

A)  be headed by a person between 35 and 55 years of age.
B)  have both a husband and a wife in the labor force.
C)  be single-parent families.
D)  be headed by a college graduate.

Question 11

Because the United States has a progressive tax system, the distribution of income after taking into account the effects of taxes and transfers is

Accepted Answer

A)  less equal than the distribution of before-tax income.
B)  more equal than the distribution of before-tax income.
C)  exactly the same as the distribution of before-tax income.
D)  none of the above.

Question 12

Which of the following is true of the tax and transfer programs of the United States?

Accepted Answer

A)  Tax-transfer programs persistently redistribute income from the rich to the poor.
B)  Social Security, the largest transfer program, redirects income toward the elderly, a group with above-average levels of both income and wealth.
C)  The bulk of agriculture subsidies go to large farmers with above-average incomes.
D)  Taxes generally take a larger share of the income of the poor than is true for those with higher incomes.
E)  Both b and c are true.

Question 13

Government programs that take money from high-income people and give it to low-income people typically

Accepted Answer

A)  improve economic efficiency because they reducing poverty.
B)  reduce economic efficiency because they distort incentives.
C)  have no effect on economic efficiency because they both reduce poverty and distort incentives.
D)  sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Question 14

Annual income data would be a better index of economic inequality if

Accepted Answer

A)  all households filed tax returns revealing their real income.
B)  households were more different with regard to age and size characteristics.
C)  all households were more similar with regard to size, age, education, and other major factors that are linked to income.
D)  mathematicians could grasp the complexities of the calculations.

Question 15

In 2009, high-income families (the top 20 percent)  in the United States earned approximately ____ percent of the total before-tax income.

Accepted Answer

A)  34
B)  48
C)  62
D)  79

Question 16

If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Accepted Answer

A)  zero.
B)  30 percent.
C)  50 percent.
D)  100 percent.

Question 17

Income mobility studies suggest that poverty

Accepted Answer

A)  cannot be alleviated by privately sponsored anti-poverty programs.
B)  cannot be alleviated by government sponsored anti-poverty programs.
C)  is a long-term problem for a relatively large number of families.
D)  is not a long-term problem for most families.

Question 18

Data on income inequality in the United States indicate that

Accepted Answer

A)  rich families stay rich and poor families stay poor.
B)  most poor families never significantly rise above the poverty level, but rich families tend to become less wealthy over time.
C)  there is substantial movement among income groupings in the United States.
D)  the inequality between the rich and poor in annual consumption expenditures is greater than the parallel inequality in annual income.

Question 19

Which of the following is true?

Accepted Answer

A)  With time, most of those with low incomes at a point in time move up the income ladder only to be replaced by others who are youthful, inexperienced, or the victim of current misfortune.
B)  Recent studies indicate that there is virtually no relationship between the relative income position of grandparents and their grandchildren.
C)  Both a and b are true.
D)  Neither a nor b is true.

Question 20

Transfers that are limited to persons or families with an income below a certain cut-off point are referred to as

Accepted Answer

A)  means-tested income transfers.
B)  poverty transfers.
C)  Social Security transfers.
D)  cash income transfers.

Exam 15: Income Inequality and Poverty

If complete equality of income were legislated, which of the following would economics predict?

Correct AnswerverifiedShow Answer

Annual income data would be a better index of economic inequality if

Correct AnswerverifiedShow Answer

In the United States the degree of individual income mobility (that is, the degree to which people move from higher to lower or lower to higher income groupings) is

Correct AnswerverifiedShow Answer

In 2009, high-income families (the top 20 percent) in the United States earned approximately ____ percent of the total before-tax income.

Correct AnswerverifiedShow Answer

Because the United States has a progressive tax system, the distribution of income after taking into account the effects of taxes and transfers is

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

In 2009, the proportion of all poverty-level families headed by a female was

Correct AnswerverifiedShow Answer

The phenomenon that describes how transfer programs, which significantly reduce the adversities of poverty, also reduce the opportunity cost of choices that often lead to poverty is known as

Correct AnswerverifiedShow Answer

If a family earned an additional $6,000 of income from work and as a result their welfare benefits were reduced by $3,000, the implicit marginal tax rate for this family would be

Correct AnswerverifiedShow Answer

This year Bill earned $3,000 more than last year. As a result, he received $2,500 less in government transfers. Therefore, Bill's implicit marginal tax rate is about

Correct AnswerverifiedShow Answer

Which of the following is true of the tax and transfer programs of the United States?

Correct AnswerverifiedShow Answer

Compared to those with higher incomes, low-income families are more likely to

Correct AnswerverifiedShow Answer

This year, Sue earned $2,000 more than last year. As a result, she received $500 less in government transfers. Therefore, Sue's implicit marginal tax rate is

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

Government programs that take money from high-income people and give it to low-income people typically

Correct AnswerverifiedShow Answer

Why not designate the poorest 10 percent of the population as the official measure of poverty?

Correct AnswerverifiedThis relative measure would imply that p...View AnswerShow Answer

Transfers that are limited to persons or families with an income below a certain cut-off point are referred to as

Correct AnswerverifiedShow Answer

Data on income inequality in the United States indicate that

Correct AnswerverifiedShow Answer

Which of the following has contributed to the rising income inequality in the United States?

Correct AnswerverifiedShow Answer

Income mobility studies suggest that poverty

Correct AnswerverifiedShow Answer

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This relative measure would imply that p...
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