1. The percentage of
families with incomes below the poverty line
a. is defined as the lowest 10 percent of households in
terms of incomes in the United States.
b. is known as the poverty rate.
c. is known as the unemployment rate.
d. rises as the general income level rises.
2. The income level
below which families are said to be poor is known as the
a. income maintenance threshold.
b. poverty line.
c. bottom quintile of the income distribution.
d. minimum wage.
3. If the U.S.
government determines that the cost of feeding an urban family of six is $6,000
per year, then the official poverty line for a family of that type is
a. $6,000.
b. $12,000.
c. $18,000.
d. $36,000.
4. What two main
factors have raised U.S. income inequality recently?
a. technical change and increased labor union membership
b. increased labor union membership and higher tax rates
c. technical change and expanded international trade
d. lower tax rates and expanded international trade
5. About what percent
of all U.S. income goes to the top fifth of the income distribution?
a. 10%.
b. 25%
c. 47%
d. 63%
6. About what percent
of all U.S. income goes to the bottom fifth of the income distribution?
a. 10%
b. 8%
c. 6%
d. 4%
7. In richer
countries, the distribution of income tends to be __________ within poorer
countries.
a. much less equal than
b. slightly less equal than
c. distributed about the same as
d. more equal than
8. Over the past 20
years, wages for college graduates __________ and wages for workers with less
education __________.
a. rose; rose.
b. rose; fell.
c. fell; rose.
d. fell; fell
9. Which of the
following groups has the highest poverty rate?
a. black
b. Asian/Pacific Islander
c. children (under age 16)
d. female-headed household
10. Medicaid and food
stamps are
a. available only to the elderly.
b. forms of in-kind assistance.
c. forms of cash assistance.
d. transfer payments.
11. Susan won big at
the blackjack tables on her birthday. The money she won is considered to be
a. permanent income.
b. life-cycle income.
c. transitory income.
d. an in-kind transfer.
12. Suppose Fred’s
marginal utility of an extra dollar of income is 56 and Sally’s is 34. If a
dollar is taken from
a. Sally and given to Fred, the economy’s total utility will
rise by 22 units.
b. Fred and given to Sally, the economy’s total utility will
rise by 22 units.
c. Sally and given to Fred, the economy’s total utility will
rise by 34 units.
d. Sally and given to Fred, the economy’s total utility will
rise by 56 units.
13. According to a
utilitarian, total social utility will be maximized when marginal dollars are
distributed to the people with the
a. greatest need.
b. highest marginal utility of income.
c. highest total utility from their income.
d. most productive labor resources.
14. In a world where
people would have no prior information about where they are in an income
distribution, given the choice, Rawls argues that they would prefer
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 their incomes.
d. less economic assistance to the poor because it distorts
the price system.
15. The philosopher
John Rawls argued that
a. people would choose income equality if they had to
determine an economic distribution system before knowing their place in it.
b. people would choose income inequality to allow the
maximum use of their individual talents.
c. government has a role to ensure income equality to
prevent social unrest.
d. people would choose income equality because it is morally
right.
16. According to a
libertarian, if income were to be distributed equally
a. productivity would increase.
b. it would take a little time for the distribution to
become unequal again.
c. the marginal product of the poor would rise and the
marginal product of the rich would rise.
d. productivity in the economy would decrease.
17. The case for
income inequality is supported by which of the following arguments?
a. personal misfortune being a random event
b. economic efficiency
c. Rawls’ maximin policy
d. Utilitarianism
18. Critics of
utilitarianism say that it requires an impossible
a. belief in utility functions.
b. interpersonal comparison of utility.
c. ranking of people’s preferences across different goods.
d. analysis of marginal utility.
19. The poor in the
United States are disproportionately people who
a. have less than a high school education.
b. have incomes that are essentially nonwage incomes.
c. are poor white women.
d. live in cities.
20. Price ceilings
and minimum wages may increase poverty in the long run because they tend to
a. decrease the incentive to work among the poor.
b. increase the level of saving among the rich.
c. increase productivity of labor among the rich and poor.
d. promote investment activity by the rich.
21. Suppose a
negative income tax program is established at 25 percent, and a poverty
threshold minimum of $15,000 is guaranteed for a family of four. If no income
is earned by this family, its total income would equal
a. $6,000.
b. $15,000.
c. $18,750.
d. $60,000.
22. The incentive to
work is an ingredient of the negative income tax because
a. if families do work, they will be eliminated from the
program.
b. if families don’t work, they will be eliminated from the
program.
c. the more income earned in the workplace, the higher the
family’s after-tax income.
d. the amount earned in the workplace is not subject to
income taxes.
23. A negative income
tax system was designed to
a. provide in-kind benefits to the poor.
b. provide minimal income to the poor.
c. reduce taxes on the rich when their incomes surpass the
maximum income tax bracket.
d. increase income payments to the poor specifically for
housing payments.
24. The main problem
with a negative income tax system is that it
a. guarantees every household a minimum level of income.
b. causes excessive government meddling in people’s lives.
c. is too complex to administer fairly.
d. ignores the culture of poverty that produces less income.
25. Social security
and unemployment insurance benefits are examples of
a. transfer payments.
b. negative income payments.
c. property income.
d. compensating differentials.
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