Question 1

Which one of the following would increase income inequality as measured by official Census data and the quintile distribution?

Accepted Answer

A)   A doubling of Social Security retirement benefits
B)   The elimination of the food stamp (SNAP) program
C)   The elimination of the TANF program
D)   Reduced divorce ratesE) All of the above
F) B) and C)

Question 2

Which of the following would move the Lorenz curve closer to the diagonal?

Accepted Answer

A)   A 20 percent boost in Social Security retirement benefits
B)   An increase in payroll taxes
C)   A reduction in the progressiveness of the federal personal income tax
D)   The elimination of the TANF programE) A) and B)
F) B) and D)

Question 3

Taxes and transfer payments:

Accepted Answer

A)   reduce the degree of income inequality.
B)   increase the degree of income inequality.
C)   have no effect upon the location of the Lorenz curve.
D)   make the Lorenz curve a straight 45-degree line.E) A) and D)
F) None of the above

Question 4

Since 1970,the distribution of personal income in the United States has:

Accepted Answer

A)   moved toward greater inequality.
B)   moved toward greater equality.
C)   remained about the same.
D)   fluctuated considerably.E) B) and C)
F) A) and D)

Question 5

A progressive income tax would cause the after-tax Lorenz curve,compared with the before-tax Lorenz curve,to be:

Accepted Answer

A)   more bowed toward the southeast.
B)   less bowed to the southeast.
C)   a vertical line.
D)   a horizontal line.E) A) and B)
F) A) and C)

Question 6

The necessity to maintain incentives to work and incentives to produce output would be a point made by an individual making the case for:

Accepted Answer

A)   income equality.
B)   income inequality.
C)   maximization of total utility.
D)   maximization of marginal utility.E) B) and C)
F) A) and B)

Question 7

Refer to the above table.It shows that:

Accepted Answer

A)   income inequality increased after taxes and transfers are taken into account.
B)   income inequality decreased after taxes and transfers are taken into account.
C)   income received by the highest 20 percent of households increased after taxes and transfers.
D)   income received by the lowest 20 percent of households decreased after taxes and transfers.E) All of the above
F) B) and C)

Question 8

The U.S.poverty rate for African Americans is substantially higher than that for Asians.

Accepted Answer

A) True 
 B)False

Question 9

About one-fourth of all American households have annual incomes of $100,000 or more.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the above table.The decline in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the:

Accepted Answer

A)   second 20 percent of households.
B)   third 20 percent of households.
C)   fourth 20 percent of households.
D)   highest 20 percent of households.E) B) and C)
F) B) and D)

Question 11

Government programs that replace earnings lost when people retire or are temporarily unemployed would be considered to be:

Accepted Answer

A)   noncash transfers.
B)   an earned-income tax credit.
C)   part of public assistance programs.
D)   part of social insurance programs.E) All of the above
F) B) and D)

Question 12

The Temporary Assistance for Needy Families (TANF)has no work requirements for those receiving welfare and no limit on the number of years for receiving welfare benefits.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the above table.Before taxes and transfers:

Accepted Answer

A)   the highest 20 percent of households received 46.0 percent of income.
B)   the highest 20 percent of households received 54.8 percent of income.
C)   the lowest 20 percent of households received 70 percent of income.
D)   the lowest 20 percent of households received 4.9 percent of income.E) C) and D)
F) None of the above

Question 14

Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano.If this initial distribution of $15,000 to Singer and $5,000 to Catalano is altered in favor of greater equality,it may be argued that:

Accepted Answer

A)   the combined total utility of the two consumers will decline because Catalano has a greater capacity to derive utility from income than does Singer.
B)   incentives to produce will be weakened and total income will decrease.
C)   incentives to produce will be enhanced and total income will increase.
D)   the combined total utility of the two consumers will decline because Singer has a greater capacity to derive utility from income than does Catalano.E) B) and C)
F) All of the above

Question 15

Complete income equality using the Gini ratio would be reflected by a value of:

Accepted Answer

A)   3.
B)   2.
C)   1.
D)   0.E) B) and C)
F) A) and D)

Question 16

The equality-efficiency trade-off would be most closely associated with which one of the following statements?

Accepted Answer

A)   The rich get richer and the poor get poorer.
B)   The only way to create income equality is to take from the rich and give to the poor.
C)   If cutting the income pie in more equal slices tends to shrink the pie,what amount of shrinkage will society tolerate?
D)   People are less concerned with the larger question of income distribution than they are with the more specific issue of income inadequacy.E) All of the above
F) None of the above

Question 17

Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano.If a given income of $20,000 is initially distributed so that Singer receives $15,000 and Catalano $5000:

Accepted Answer

A)   no judgment can be made as to the effect of a redistribution of income on total utility.
B)   this initial distribution of income is maximizing the combined total utility of the two consumers.
C)   the combined total utility of the two consumers can be increased by redistributing income from Catalano to Singer.
D)   the combined total utility of the two consumers can be increased by redistributing income from Singer to Catalano.E) A) and B)
F) A) and C)

Question 18

The empirical data indicate that the tax system and the transfer programs of the government:

Accepted Answer

A)   increase the degree of inequality in the distribution of income.
B)   make no change in the degree of inequality in the distribution of income.
C)   reduce the degree of inequality in the distribution of income.
D)   affect the distribution of wealth,not income.E) B) and D)
F) A) and B)

Question 19

Differences in ability are one reason for income differences in the United States.

Accepted Answer

A) True 
 B)False

Question 20

Using the data in the above table,what percentage of households made less than $35,000?

Accepted Answer

A)   5 percent
B)   12 percent
C)   35 percent
D)   51 percentE) B) and C)
F) All of the above

Exam 11: Income Inequality and Poverty

The U.S.poverty rate for African Americans is substantially higher than that for Asians.

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About one-fourth of all American households have annual incomes of $100,000 or more.

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Refer to the above table.It shows that:

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Taxes and transfer payments:

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The empirical data indicate that the tax system and the transfer programs of the government:

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Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano.If a given income of $20,000 is initially distributed so that Singer receives $15,000 and Catalano $5000:

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Since 1970,the distribution of personal income in the United States has:

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Refer to the above table.Before taxes and transfers:

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Using the data in the above table,what percentage of households made less than $35,000?

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The Temporary Assistance for Needy Families (TANF)has no work requirements for those receiving welfare and no limit on the number of years for receiving welfare benefits.

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Complete income equality using the Gini ratio would be reflected by a value of:

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Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano.If this initial distribution of $15,000 to Singer and $5,000 to Catalano is altered in favor of greater equality,it may be argued that:

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Government programs that replace earnings lost when people retire or are temporarily unemployed would be considered to be:

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A progressive income tax would cause the after-tax Lorenz curve,compared with the before-tax Lorenz curve,to be:

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Which of the following would move the Lorenz curve closer to the diagonal?

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The equality-efficiency trade-off would be most closely associated with which one of the following statements?

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Which one of the following would increase income inequality as measured by official Census data and the quintile distribution?

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Differences in ability are one reason for income differences in the United States.

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Refer to the above table.The decline in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the:

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The necessity to maintain incentives to work and incentives to produce output would be a point made by an individual making the case for:

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