Question 1

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 C)
F) B) and D)

Question 2

Which of the following groups has the lowest poverty rate?

Accepted Answer

A)  blacks
B)  Asians
C)  children (under age 18) 
D)  female households, no spouse presentE) C) and D)
F) A) and C)

Question 3

An example of an in-kind transfer to the poor is

Accepted Answer

A)  the negative income tax.
B)  the Earned Income Tax Credit (EIT
C)  .
C)  Medicaid.
D)  Temporary Assistance for Needy Families (TANF) .E) All of the above
F) None of the above

Question 4

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) B) and D)
F) B) and C)

Question 5

Scenario 20-7
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/6 of income)  - $24,000
-Refer to Scenario 20-7. This negative income tax would guarantee what minimum level of income to every family?

Accepted Answer

A)  $24,000
B)  $50,000
C)  $144,000
D)  $150,000E) A) and D)
F) B) and C)

Question 6

Which of the following formulas is most representative of a negative income tax proposal?

Accepted Answer

A)  Taxes Owed = (1/4 of Income)   $2
B)  Taxes Owed = (1/2 of Income)   3/4
C)  Taxes Owed = (1/2 of Income)  + $10,000
D)  Taxes Owed = (1/3 of Income)  - $10,000E) B) and C)
F) A) and D)

Question 7

Caroline earns more than John. Under a new tax system, some of the taxes paid by Caroline would go to John. A libertarian would

Accepted Answer

A)  support the system because an extra dollar earned by Caroline would be worth less to her than an extra dollar given to John.
B)  oppose the system if it redistributed income in the presence of equal opportunity.
C)  oppose the system because an extra dollar earned by Caroline would be worth more to her than an extra dollar given to John.
D)  support the system if it maximized the well-being of the poorest member of society.E) A) and D)
F) All of the above

Question 8

Table 20-1
The following table shows the distribution of income in Marysville. 
-Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

Accepted Answer

A)  $30,000
B)  $60,000
C)  $90,000
D)  There is insufficient information to answer this question.E) A) and B)
F) C) and D)

Question 9

Table 20-13
The following table shows the distribution of income in Widgetapolis.  ​
-Refer to Table 20-13. Twenty percent of all families have incomes above what level?

Accepted Answer

A)  $39,000
B)  $60,000
C)  $82,000
D)  $110,000E) A) and D)
F) A) and C)

Question 10

Figure 20-3 
-Refer to Figure 20-3. In 2011, the percent of elderly aged 65 and over in poverty is

Accepted Answer

A)  higher than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty.
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of children under age 18 in poverty.
C)  lower than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty.
D)  lower than the percentage of children under age 18 but is equal to the percentage of adults aged 18 to 64 in poverty.E) None of the above
F) C) and D)

Question 11

Of the four countries below, the country that has the most income equality is

Accepted Answer

A)  Ethiopia.
B)  France.
C)  Russia.
D)  Thailand.E) A) and B)
F) C) and D)

Question 12

Table 20-6 
-Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position?

Accepted Answer

A)  The percentage of people earning less than $25,000 decreased from 2011 to 2012.
B)  The percentage of people earning more than $100,000 increased from 2011 to 2012.
C)  The percentage of people earning between $50,000 and $100,000 stayed virtually constant from 2011 to 2012.
D)  Both a and b are correct.E) B) and C)
F) A) and B)

Question 13

The poverty line in the country of Inequalia is $7,800. The distribution of income for Inequalia is as follows:  The poverty rate in Inequalia is

Accepted Answer

A)  7.8 percent.
B)  between 10 percent and 25 percent.
C)  between 25 percent and 50 percent.
D)  39 percent.E) C) and D)
F) A) and B)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The United States has less income inequality than

Accepted Answer

A)  Ethiopia.
B)  United Kingdom.
C)  Vietnam.
D)  Mexico.E) A) and B)
F) A) and C)

Question 16

The concept of diminishing marginal utility is embedded in the utilitarian rationale for

Accepted Answer

A)  trickle-down effects.
B)  enhancing market efficiency.
C)  redistributing income.
D)  maintaining the status quo income distribution.E) A) and D)
F) C) and D)

Question 17

Which of the following is correct?

Accepted Answer

A)  Governments can never improve market outcomes.
B)  Governments can sometimes improve market outcomes.
C)  Governments can always improve market outcomes.
D)  Government can never make the income distribution more equal.E) A) and B)
F) A) and C)

Question 18

Which of the following is not correct?

Accepted Answer

A)  Many measures of inequality are based on income, which may not reflect a person's standard of living.
B)  Because many of the poorest families receive in-kind transfers, more families have lower standards of living when compared to poverty rates based on income.
C)  Because people can borrow and save to smooth out life cycle changes in income, equality measures based only on income may not reflect a person's standard of living.
D)  A person's standard of living depends more on her permanent income than her transitory income, so inequality measures based on current income may be misleading.E) None of the above
F) B) and C)

Question 19

Briefly describe the three prominent schools of thought in political philosophy. Identify one of the most well-known philosophers in each school.

Accepted Answer

According to utilitarianism, the governm...

Question 20

Which of the following is not correct?

Accepted Answer

A)  Critics argue that minimum-wage laws hurt the very people they are intended to help.
B)  Minimum-wage laws may increase unemployment among the groups of workers affected by the minimum wage.
C)  If the demand for unskilled labor is relatively inelastic, the higher wage will produce more unemployment than if the demand for unskilled labor is relatively elastic.
D)  Minimum-wage laws may benefit teenagers from middle-class families, so the policy is not a precise way to help the poor.E) B) and C)
F) A) and B)

Exam 20: Income Inequality and Poverty

The typical economic life cycle illustrates how people tend to

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Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

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Which of the following groups has the lowest poverty rate?

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

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Figure 20-3 -Refer to Figure 20-3. In 2011, the percent of elderly aged 65 and over in poverty is

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Caroline earns more than John. Under a new tax system, some of the taxes paid by Caroline would go to John. A libertarian would

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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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Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. Twenty percent of all families have incomes above what level?

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The poverty line in the country of Inequalia is $7,800. The distribution of income for Inequalia is as follows: The poverty rate in Inequalia is

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The United States has less income inequality than

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The concept of diminishing marginal utility is embedded in the utilitarian rationale for

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Which of the following formulas is most representative of a negative income tax proposal?

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Which of the following is correct?

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Of the four countries below, the country that has the most income equality is

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Which of the following is not correct?

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Briefly describe the three prominent schools of thought in political philosophy. Identify one of the most well-known philosophers in each school.

Correct AnswerverifiedAccording to utilitarianism, the governm...View AnswerShow Answer

Table 20-6 -Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position?

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Scenario 20-7 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/6 of income) - $24,000 -Refer to Scenario 20-7. This negative income tax would guarantee what minimum level of income to every family?

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Which of the following is not correct?

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An example of an in-kind transfer to the poor is

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Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. Twenty percent of all families have incomes above what level?

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According to utilitarianism, the governm...
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