Econ Chapter 17

Front 1

A Lorenz curve is a graph whose axes measure the:

Back 1

a. total amount of income in dollars on one axis and the total number of individuals or families receiving that income or a lower one on the other.

b. percentage of people (10 percent, 20 percent, etc.) on one axis and the percentage of total income received by the lowest 10 percent, the lowest 20 percent, etc., on the other.

c. number of individuals or families receiving a certain income on one axis and the percentage of the total population represented by that number on the other.

d. number of individuals or families in different occupations on one axis and the median income received in that occupation on the other.

e. income classes (e.g., $0 to $1999 and $2000 to $3999) on one axis and the percentage of individuals or families in each such income class on the other.

Front 2

Absolute or total equality in an income distribution would appear on a Lorenz-curve chart as a:

Back 2

a. curved line well bowed out from the diagonal.

b. curved line close to the diagonal.

c. right-angled line.

d. 45° diagonal line.

e. none of the preceding

Front 3

Which alternative in question 2 would have been correct had that question referred to absoluteinequality in income—i.e., a situation in which one individual or family gets all the income andthe others receive no income at all?

Back 3

a.

b.

c.

d.

e.

Front 4

From the mid-1970s to 2006 in the United States:

Back 4

a. the ratio of incomes received by the richest fifth to those received by the bottom fifth has been stable.

b. the ratio of incomes received by the richest fifth to those received by the bottom fifth has fallen.

c. the ratio of incomes received by the richest fifth to those received by the bottom fifth has risen..

d. the richest 0.1% of the population are all billionaires.

Front 5

The median family income is the:

Back 5

a. figure obtained by listing all incomes from lowest to highest and taking the one exactly in the middle of the ranking.

b. income figure that would result if the total incomes received by all families were divided equally among those families.

c. income it is estimated a family must have in order to reach the “minimum comfort” level of consumption.

d. level of income found at the exact midpoint of a Lorenz curve.

e. none of the preceding.

Front 6

Which alternative in question 5 would be correct had that question referred to the mean ratherthan to the median family income?

Back 6

a.

b.

c.

d.

e.

Front 7

If there were any inequality at all in the distribution of income, which of the following would betrue of the group making up the lowest 20 percent in the income ranking?

Back 7

a. It is just as likely as not that it will receive more than 20 percent of this total income.

b. It must receive exactly 20 percent of this total income.

c. It will usually, but not always, receive less than 20 percent of this total income.

d. It must have received less than 20 percent of the total income of all groups together.

e. None of the above is necessarily true.

Front 8

The poverty line, computed to reflect a minimum-subsistence income:

Back 8

a. was $21,200 for a family of four in 2008.

b. includes only cash payments, ignoring in-kind benefits received from government and other sources.

c. is roughly three times the minimum-subsistence food budget.

d. does not include an adjustment for improvements in other aspects of the quality of life that have occurred over time.

e. all the above.

Front 9

The average income of the lowest 20 percent of the population has increased by more than 130percent since 1929:

Back 9

a. so the need for antipoverty programs is a myth.

b. but the percentage of total income that growth represents has held steady at around 5 percent.

c. but almost all that growth is explained by growth in total GDP.

d. choices b and c only.

e. none of the above.

Front 10

Differences in ability are commonly cited to explain differences in income. This explanation:

Back 10

a. covers only part of the reason, because there are so many more instances of skewness in ability than there are of skewness in income.

b. covers only part of the reason, because the shape of the income distribution is significantly different from that of the ability distribution.

c. covers only part of the reasons because the measured range of individual ability differences is much wider than the range of income differences.

d. gives a reasonably complete interpretation of income differences.

e. is almost meaningless because there is no suitable way of comparing ability differences against income differences.

Front 11

Which of the following is not a reason that might explain the incidence of poverty incontemporary America?

Back 11

a. Differences in education and training.

b. The existence of noncompeting groups.

c. Differences in economic environment, including the distribution of wealth.

d. The asymmetric effect of recession on demographic groups.

e. Differences in ability among all people.

Front 12

A poor family’s employment earnings are supplemented by a negative income tax—in theamount, say, of $4000. Under this tax proposal, if family employment earnings were to rise by$1000, the income received from the negative tax would typically:

Back 12

a. fall by $1000.

b. fall by more than $1000.

c. fall by some amount less than $1000.

d. fall by $4000.

e. rise by some amount such as $500

Front 13

Let point A represent some initial distribution of income between the indicated upper half andthe lower half. Which point would represent the equal distribution of income if there were noleaks in the bucket?

Back 13

a. A.

b. B.

c. C.

d. D.

e. E.

Front 14

Which answer to question 14 would have been correct if it had asked for the point that wouldrepresent equality given the leaks that produce curve ABCD?

Back 14

a.

b.

c.

d.

e.

Front 15

Which of the following is not likely to be a significant source of leaks in the equity-efficiencytradeoff?

Back 15

a. The administrative costs of running a welfare income redistribution program.

b. The work disincentives of the progressive income tax.

c. The disincentives against saving and investment that are produced by the progressive income tax.

d. A change in attitude that makes cheating on taxes more acceptable.

e. All the above could be significant, though there is little evidence to support choice c

Front 16

In the 2000 budget, which of the following was the largest item targeted directly at helping thepoor?

Back 16

a. Medicaid.

b. Aid to Families with Dependent Children.

c. Food stamps and child nutrition.

d. Aid to the aged, blind, and disabled.

e. Housing assistance.

Front 17

Despite the fact that many people complain about the number of programs for the poor fundedby the federal government, these programs comprise:

Back 17

a. less than 1 percent of the budget.

b. about 5 percent of the budget.

c. nearly 8 percent of the budget.

d. about 15 percent of the budget.

e. more than 25 percent of the budget.

Front 18

“Inefficiency” in income redistribution means the:

Back 18

a. reduction in total output caused by those unfavorably affected by redistribution and by their decision to pay less in income tax by working less.

b. administrative costs of redistribution and the burden it places on federal workers.

c. lesser skills of the gainers from redistribution.

d. total amount of income transferred from upper income groups to lower income groups.

e. resulting reduction in total taxes collected by the government

Front 19

The earned-income tax credit:

Back 19

a. acts as a wage supplement.

b. is a supplement to earned income of up to 40 percent.

c. can simultaneously support the poorest families and maintain incentives for the working poor.

d. all of the above.

e. none of the above.

Front 20

In 1996, Congress passed a welfare reform package that changed the nature and incentivesprovided by the old Aid for Families with Dependent Children program. Which of the followinggoals or guidelines was included as part of the reform package?

Back 20

a. Families no longer receive aid as an entitlement.

b. The Federal government took on responsibility for paying for and administering the program.

c. Legal and illegal immigrants are now eligible for benefits.

d. Adults in the program are encouraged to work, but are not required to find employment outside the home.

e. Children living in poverty are to receive additional in-kind benefits