Question 1

The poverty line is set by the government so that 10 percent of all families fall below that line and are thereby classified as "poor."

Accepted Answer

A) True 
 B)False

Question 2

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?

Accepted Answer

Life-cycle variation in income suggests ...

Question 3

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3   Income) - 10,000.A family that earns an income of $60,000 will

Accepted Answer

A)   pay $10,000 in taxes.
B)   receive an income subsidy of $3,000.
C)   receive an income subsidy of $10,000.
D)   neither pay taxes nor receive an income subsidy.E) None of the above
F) All of the above

Question 4

In the United States,long-term poverty,defined as a family having an income below the poverty line for eight or more years,is

Accepted Answer

A)   common,affecting approximately 25 percent of all American families.
B)   common,affecting approximately 15 percent of all American families.
C)   uncommon,affecting approximately 8 percent of all American families.
D)   rare,affecting approximately 3 percent of all American families.E) A) and B)
F) A) and D)

Question 5

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 C)
F) A) and C)

Question 6

Which of the following is not a characteristic of the Earned Income Tax Credit (EITC) ?

Accepted Answer

A)   It does not discourage recipients from working.
B)   It is less distortionary than other anti-poverty programs.
C)   It helps the disabled who cannot work.
D)   It applies only to the working poor.E) B) and C)
F) B) and D)

Question 7

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer.Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Florida.Which of the following is correct?

Accepted Answer

A)   Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income.
B)   Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.
C)   Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.
D)   Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income.E) C) and D)
F) All of the above

Question 8

According to libertarians,the government should redistribute income from rich individuals to poor individuals to achieve a more equal distribution of income.

Accepted Answer

A) True 
 B)False

Question 9

Libertarians believe that

Accepted Answer

A)   it is more important to evaluate the process by which economic outcomes are produced than the outcomes themselves.
B)   government should attempt to redistribute income from the rich to the poor when the gap between rich and poor is more than 20%.
C)   equality of income is more important than equality of opportunity.
D)   it is more important to evaluate economic outcomes first and then the process that produced them.E) C) and D)
F) A) and D)

Question 10

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 C)
F) C) and D)

Question 11

The 2008 U.S.distribution of income shows that the top fifth of all families have

Accepted Answer

A)   more than ten times the income of the bottom 20 percent.
B)   more than five times the income of the bottom 20 percent.
C)   more than double the income of the bottom 20 percent.
D)   the same share of income as the bottom 20 percent.E) A) and C)
F) B) and D)

Question 12

Which of the following statements is not correct?

Accepted Answer

A)   The poverty line is an absolute level of income set by the federal government below which a family is considered to be in poverty.
B)   The poverty line is approximately equal to three times the cost of providing an adequate diet.
C)   The poverty line is adjusted annually to reflect changes in price levels.
D)   The poverty line is adjusted semiannually to reflect changes in fuel prices.E) A) and D)
F) None of the above

Question 13

Raising total utility is the prime objective of which political philosophy?

Accepted Answer

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

Question 14

Table 20-4
  Source: U.S.Bureau of Census
-Refer to Table 20-4.Comparing data from 2000 and 2007,which of the following statements is correct?

Accepted Answer

A)   There has been no change in overall income inequality because the share of income held by the fourth fifth is identical.
B)   Overall income inequality has worsened slightly,as shown by the simultaneous increase in the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth.
C)   Overall income inequality has improved because the share held by the middle fifth has declined by almost 1%.
D)   None of the above is correct.E) All of the above
F) A) and C)

Question 15

Which of the following is not correct?

Accepted Answer

A)   Poverty is correlated with race.
B)   Poverty is correlated with age.
C)   Poverty is correlated with family composition.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 16

Government vouchers to purchase food,also known as food stamps,are an example of

Accepted Answer

A)   an in-kind transfer.
B)   life-cycle income.
C)   a negative income tax.
D)   permanent income.E) B) and C)
F) None of the above

Question 17

A common criticism of welfare programs is that they

Accepted Answer

A)   create self-reliant individuals.
B)   encourage strong family values.
C)   encourage illegitimate births.
D)   have increasing benefits over time,in real terms.E) B) and C)
F) A) and D)

Question 18

Figure 20-4
Poverty Rates by Age 
-Refer to Figure 20-4.In 2001,the percent of children under age 18 in poverty is

Accepted Answer

A)   higher than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 years and over in poverty.
B)   higher than the percentage of adults aged 18 to 64 but is lower than the percentage of elderly aged 65 years and over in poverty.
C)   lower than both the percentage of adults aged18 to 64 and the percentage of elderly aged 65 years and over in poverty.
D)   lower than the percentage of adults aged 18 to 64 but is higher than the percentage of elderly aged 65 years and over in poverty.E) C) and D)
F) B) and C)

Question 19

Raising the welfare of the worst-off person in society is an important goal of which political philosophy?

Accepted Answer

A)   utilitarianism
B)   liberalism
C)   libertarianism
D)   secularismE) A) and C)
F) A) and B)

Question 20

The federal government sets the poverty line at roughly

Accepted Answer

A)   five times the cost of providing an adequate diet.
B)   four times the cost of providing an adequate diet.
C)   three times the cost of providing an adequate diet.
D)   two times the cost of providing an adequate diet.E) C) and D)
F) B) and C)

Exam 20: Income Inequality and Poverty

The poverty line is set by the government so that 10 percent of all families fall below that line and are thereby classified as "poor."

Correct Answer
verified

Raising total utility is the prime objective of which political philosophy?

Correct Answer
verified

In the United States,long-term poverty,defined as a family having an income below the poverty line for eight or more years,is

Correct Answer
verified

According to libertarians,the government should redistribute income from rich individuals to poor individuals to achieve a more equal distribution of income.

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000.A family that earns an income of $60,000 will

Correct Answer
verified

The 2008 U.S.distribution of income shows that the top fifth of all families have

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

Correct Answer
verified

A common criticism of welfare programs is that they

Correct Answer
verified

Government vouchers to purchase food,also known as food stamps,are an example of

Correct Answer
verified

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 2001,the percent of children under age 18 in poverty is

Correct Answer
verified

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?

Correct Answer
verified
Life-cycle variation in income suggests ...
View Answer

Table 20-4 Source: U.S.Bureau of Census -Refer to Table 20-4.Comparing data from 2000 and 2007,which of the following statements is correct?

Correct Answer
verified

Libertarians believe that

Correct Answer
verified

Which of the following is not a characteristic of the Earned Income Tax Credit (EITC) ?

Correct Answer
verified

The federal government sets the poverty line at roughly

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

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

Correct Answer
verified

Raising the welfare of the worst-off person in society is an important goal of which political philosophy?

Correct Answer
verified

Exam 20: Income Inequality and Poverty

The poverty line is set by the government so that 10 percent of all families fall below that line and are thereby classified as "poor."

Correct AnswerverifiedShow Answer

Raising total utility is the prime objective of which political philosophy?

Correct AnswerverifiedShow Answer

In the United States,long-term poverty,defined as a family having an income below the poverty line for eight or more years,is

Correct AnswerverifiedShow Answer

According to libertarians,the government should redistribute income from rich individuals to poor individuals to achieve a more equal distribution of income.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000.A family that earns an income of $60,000 will

Correct AnswerverifiedShow Answer

The 2008 U.S.distribution of income shows that the top fifth of all families have

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

Correct AnswerverifiedShow Answer

A common criticism of welfare programs is that they

Correct AnswerverifiedShow Answer

Government vouchers to purchase food,also known as food stamps,are an example of

Correct AnswerverifiedShow Answer

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 2001,the percent of children under age 18 in poverty is

Correct AnswerverifiedShow Answer

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis.What are their respective implications for inequality in the income distribution?

Correct AnswerverifiedLife-cycle variation in income suggests ...View AnswerShow Answer

Table 20-4 Source: U.S.Bureau of Census -Refer to Table 20-4.Comparing data from 2000 and 2007,which of the following statements is correct?

Correct AnswerverifiedShow Answer

Libertarians believe that

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of the Earned Income Tax Credit (EITC) ?

Correct AnswerverifiedShow Answer

The federal government sets the poverty line at roughly

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Raising the welfare of the worst-off person in society is an important goal of which political philosophy?

Correct AnswerverifiedShow Answer

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Life-cycle variation in income suggests ...
View Answer

Correct Answer
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Correct Answer
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