Question 1

Refer to the above graph.If a curve shifted from (d) to (b) ,then the Gini ratio would:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   become negative.E) A) and C)
F) All of the above

Question 2

A major criticism of the welfare system that led to recent reforms is that welfare payments:

Accepted Answer

A)   encourage overuse of the medical system.
B)   create dependency on government programs.
C)   give strong incentives for people to change jobs.
D)   fail to provide a minimum income for young children.E) A) and D)
F) A) and B)

Question 3

The difference between the 45-degree line and the Lorenz curve shows the:

Accepted Answer

A)   inflationary gap.
B)   recessionary gap.
C)   number of households that are classified as being poor.
D)   degree of income inequality.E) B) and D)
F) None of the above

Question 4

Greater income equality that is achieved through the redistribution of income is thought to:

Accepted Answer

A)   stimulate innovation and entrepreneurship.
B)   promote economic efficiency in the economy.
C)   increase incentives to work,save,and invest in the economy.
D)   come at the opportunity cost of reduced production and income.E) B) and D)
F) All of the above

Question 5

The benefit-reduction rate is the rate at which government benefits increase as the earned income of a family increases.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the above table.The rise in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the:

Accepted Answer

A)   lowest 20 percent of households.
B)   third 20 percent of households.
C)   fourth 20 percent of households.
D)   highest 20 percent of households.E) B) and D)
F) None of the above

Question 7

The distribution of income in the United States after taxes and transfers are taken into account is less equal than it is before taxes and transfers are taken into account.

Accepted Answer

A) True 
 B)False

Question 8

Social insurance is distinguished from public assistance,or welfare,by the fact that:

Accepted Answer

A)   all social insurance benefits are paid in cash while all public assistance benefits are paid in kind (food,housing,medical care) .
B)   an individual acquires a right to social insurance benefits by meeting objective eligibility criteria while public assistance benefits are determined according to individual need.
C)   the total amount paid in benefits is much larger in the public assistance programs than in the social insurance programs.
D)   payroll taxes are used to finance public assistance programs while general revenues are used to finance social insurance programs.E) A) and B)
F) A) and C)

Question 9

The Earned Income Tax Credit:

Accepted Answer

A)   increases the personal income tax liability of low-income working families.
B)   provides a cash payment to low-income working families if their tax credit exceeds their tax liability.
C)   is designed to make labor force employment less attractive.
D)   was eliminated as part of welfare reform in 1996.E) B) and C)
F) A) and D)

Question 10

In 2009,the percentage of the total population that lived in poverty was approximately:

Accepted Answer

A)   5 percent and the percentage of African Americans who lived in poverty was approximately 10 percent.
B)   7 percent and the percentage of African Americans who lived in poverty was approximately 14 percent.
C)   12 percent and the percentage of African Americans who lived in poverty was approximately 25 percent.
D)   21 percent and the percentage of African Americans who lived in poverty was approximately 58 percent.E) A) and C)
F) B) and D)

Question 11

Recent government statistics indicate that about 20 percent of the nation lives in poverty.

Accepted Answer

A) True 
 B)False

Question 12

A government payment in the form of goods and services rather than money is a(n) :

Accepted Answer

A)   earned income tax credit.
B)   benefit reduction.
C)   noncash transfer.
D)   work incentive.E) All of the above
F) B) and C)

Question 13

Public assistance programs provide benefits for those who are unable to earn income because of permanent disabilities,or have no or very low income and also have dependent children.

Accepted Answer

A) True 
 B)False

Question 14

Under a guaranteed minimum annual income plan,if the minimum income level is $5000 with a benefit-reduction rate of 50 percent,and if a family had earnings of $4000,it would receive annual transfer payments of:

Accepted Answer

A)   $1000.
B)   $3000.
C)   $5000.
D)   $7000.The family is guaranteed an income of $5000.If the family made $4000,it would have 50 percent of the earned income taken away.The annual transfer payment is $5000 - $2000 = $3000.E) A) and B)
F) A) and C)

Question 15

The basic argument for income inequality is that it is necessary if consumer satisfaction (utility)is to be maximized.

Accepted Answer

A) True 
 B)False

Question 16

A flow of wages and salary earnings,along with rent,interest,and profits,is:

Accepted Answer

A)   wealth.
B)   income.
C)   transfers.
D)   utility.E) B) and C)
F) A) and D)

Question 17

Which is a cause of growing income inequality in the United States in the last decade?

Accepted Answer

A)   Competition in exporting to other countries among several major industries
B)   Industrial restructuring from services to goods production
C)   A widening wage gap between skilled and unskilled workers
D)   An increase in the progressivity of the federal tax systemE) A) and B)
F) None of the above

Question 18

Social Security,Medicare,and unemployment compensation are social insurance programs.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the above graph.A nation that has an income distribution of perfect equality would be represented by the above curve:

Accepted Answer

A)   a.
B)   b.
C)   c.
D)   d.E) All of the above
F) C) and D)

Question 20

The average household income in the United States in 2009 was:

Accepted Answer

A)   $27,876.
B)   $34,231.
C)   $52,025.
D)   $67,570.E) B) and D)
F) A) and D)

Exam 11: Income Inequality and Poverty

A major criticism of the welfare system that led to recent reforms is that welfare payments:

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The Earned Income Tax Credit:

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Greater income equality that is achieved through the redistribution of income is thought to:

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Which is a cause of growing income inequality in the United States in the last decade?

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In 2009,the percentage of the total population that lived in poverty was approximately:

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The distribution of income in the United States after taxes and transfers are taken into account is less equal than it is before taxes and transfers are taken into account.

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Refer to the above graph.If a curve shifted from (d) to (b) ,then the Gini ratio would:

Correct AnswerverifiedShow Answer

The average household income in the United States in 2009 was:

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Refer to the above table.The rise in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the:

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Public assistance programs provide benefits for those who are unable to earn income because of permanent disabilities,or have no or very low income and also have dependent children.

Correct AnswerverifiedShow Answer

The basic argument for income inequality is that it is necessary if consumer satisfaction (utility)is to be maximized.

Correct AnswerverifiedShow Answer

The benefit-reduction rate is the rate at which government benefits increase as the earned income of a family increases.

Correct AnswerverifiedShow Answer

A government payment in the form of goods and services rather than money is a(n) :

Correct AnswerverifiedShow Answer

A flow of wages and salary earnings,along with rent,interest,and profits,is:

Correct AnswerverifiedShow Answer

Social Security,Medicare,and unemployment compensation are social insurance programs.

Correct AnswerverifiedShow Answer

Social insurance is distinguished from public assistance,or welfare,by the fact that:

Correct AnswerverifiedShow Answer

Refer to the above graph.A nation that has an income distribution of perfect equality would be represented by the above curve:

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Under a guaranteed minimum annual income plan,if the minimum income level is $5000 with a benefit-reduction rate of 50 percent,and if a family had earnings of $4000,it would receive annual transfer payments of:

Correct AnswerverifiedShow Answer

The difference between the 45-degree line and the Lorenz curve shows the:

Correct AnswerverifiedShow Answer

Recent government statistics indicate that about 20 percent of the nation lives in poverty.

Correct AnswerverifiedShow Answer

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