Page 14
75.
Some countries, including Canada, have adopted a health care system in which the
government pays the medical bills. This is known as a(n) _____ system.
A)
employment-based
B)
private health insurance
C)
means-tested
D)
single-payer
76.
Progress in medical science has contributed to _____ health care costs.
A)
increasing
B)
decreasing
C)
constant
D)
randomly fluctuating
77.
Community rating is a regulation that requires:
A)
cities to give ratings to movies shown in local theaters.
B)
insurance companies to offer the same policies for the same premium to everyone,
regardless of medical history.
C)
insurance companies to charge higher premiums to healthy people.
D)
insurance companies to charge higher premiums to the sickest people in the
community.
78.
The problem with community rating is that it:
A)
causes moral hazard.
B)
results in poor-quality health care.
C)
is very unpopular with health care providers.
D)
may cause adverse selection.
79.
The individual mandate is the requirement that:
A)
each health care provider must provide care for Medicare patients.
B)
each health care provider must provide care for Medicaid patients.
C)
each individual must purchase health insurance.
D)
everyone must go to school for at least 12 years.
80.
To ensure that low- and middle-income families have health insurance that they can
afford, the Affordable Care Act of 2010:
A)
provides government subsidies to low- and middle-income families.
B)
provides Medicaid for low- and middle-income families.
C)
exempts low- and middle-income families from the individual mandate.
D)
forces employers to provide them with health insurance.
Page 15
81.
Poverty can be defined either in absolute terms or in relative terms.
A)
True
B)
False
82.
The poverty threshold is the same, regardless of the number of members in a household.
A)
True
B)
False
83.
People with more education have a lower poverty rate.
A)
True
B)
False
84.
In the United States, inequality has increased over the past 25 years, in part because of
rapid technological change.
A)
True
B)
False
85.
Technological change in the United States over the past three decades has increased the
demand for skilled labor and decreased the demand for unskilled labor.
A)
True
B)
False
86.
Means-tested programs are available only to those with sufficiently low income. An
example of a means-tested program is Temporary Assistance for Needy Families.
A)
True
B)
False
87.
A negative income tax is levied on firms, even if they have negative income.
A)
True
B)
False
88.
Poverty tends to be more prevalent for those over age 65 than for those under age 18.
A)
True
B)
False
89.
How do poverty programs differ from social insurance programs?
Page 16
90.
What are some of the causes of poverty in the United States?
91.
Why do economists generally regard median income as a better measure of a typical
American’s well-being than they do mean income?
92.
(Table: Individual Earnings) Use Table: Individual Earnings. The table shows the
income of 10 workers.
A) Compute the mean and median income.
B) Draw up a new table that arranges the workers into quintiles from the lowest to the
highest income.
C) Add a column to the table that shows the percentage of total income going to the
workers in each quintile.
93.
Since about 1950, the share of income going to the richest 10% of Americans has
steadily increased. What explains this trend?
94.
Critics of traditional welfare programs often cite a disincentive to work as a flaw in the
policy. Why would these critics be in favor of the Earned Income Tax Credit (EITC)?
And why is the EITC described as a negative income tax?
95.
Explain what is meant by the adverse selection problem, which has the potential to
doom a private health insurance company to failure.
Page 17
96.
What are the fundamental differences between the Medicare and Medicaid programs?
97.
How have advancements in medicine contributed to the soaring cost of health care in the
United States? Isn’t medical progress a good thing?
98.
The welfare state:
A)
often takes up a large share of government spending in wealthy countries.
B)
is generally referred to as Social Security.
C)
usually takes up only a small share of government spending in wealthy countries.
D)
affects only low-income households.
99.
Payments from the government to assist individuals are called:
A)
taxes.
B)
transfers.
C)
the welfare state.
D)
SCHIP.
100.
A high-income household is taxed a certain amount of money. A low-income household
receives financial assistance in the same amount from government. The value of the
marginal dollar of the financial assistance to the family and the taxes paid by the
high-income family are:
A)
the same since it is the same amount of money.
B)
different since the marginal dollar is worth more to the low-income family.
C)
different since the high-income family’s lost income will keep them from buying
necessities.
D)
unimportant in determining the impact of this plan on the welfare state.
101.
Poverty programs are aimed at:
A)
keeping people from earning less than $10,000.
B)
people who have run into problems paying for high-priced gas.
C)
reducing the percentage of families living below the poverty line.
D)
Social Security recipients.
102.
A social insurance program is aimed at:
A)
keeping people from earning less than $10,000.
B)
people who have encountered unexpected financial distress.
C)
reducing the percentage of families living below the poverty line.
D)
households with children.
Page 18
103.
Among the reasons for a welfare state is the desire to alleviate income inequality and:
A)
achieve economic equality for all households.
B)
eliminate poverty.
C)
alleviate economic insecurity.
D)
increase efficiency.
104.
For which item(s) is/are the ability-to-pay principle is a good justification?
I. the welfare state
II. government transfers
III. the income tax structure
IV. Pigouvian subsidies
A)
I and II only
B)
I and III only
C)
I, II, and III only
D)
I, II, III, and IV
105.
Political conservatives and liberals:
A)
both oppose programs associated with the welfare state.
B)
generally agree on their support of programs associated with the welfare state but
disagree on the appropriate extent of these programs.
C)
have conflicting views; conservatives support programs associated with the welfare
state, while liberals oppose such programs.
D)
have conflicting views; liberals support programs associated with the welfare state,
while conservatives oppose such programs.
106.
Programs associated with the welfare state are believed to cause deadweight loss since
they:
A)
affect the amount of disposable income that households below the poverty line
have to spend.
B)
affect incentives to work and to save.
C)
are supported by many political parties.
D)
are based on the ability-to–pay principle.
107.
John Rawls believed that:
A)
government has a small role in achieving an economically fair society.
B)
we should do unto others as we would like them to do unto us if we were in the
same place.
C)
Robert Nozick’s views of economic fairness are similar to his own view.
D)
government has no right to force people with high incomes to support others with
lower incomes.
Page 19
108.
If you were to support the provision of a particular economic policy without knowing
your own economic status, you would be operating:
A)
under a Rawlsian “veil of ignorance.”
B)
in a way similar to how Robert Nozick believes one should operate.
C)
in a way that would not encourage economic fairness.
D)
in such a way as to increase the number of people below the poverty line.
109.
The poverty threshold is defined as:
A)
less than $15,000.
B)
the minimum annual income that is considered adequate to purchase the necessities
of life.
C)
a static and inaccurate figure since it does not change when prices change.
D)
$20,000 for both individuals and households.
110.
The poverty threshold depends on:
A)
only the major wage earner’s annual income.
B)
the size and composition of a family.
C)
only the size of the family.
D)
only the composition of the family.
111.
Since 1967, the percentage of the population living below the poverty line has:
A)
not fluctuated.
B)
steadily increased.
C)
steadily decreased.
D)
fluctuated, but not in any consistent direction.
112.
A definition of poverty that compares the individual’s level of income with that of other
individuals in the country:
A)
is an absolute measure.
B)
would show that poverty has remained constant in the United States for the past 50
years.
C)
is a relative measure.
D)
is a relatively little used measure.
113.
Compared with other countries of comparable wealth, the United States has:
A)
unusually high poverty rates.
B)
similar levels of poverty.
C)
relatively low levels of poverty.
D)
low levels of poverty only when relative measures of poverty are used.
Page 20
114.
Some of the major causes of poverty are lack of education, bad luck, lack of proficiency
in English, and:
A)
racial and gender discrimination.
B)
geographic region.
C)
differences in religious preference.
D)
government restrictions.
115.
In the United States, income inequality fell:
A)
during the 1930s and 1940s.
B)
after 1980.
C)
during the years following World War II.
D)
after 1917 and has remained consistent since then.
116.
The period during the 1930s and 1940s when income inequality fell sharply is called
the:
A)
Great Compression.
B)
Gini coefficient.
C)
new Gilded Age.
D)
U.S. welfare state.
117.
The rising income gap among highly educated workers in the United States:
A)
is an important feature of the increase in income inequality.
B)
has not been a cause of concern for income inequality policy makers.
C)
is less of a concern than is the effect of increased immigration on income
inequality.
D)
has been present for the past 80 years.
118.
Increases in income inequality in the United States are partially attributed to:
A)
equal and rising increases in the salaries of low-wage workers.
B)
the impact of technological innovation on the demand for labor.
C)
a reduction in the effect of international trade on the economy.
D)
stricter immigration policies.
119.
If the median household income in 2010 was $49,445:
A)
the average income for a U.S. household was $49,445.
B)
poverty rates fell during this period.
C)
half of the households in the United States earned less than $49,445, and half
earned more than $49,445.
D)
incomes in the United States were rising.
Page 21
120.
The mean household income is:
A)
the income of households lying at the exact middle of the income distribution.
B)
the average income across all households.
C)
the income level that policy makers wish to achieve for all households on average.
D)
also the poverty threshold level.
121.
The Gini coefficient:
A)
varies between 0 and 1.
B)
is also equal to the mean household income for a country.
C)
is the same for most industrially developed countries.
D)
is seldom used since it does not help one understand income inequality.
122.
For the United States in 2012, a Gini coefficient of 0.47 suggests that:
A)
the United States has almost achieved income equality.
B)
the average household income is $47,000.
C)
compared with most European countries, the United States has unusually high
levels of income inequality.
D)
the median household income for the United States is $47,000.
123.
Much of the rise in income inequality in the past 20 years in the United States comes
from:
A)
a rising gap among the incomes of highly educated workers.
B)
the use of median income levels instead of mean income levels.
C)
a predictable rising gap between the incomes of highly educated and less well
educated workers.
D)
declining government controls on wage supports.
124.
A sudden loss of income and a significant increase in costly medical expenses are
examples of:
A)
economic insecurity.
B)
economic inequality.
C)
poverty thresholds.
D)
the Great Compression.
125.
Means-tested programs:
A)
provide benefits for all.
B)
are poverty programs that specifically help those with low incomes.
C)
provide benefits only for households that earn below the mean household income
in the United States for a given year.
D)
provide only in-kind benefits.
Page 22
126.
Programs that are not means-tested:
A)
provide benefits for people regardless of income level.
B)
specifically help those with low incomes.
C)
provide benefits only for households that earn below the mean household income
in the United States for a given year.
D)
provide only in-kind benefits.
127.
Which program was introduced in 1990 to replace the means-tested program Aid to
Families with Dependent Children?
A)
Social Security
B)
Medicare
C)
food stamps
D)
Temporary Assistance to Needy Families
128.
Temporary Assistance for Needy Families is a means-tested program that:
A)
offers assistance to anyone who is defined as below the poverty threshold.
B)
provides limited assistance to poor households with children.
C)
is essentially an in-kind benefit.
D)
is the same thing as Medicaid.
129.
Unemployment insurance is a(n) _____ that is _____.
A)
monetary transfer; means-tested
B)
monetary transfer; not means-tested
C)
in-kind benefit; means-tested
D)
in-kind benefit; not means-tested
130.
In the United States and other wealthy countries, a large part of the welfare state is
devoted to payments for:
A)
health care.
B)
unemployment insurance.
C)
food stamps.
D)
Temporary Aid to Needy Families.
131.
In 2014, the LARGEST share of health care costs was paid for by:
A)
the government.
B)
private insurers.
C)
private individuals.
D)
charities.
Page 23
132.
The adverse selection death spiral occurs when private insurance companies:
A)
charge higher-than-average prices for health insurance because only sick people
want it, which in turn further drives off healthy individuals and leaves only sicker,
high-cost individuals, resulting in yet higher premiums the following period.
B)
find themselves with only healthy individuals to insure, so they raise their prices to
take advantage of healthier, richer customers.
C)
offer health insurance at average cost, which results in losses to the company.
D)
refuse to insure very sick individuals because of their high cost to the company.
133.
Employment-based insurance:
A)
is provided by companies to their employees.
B)
is provided only to those who are not working.
C)
consistently runs into the problem of adverse selection death spiral.
D)
does not receive benefits from the U.S. government.
134.
Medicare is health insurance coverage provided to:
A)
all Americans age 65 and older and is means-tested.
B)
individuals who fall below the poverty threshold and is means-tested.
C)
all Americans age 65 and older and is not means-tested.
D)
individuals who fall below the poverty threshold and is not means-tested.
135.
Health care expenditures in the United States are _____ than in other countries such as
Canada and France, and the government share of health care spending in the United
States is _____ than in those countries.
A)
higher; higher
B)
higher; lower
C)
lower; lower
D)
lower; higher
Page 24
Answer Key
1.
D
2.
C
3.
B
4.
D
5.
D
6.
A
7.
C
8.
D
9.
B
10.
A
11.
D
12.
A
13.
D
14.
A
15.
B
16.
D
17.
C
18.
D
19.
A
20.
A
21.
C
22.
B
23.
A
24.
C
25.
D
26.
D
27.
A
28.
C
29.
D
30.
B
31.
C
32.
C
33.
D
34.
D
35.
B
36.
A
37.
B
38.
D
39.
A
40.
C
41.
B
42.
C
43.
B
44.
C
Page 25
45.
A
46.
C
47.
C
48.
C
49.
B
50.
B
51.
C
52.
D
53.
B
54.
A
55.
C
56.
B
57.
D
58.
C
59.
B
60.
A
61.
B
62.
D
63.
C
64.
A
65.
B
66.
D
67.
A
68.
C
69.
B
70.
D
71.
B
72.
D
73.
C
74.
A
75.
D
76.
A
77.
B
78.
D
79.
C
80.
A
81.
A
82.
B
83.
A
84.
A
85.
A
86.
A
87.
B
88.
B
89.
90.
Page 26
91.
92.
93.
94.
95.
96.
97.
98.
A
99.
B
100.
B
101.
C
102.
B
103.
C
104.
C
105.
B
106.
B
107.
B
108.
A
109.
B
110.
B
111.
D
112.
C
113.
A
114.
A
115.
A
116.
A
117.
A
118.
B
119.
C
120.
B
121.
A
122.
C
123.
A
124.
A
125.
B
126.
A
127.
D
128.
B
129.
B
130.
A
131.
A
132.
A
133.
A
134.
C
135.
B