Question 1

Scenario 20-3
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over
$35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of utilitarianism prefer?

Accepted Answer

A)   Plan A
B)   Plan B
C)   either Plan A or Plan B
D)   neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophyE) B) and C)
F) None of the above

Question 2

Which political philosophy believes that the government should equalize the incomes of all members of society?

Accepted Answer

A)   Utilitarianism.
B)   Liberalism.
C)   Libertarianism.
D)   None of the above is correct.E) B) and D)
F) C) and D)

Question 3

Which of the following programs would be opposed by philosopher John Rawls?

Accepted Answer

A)   a negative income tax
B)   the Supplemental Security Income (SSI)  program
C)   a tax plan creating a perfectly egalitarian income distribution
D)   Rawls would oppose all of the programs.E) A) and B)
F) A) and C)

Question 4

Poor families are eligible for financial assistance, without having to demonstrate any additional "need,"

Accepted Answer

A)   under the current welfare system and under a negative income tax.
B)   under the current welfare system but not under a negative income tax.
C)   under a negative income tax but not under the current welfare system.
D)   under neither the current welfare system nor under a negative income tax.E) All of the above
F) B) and C)

Question 5

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Accepted Answer

A)   the costs of welfare programs will exceed the benefits.
B)   it should not try to reach complete equality in income.
C)   income equality will be the best policy option.
D)   equality of economic opportunity will reduce society's utility.E) A) and B)
F) All of the above

Question 6

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

Life­cycle variation in income suggests ...

Question 7

When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually became

Accepted Answer

A)   more equal between 1935 and 2011.
B)   more equal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
C)   more unequal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
D)   more unequal between 1935 and 2011.E) A) and B)
F) B) and D)

Question 8

The United States has less income inequality than

Accepted Answer

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

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) None of the above
F) C) and D)

Question 10

Since the early 1970s, average incomes have

Accepted Answer

A)   increased, which has reduced the poverty rate.
B)   increased, while the poverty rate increased slightly.
C)   decreased, while the poverty rate has remained unchanged.
D)   remained unchanged, while the poverty rate has decreased.E) A) and B)
F) A) and C)

Question 11

The poverty line in the country of Inequalia is $7,800. The distribution of income for Inequalia is as follows: Number of Families Income   200 less than $5,000
300 between $5,000 and $10,000
500 between $10,000 and $15,000
700 between $15,000 and $20,000
300 over $20,000  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) All of the above
F) B) and D)

Question 12

When the government taxes income as part of a redistribution program,

Accepted Answer

A)   the poor pay higher taxes.
B)   the rich always benefit more than the poor.
C)   the poor are encouraged to work.
D)   incentives to earn income are diminished.E) A) and B)
F) C) and D)

Question 13

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Accepted Answer

A)   an income distribution that is relatively equal.
B)   that everyone has the same work opportunities and market-determined wage rates.
C)   that private property be transformed to government property to safeguard people's incomes.
D)   less economic assistance to the poor because it distorts the price system.E) None of the above
F) A) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   The distribution of annual income accurately reflects the distribution of living standards.
B)   Permanent incomes are more equally distributed than annual incomes.
C)   Transitory changes in income generally have a significant impact on a family's standard of living.
D)   Annual income is more equally distributed than permanent income.E) A) and B)
F) All of the above

Question 15

Diminishing marginal utility suggests that

Accepted Answer

A)   more is always preferred to less.
B)   the well-being of society is maximized when the distribution of income is equal.
C)   the poor are less efficient at spending money than the rich.
D)   the poor receive more satisfaction from the last dollar spent than the rich.E) A) and D)
F) A) and C)

Question 16

In the United States, long-term poverty affects

Accepted Answer

A)   more families than short-term poverty.
B)   an equal number of families as short-term poverty.
C)   slightly fewer families than short-term poverty.
D)   many fewer families than short-term poverty.E) A) and C)
F) None of the above

Question 17

Scenario 20-4
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/5 of income)  - $15,000
-Refer to Scenario 20-4. A family earning $100,000 before taxes would have how much after-tax income?

Accepted Answer

A)   $50,000
B)   $65,000
C)   $80,000
D)   $95,000E) None of the above
F) B) and D)

Question 18

Economists study poverty and income inequality to answer which of the following questions?

Accepted Answer

A)   What are people's wages?
B)   How does labor-force experience affect wages?
C)   How much inequality is there in society?
D)   How do people adjust their behavior due to taxation?E) All of the above
F) A) and D)

Question 19

Figure 20-3 
-Refer to Figure 20-3. In 1968, 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)   is lower than the percentage of adults aged 18 to 64 but is higher than the percentage of children under age 18 in poverty.E) A) and B)
F) A) and D)

Question 20

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

Exam 20: Income Inequality and Poverty

Poor families are eligible for financial assistance, without having to demonstrate any additional "need,"

Correct Answer
verified

Economists study poverty and income inequality to answer which of the following questions?

Correct Answer
verified

When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually became

Correct Answer
verified

Correct Answer
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Libertarians believe that

Correct Answer
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Correct Answer
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Diminishing marginal utility suggests that

Correct Answer
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Figure 20-3 -Refer to Figure 20-3. In 1968, the percent of elderly aged 65 and over in poverty is

Correct Answer
verified

When the government taxes income as part of a redistribution program,

Correct Answer
verified

In the United States, long-term poverty affects

Correct Answer
verified

Which of the following programs would be opposed by philosopher John Rawls?

Correct Answer
verified

Which political philosophy believes that the government should equalize the incomes of all members of society?

Correct Answer
verified

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

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
Lifecycle variation in income suggests ...
View Answer

The United States has less income inequality than

Correct Answer
verified

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Correct Answer
verified

Since the early 1970s, average incomes have

Correct Answer
verified

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

Scenario 20-4 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/5 of income) - $15,000 -Refer to Scenario 20-4. A family earning $100,000 before taxes would have how much after-tax income?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Exam 20: Income Inequality and Poverty

Poor families are eligible for financial assistance, without having to demonstrate any additional "need,"

Correct AnswerverifiedShow Answer

Economists study poverty and income inequality to answer which of the following questions?

Correct AnswerverifiedShow Answer

When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually became

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Libertarians believe that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Diminishing marginal utility suggests that

Correct AnswerverifiedShow Answer

Figure 20-3 -Refer to Figure 20-3. In 1968, the percent of elderly aged 65 and over in poverty is

Correct AnswerverifiedShow Answer

When the government taxes income as part of a redistribution program,

Correct AnswerverifiedShow Answer

In the United States, long-term poverty affects

Correct AnswerverifiedShow Answer

Which of the following programs would be opposed by philosopher John Rawls?

Correct AnswerverifiedShow Answer

Which political philosophy believes that the government should equalize the incomes of all members of society?

Correct AnswerverifiedShow Answer

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

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 AnswerverifiedLife­cycle variation in income suggests ...View AnswerShow Answer

The United States has less income inequality than

Correct AnswerverifiedShow Answer

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Correct AnswerverifiedShow Answer

Since the early 1970s, average incomes have

Correct AnswerverifiedShow Answer

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

Scenario 20-4 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/5 of income) - $15,000 -Refer to Scenario 20-4. A family earning $100,000 before taxes would have how much after-tax income?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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Lifecycle variation in income suggests ...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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