Question 1

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. A family earning $110,000 before taxes would have how much after-tax income?

Accepted Answer

A)   $82,500
B)   $92,500
C)   $100,000
D)   $127,500E) B) and C)
F) A) and B)

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

In the Temporary Assistance for Needy Families program, most families

Accepted Answer

A)   must have both parents in the home to qualify.
B)   are female head-of-household families in which the father is absent.
C)   have adult children with disabilities living at home.
D)   are ineligible to receive assistance from other support programs.E) A) and B)
F) B) and C)

Question 4

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)   does not adjust its standard of living to reflect transitory changes in income.
D)   is most likely millionaires.E) None of the above
F) A) and B)

Question 5

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

Accepted Answer

A)   People will alter their behaviors.
B)   Incentives will be distorted.
C)   Total utility will likely remain constant.
D)   The allocation of resources will be less efficient .E) B) and C)
F) All of the above

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

When considering a person's standard of living, data on the income distribution and the poverty rate may provide an incomplete picture because the poor may

Accepted Answer

A)   receive in-kind transfers.
B)   be lending to smooth their income over their life cycle.
C)   be saving to smooth their income due to a drop in transitory income.
D)   under-report their income.E) A) and C)
F) B) and D)

Question 8

The maximin criterion for government policies is associated with

Accepted Answer

A)   the school of thought called utilitarianism.
B)   the school of thought called liberalism.
C)   the school of thought called libertarianism.
D)   the school of thought called stoicism.E) A) and D)
F) C) and D)

Question 9

Table 20-5
Distribution of Income in Umakastan 
-Refer to Table 20-5. Where would the government of Umakastan have to set the poverty line to have a poverty rate of about 28%?

Accepted Answer

A)   $20,000
B)   $34,690
C)   $38,000
D)   $56,000E) None of the above
F) B) and C)

Question 10

Economic mobility in the United States is

Accepted Answer

A)   great, so many of those below the poverty line are there only temporarily.
B)   rare, so most of those below the poverty line are there for decades.
C)   rare, yet many of those below the poverty line are there only temporarily.
D)   unrelated to poverty.E) All of the above
F) B) and C)

Question 11

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

Accepted Answer

A)   earned income cycle.
B)   substitution effect.
C)   life cycle.
D)   pattern of change.E) B) and C)
F) None of the above

Question 12

Utilitarianism is

Accepted Answer

A)   a liberal religion that focuses on individual rights.
B)   a political philosophy that believes the government should choose policies deemed to be just by an impartial observer.
C)   a political philosophy that believes the government should not redistribute income.
D)   a political philosophy that believes the government should choose policies to maximize the total utility of society.E) B) and C)
F) A) and C)

Question 13

In 2011 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

Accepted Answer

A) True 
 B)False

Question 14

Whether or not policymakers should try to make our society more egalitarian is largely a matter of

Accepted Answer

A)   economic efficiency.
B)   political philosophy.
C)   egalitarian principles.
D)   enhanced opportunity.E) A) and D)
F) A) and B)

Question 15

Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?

Accepted Answer

A)   in-kind transfers
B)   economic life cycle
C)   transitory income
D)   All of the above contribute to an incomplete picture of inequality.E) B) and D)
F) C) and D)

Question 16

The only qualification to receive government assistance under a negative income tax is

Accepted Answer

A)   pre-school children.
B)   to be enrolled in job training.
C)   a working head-of-household.
D)   a low income.E) A) and B)
F) None of the above

Question 17

Table 20-10  *A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income) .
Source: The World Bank
-Refer to Table 20-10. Which country has the most equal income distribution?

Accepted Answer

A)   Latvia
B)   Italy
C)   France
D)   SwedenE) A) and B)
F) A) and C)

Question 18

A common criticism of government programs that are designed to assist the poor is that

Accepted Answer

A)   those who receive assistance rarely meet the criterion for eligibility.
B)   the majority of those below the poverty line refuse to accept government assistance.
C)   they create incentives for people to become "needy."
D)   they typically account for a majority of annual government expenditures.E) None of the above
F) B) and D)

Question 19

The typical economic life cycle illustrates how people tend to

Accepted Answer

A)   borrow more when they are younger and save more when they are middle-aged.
B)   earn their peak incomes immediately prior to the typical retirement age of 65.
C)   adjust their consumption based on changes in their transitory income.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 20

People have their highest saving rates when they are

Accepted Answer

A)   retired.
B)   middle-aged.
C)   married with young children.
D)   young and single.E) All of the above
F) None of the above

Exam 20: Income Inequality and Poverty

Correct Answer
verified

The only qualification to receive government assistance under a negative income tax is

Correct Answer
verified

In the Temporary Assistance for Needy Families program, most families

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

The maximin criterion for government policies is associated with

Correct Answer
verified

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

Correct Answer
verified

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. A family earning $110,000 before taxes would have how much after-tax income?

Correct Answer
verified

Table 20-5 Distribution of Income in Umakastan -Refer to Table 20-5. Where would the government of Umakastan have to set the poverty line to have a poverty rate of about 28%?

Correct Answer
verified

Whether or not policymakers should try to make our society more egalitarian is largely a matter of

Correct Answer
verified

People have their highest saving rates when they are

Correct Answer
verified

When considering a person's standard of living, data on the income distribution and the poverty rate may provide an incomplete picture because the poor may

Correct Answer
verified

In 2011 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

Correct Answer
verified

Saving and borrowing is indicative of a family that

Correct Answer
verified

Economic mobility in the United States is

Correct Answer
verified

Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?

Correct Answer
verified

The typical economic life cycle illustrates how people tend to

Correct Answer
verified

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

Correct Answer
verified

Utilitarianism is

Correct Answer
verified

A common criticism of government programs that are designed to assist the poor is that

Correct Answer
verified

Exam 20: Income Inequality and Poverty

Correct AnswerverifiedShow Answer

The only qualification to receive government assistance under a negative income tax is

Correct AnswerverifiedShow Answer

In the Temporary Assistance for Needy Families program, most families

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The maximin criterion for government policies is associated with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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. A family earning $110,000 before taxes would have how much after-tax income?

Correct AnswerverifiedShow Answer

Table 20-5 Distribution of Income in Umakastan -Refer to Table 20-5. Where would the government of Umakastan have to set the poverty line to have a poverty rate of about 28%?

Correct AnswerverifiedShow Answer

Whether or not policymakers should try to make our society more egalitarian is largely a matter of

Correct AnswerverifiedShow Answer

People have their highest saving rates when they are

Correct AnswerverifiedShow Answer

When considering a person's standard of living, data on the income distribution and the poverty rate may provide an incomplete picture because the poor may

Correct AnswerverifiedShow Answer

In 2011 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

Correct AnswerverifiedShow Answer

Saving and borrowing is indicative of a family that

Correct AnswerverifiedShow Answer

Economic mobility in the United States is

Correct AnswerverifiedShow Answer

Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?

Correct AnswerverifiedShow Answer

The typical economic life cycle illustrates how people tend to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Utilitarianism is

Correct AnswerverifiedShow Answer

A common criticism of government programs that are designed to assist the poor is that

Correct AnswerverifiedShow Answer

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