Chapter 19 Test Bank Key
1. Personal income is
A. The sum of wealth and in-kind income.
2. In-kind benefits are a way of correcting
3. Medicare is an example of
4. Public housing is an example of
A. In-kind income.
5. According to the Census Bureau, in 2013 nearly _____________ Americans were counted as poor.
6. When the Census Bureau counts the number of poor Americans, it counts
7. Which of the following statements regarding the distribution of money income is most correct?
8. Income is measured as
A. A flow only.
9. Wealth refers to
A. The way personal income is divided among households.
10. Wealth is measured as
11. The size distribution of income
A. Is the same thing as the functional distribution of income.
12. How income is distributed is typically measured
13. The proportion of total income received by a particular group is called the
14. A graphic illustration of the cumulative size distribution of income is known as the
A. Size distribution of income.
15. If income is distributed equally, the
A. Lorenz curve is a straight line.
16. If a greater portion of income is distributed to those in the highest income quintile, the
A. Lorenz curve is a straight line.
17. If the area between the diagonal line of absolute equality and the Lorenz curve is greater for the United
States than for Japan, we can conclude that the
18. If the area between the diagonal line of absolute equality and the Lorenz curve is greater for China than for
the United States, we can conclude that the
A. Distribution of income in China is closer to being equal than in the United States.
19. The federal income tax is designed to
A. Shift the Lorenz curve inward.
20. A mathematical summary of inequality based on the Lorenz curve is known as the
21. In the United States between 2000 and 2013, the Gini coefficient
22. If the Gini coefficient is greater for the United Kingdom than for Japan, we can conclude that
23. If the Gini coefficient is greater for Zambia than for the Netherlands, we can conclude that the
A. Relative distributions of income in the two countries are the same.
24. As the ________ becomes larger, the distance between the line of absolute equality and the ________
becomes greater.
A. Gini coefficient; Lorenz curve
25. Market failure exists whenever
A. Income distribution is unequal.
26.
The size distribution of income in Figure 33.1 reveals that
27.
In Alpha the lowest 20 percent of families receive approximately what percentage of income? (See Figure 33.1)
28.
In Omega the lowest 40 percent of families receive approximately what percentage of income? (See
Figure 33.1)
29.
In Figure 33.1, suppose that the Gini coefficient for Omega is 0.55. The Gini coefficient for Alpha must be
30.
The bottom 80 percent of families in Alpha receive approximately what percentage of total income? (See Figure
33.1.)
31.
Figure 33.2 illustrates Lorenz curves for four different economies. For which economy would lower–
income families receive the largest share of total income?
32.
Figure 33.2 illustrates Lorenz curves for four different economies. For which economy would the lowest 20
percent of families receive the smallest share of total income?
33.
Figure 33.2 illustrates Lorenz curves for four different economies. Which economy should have a Gini
coefficient of zero?
34.
Figure 33.3 illustrate four different Lorenz curves. Assume Brazil has a larger Gini coefficient than the United
States. If the income distribution for the United States is represented by curve C, which curve would most likely
represent the income distribution for Brazil?
35.
Figure 33.3 illustrate Lorenz curves for four different economies. Which economy will have a Gini coefficient
of zero?
36.
Figure 33.3 illustrates Lorenz curves for four different economies. For which economy would the lowest 20
percent of families receive the smallest share of total income?
37. If the percentage of income paid in taxes increases as income rises, then the tax system
38. A tax is progressive if it takes a
A. Smaller number of dollars as income rises.
39. Which of the following taxes is most likely to reduce inequity?
40. Which of the following is a progressive tax?
A. The federal income tax.
41. The U.S. federal income tax is classified as a
A. Regressive tax only.
42. To make a tax system more progressive, policy makers could
A. Raise marginal tax rates for higher incomes.
43. If the marginal tax rate is too high, it can cause all of the following except
44. Government attempts to create a more equitable income distribution by increasing marginal tax rates may do all
of the following except
45. In general, lower marginal tax rates provide incentives to
46. If an individual is taxed at a 17 percent rate for each extra dollar earned, the reference is to the
47. Assume the marginal tax rate is 12 percent for the first $40,000 of income, 28 percent for income between
$40,000 and $100,000, and 30 percent for any income over $100,000. If Sarah has taxable income equal
48. Assume that the marginal tax rate is 10 percent for the first $10,000 of income, 20 percent for income between
$10,000 and $40,000, and 30 percent for any income over $40,000. If Jerome has taxable income equal to
49. Assume the marginal tax rate is 10 percent for the first $30,000 of income, 15 percent for income
between $30,000 and $70,000, and 20 percent for any income over $70,000. If Emily has taxable income
equal to $80,000 for the year, what is her tax bill?
50. The tax elasticity of supply measures the
51. A tax elasticity of supply equal to zero indicates that
A. Employers will not hire any workers if tax rates increase.
52. A tax elasticity of supply equal to 0.21 indicates that
A. Employers will not hire any workers if tax rates increase.
53. If the tax elasticity of supply is 0.6 and tax rates increase by 10 percent, the quantity of labor supplied will
54. Increasing tax rates on businesses can be justified based on equity considerations when
55. Additional loopholes in the personal income tax law tend to