Question 1

Poverty is found to be correlated with

Accepted Answer

A)  age and race but not family composition.
B)  race only.
C)  race and family composition but not age.
D)  age, race, and family composition.E) A) and D)
F) B) and C)

Question 2

Which of the following programs would be favored by philosopher John Rawls and why?

Accepted Answer

A)  A negative income tax because it maximizes the income of the poorest member of society.
B)  The Supplemental Security Income (SSI)  program because it does not encourage illegitimate births or break up two-parent families.
C)  A minimum-wage law because it benefits unskilled workers regardless of their income levels.
D)  None of the programs would be favored because each of them forcibly redistributes income that was fairly, if not equally, earned.E) B) and C)
F) B) and D)

Question 3

When a government policy alters the distribution of income to achieve greater income equality,which of the following will happen?

Accepted Answer

A)  Incentives for earning income are distorted.
B)  Consumers alter their behavior in response to the policy.
C)  The new allocation of resources is less efficient than the pre-policy allocation.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 4

The poverty rate is based on a family's

Accepted Answer

A)  income, in-kind transfers, and other government aid.
B)  income and in-kind transfers.
C)  in-kind transfers only.
D)  income only.E) B) and C)
F) C) and D)

Question 5

Saving and borrowing is indicative of a family that

Accepted Answer

A)  is most likely to be poor.
B)  has a difficult time balancing its standard of living.
C)  adjusts its standard of living to reflect transitory changes in income.
D)  is most likely millionaires.E) None of the above
F) B) and C)

Question 6

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

Accepted Answer

A)  improve economic efficiency by 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.E) None of the above
F) A) and D)

Question 7

Because people can borrow when they are young,the life cycle theory would suggest that one's standard of living depends on

Accepted Answer

A)  lifetime income rather than annual income.
B)  aggregate income rather than annual personal income.
C)  annual extended family income rather than annual personal income.
D)  income averaged across seasons rather than across years.E) A) and D)
F) All of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Table 20-2
Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years
[Dollars]
  
Source: U. S. Bureau of the Census, Current Population Survey.
-Refer to Table 20-2.What is the poverty line for a family of six with three children?

Accepted Answer

A)  $21,469
B)  $24,797
C)  $25,738
D)  $28,718E) A) and B)
F) All of the above

Question 10

The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

Accepted Answer

A) True 
 B)False

Question 11

A government's policy of redistributing income makes the income distribution more equitable,

Accepted Answer

A)  distorts incentives, and makes the allocation of resources more efficient.
B)  alters behavior, and makes the allocation of resources more efficient.
C)  distorts incentives but does not alter behavior.
D)  distorts incentives, and makes the allocation of resources less efficient.E) A) and B)
F) A) and C)

Question 12

Which of the following is not a question that economists try to answer when measuring the distribution of income?

Accepted Answer

A)  How much inequality is there in our society?
B)  How many people live in poverty?
C)  How often do people receive raises?
D)  What problems arise in measuring the amount of inequality?E) B) and C)
F) A) and B)

Question 13

Figure 20-3
 
-Refer to Figure 20-3.An effective minimum wage would be set at a level

Accepted Answer

A)  above Wₒ, and employment would rise above Qₒ.
B)  above Wₒ, and employment would fall below Qₒ.
C)  below Wₒ, and employment would rise above Qₒ.
D)  below Wₒ, and employment would fall below Qₒ.E) All of the above
F) A) and B)

Question 14

Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

Accepted Answer

A)  in-kind transfers
B)  negative income tax
C)  transitory versus permanent income
D)  economic mobilityE) A) and C)
F) A) and B)

Question 15

Table 20-2
Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years
[Dollars]
  
Source: U. S. Bureau of the Census, Current Population Survey.
-Refer to Table 20-2.What is the poverty line for a family of three with one child?

Accepted Answer

A)  $12,072
B)  $12,400
C)  $14,480
D)  $14,494E) A) and D)
F) B) and C)

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits.
B)  The Earned Income Tax Credit (EIT
C)   is very similar to a negative income tax.
C)  Minimum wage laws will likely increase unemployment.
D)  The elderly are more likely to be poor than single mothers.E) B) and C)
F) None of the above

Question 17

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Accepted Answer

A) True 
 B)False

Question 18

In-kind transfers are politically popular because

Accepted Answer

A)  they provide high quality food and shelter.
B)  they provide cash.
C)  allow resale of food stamps for cash, if needed.
D)  the public believes that the aid is not going to support addictions.E) A) and C)
F) C) and D)

Question 19

Since the early 1970s,welfare benefits have declined,

Accepted Answer

A)  which is largely due to the success of the negative income tax program.
B)  which is largely due to the success of private charities.
C)  yet the percentage of children living with only one parent has increased.
D)  and the percentage of children living with only one parent has decreased.E) A) and B)
F) A) and C)

Question 20

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Accepted Answer

A)  utilitarianism
B)  liberalism
C)  libertarianism
D)  None of the above is correct.E) B) and C)
F) A) and D)

Exam 20: Income Inequality and Poverty

Since the early 1970s,welfare benefits have declined,

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Figure 20-3 -Refer to Figure 20-3.An effective minimum wage would be set at a level

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Which of the following programs would be favored by philosopher John Rawls and why?

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When a government policy alters the distribution of income to achieve greater income equality,which of the following will happen?

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Saving and borrowing is indicative of a family that

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Suppose that a family saves and borrows to buffer itself against changes in income.These actions relate to which problem in measuring inequality?

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The poverty rate is based on a family's

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Because people can borrow when they are young,the life cycle theory would suggest that one's standard of living depends on

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Poverty is found to be correlated with

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Table 20-2 Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-2.What is the poverty line for a family of three with one child?

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

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The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

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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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Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

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A government's policy of redistributing income makes the income distribution more equitable,

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Table 20-2 Poverty Thresholds in 2002, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-2.What is the poverty line for a family of six with three children?

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Which of the following statements is not correct?

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In-kind transfers are politically popular because

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The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

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Which of the following is not a question that economists try to answer when measuring the distribution of income?

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