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Income Inequality and Poverty 4961
Table 20-3
The Distribution of Income in Edgerton
Group
Annual Family Income
Top Fifth
$88,000 and over
Fourth Fifth
$76,000 - 87,999
Middle Fifth
$44,000 - 75,999
Second Fifth
$28,000 - 43,999
Bottom Fifth
Under $28,000
28. Refer to Table 20-3. According to the table, what percent of families in Edgerton have income
levels below
$76,000?
a. 20 percent.
b. 40 percent.
c. 60 percent.
d. 80 percent.
4962 Income Inequality and Poverty
29. Refer to Table 20-3. According to the table, what percent of families in Edgerton have income
levels at or above $76,000?
a. 80 percent
b. 60 percent
c. 50 percent
d. 40 percent
30. Refer to Table 20-3. According to the table, what percent of families in Edgerton have income
levels below $44,000?
a. 80 percent
b. 60 percent
c. 50 percent
d. 40 percent
Income Inequality and Poverty 4963
31. Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a
poverty rate of 40 percent?
a. $28,000
b. $44,000
c. $76,000
d. $88,000
32. Refer to Table 20-3. If the poverty rate is 26%, where is the poverty line in Edgerton?
a. under $28,000
b. between $28,000 and $43,999
c. between $44,000 and $75,999
d. between $76,000 and $87,999
4964 Income Inequality and Poverty
Table 20-4
Quintile
Shares of Income by
Quintile, 1990
Shares of Income by
Quintile, 2000
Shares of Income by
Quintile, 2011
Bottom Fifth
4.6%
4.3%
3.8%
Second Fifth
10.8%
9.8%
9.3%
Middle Fifth
16.6%
15.5%
15.1%
Fourth Fifth
23.8%
22.8%
23.0%
Top Fifth
44.3%
47.4%
48.9%
Source: U.S. Bureau of Census
33. Refer to Table 20-4. In 2011, the top fifth of families have
a. almost 13 times as much income as the bottom fifth of families.
b. 28.2% more income than the bottom fifth of families.
c. 50.3% more income than the bottom fifth of families.
d. 45.1% more income than the bottom fifth of families.
34. Refer to Table 20-4. In 2011, the bottom 60% of families have
a. about 13% of total income in the U.S.
b. about 28% of total income in the U.S.
c. about 51% of total income in the U.S.
d. about 74% of total income in the U.S.
Income Inequality and Poverty 4965
35. Refer to Table 20-4. Comparing data from 2000 and 2011, which of the following statements is
correct?
a. There has been no change in overall income inequality because the share of income held by the
fourth fifth is nearly identical.
b. Overall income inequality has worsened slightly, as shown by the simultaneous increase in the
share of income held by the top fifth and the decrease in the share of income held by the
bottom fifth.
c. Overall income inequality has improved because the share held by the second fifth has declined
by 0.5%.
d. None of the above is correct.
4966 Income Inequality and Poverty
Table 20-5
Distribution of Income in Umakastan
Number of Families
Income Range
Average Income
47,000
less than $20,000
$18,750
84,820
between $20,000 and $38,000
$34,690
114,660
between $38,000 and $56,000
$47,202
126,980
between $56,000 and $74,000
$65,000
49,540
between $74,000 and $98,000
$86,740
47,000
more than $98,000
$145,500
36. Refer to Table 20-5. If the poverty rate in Umakastan is 10%, what is the poverty line?
a. $18,750
b. $20,000
c. $34,690
d. $38,000
37. Refer to Table 20-5. Approximately what percentage of families in Umakastan have income
levels below $74,000?
a. 27%
b. 28%
c. 52%
d. 79%
Income Inequality and Poverty 4967
38. Refer to Table 20-5. Where would the government of Umakastan have to set the poverty line
to have a poverty rate of about 28%?
a. $20,000
b. $34,690
c. $38,000
d. $56,000
4968 Income Inequality and Poverty
Table 20-6
Income Range
Percentage of
Households, 2012
Percentage of
Households, 2011
Less than $10,000
7.2%
7.6%
$10,000 to $14,999
5.5%
5.8%
$15,000 to $24,999
10.6%
11.1%
$25,000 to $34,999
10.6%
11.0%
$35,000 to $49,999
14.2%
14.6%
$50,000 to $74,999
18.8%
18.8%
$75,000 to $99,999
12.5%
12.1%
$100,000 to $149,999
12.2%
11.4%
$150,000 to $199,999
4.3%
3.9%
$200,000 or more
4.2%
3.7%
39. Refer to Table 20-6. In both 2011 and 2012, approximately 25% of the population earned less
than
a. $15,000.
b. $25,000.
c. $50,000.
d. $100,000.
Income Inequality and Poverty 4969
40. Refer to Table 20-6. A person who is concerned that income inequality has worsened between
2011 and 2012 would cite which of the following statistics to support her position?
a. The percentage of people earning less than $25,000 decreased from 2011 to 2012.
b. The percentage of people earning more than $100,000 increased from 2011 to 2012.
c. The percentage of people earning between $50,000 and $100,000 stayed virtually constant from
2011 to 2012.
d. Both a and b are correct.
Table 20-7
Quintile
Upper limit of
incomes, 2011
Upper limit of
incomes, 2001
Bottom Fifth
$20,712
$21,273
Second Fifth
$39,000
$40,139
Middle Fifth
$62,725
$63,805
Fourth Fifth
$100,240
$99,000
Top Fifth
over $100,240
over $99,000
41. Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the
data?
a. The most alarming statistic is the lowering of the top income level that defines the bottom fifth
of the income distribution because this indicates that the income distribution is becoming more
unequal.
b. The greatest cause for concern is the increase in the minimum income level that defines the top
fifth of the income distribution because this indicates that the rich have become richer.
c. The income distribution has been relatively unchanged from 2001 to 2011.
d. Both a and b are correct.
4970 Income Inequality and Poverty
Table 20-8
Quintile
Shares of Income by
Quintile, 2000
Shares of Income by
Quintile, 2011
Bottom Fifth
4.3%
3.8%
Second Fifth
9.8%
9.3%
Middle Fifth
15.5%
15.1%
Fourth Fifth
22.8%
23.0%
Top Fifth
47.4%
48.9%
Source: U.S. Bureau of Census
42. Refer to Table 20-8. In 2011, the bottom 40% of families has
a. about 13% of total income in the U.S.
b. about 28% of total income in the U.S.
c. about 51% of total income in the U.S.
d. about 72% of total income in the U.S.
43. Refer to Table 20-8. Comparing data from 2000 and 2011, which of the following statements is
correct?
a. The bottom 40% of the population had a greater share of the income in 2011 than it did in
2001.
b. The top 40% of the population had a greater share of the income in 2011 than it did in 2001.
c. The middle 60% of the population had a greater share of the income in 2011 than it did in 2001.
d. All of the above are correct.
Income Inequality and Poverty 4971
Table 20-9
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Year
Bottom Fifth
Second Fifth
Middle Fifth
Fourth Fifth
Top Fifth
Top 5%
2010
3.3%
8.5%
14.6%
23.4%
50.2%
21.3%
2005
3.4
8.6
14.6
23.0
50.4
22.2
2000
3.6
8.9
14.8
23.0
49.8
22.1
1995
3.7
9.1
15.2
23.3
48.7
21.0
1990
3.8
9.6
15.9
24.0
46.6
18.5
1985
3.9
9.8
16.2
24.4
45.6
17.6
1980
4.2
10.2
16.8
24.7
44.1
16.5
Source: US Census Bureau
44. Refer to Table 20-9. Which of the following statements best describes the trends in the table?
a. From 1980 to 2010, the distribution of income has become less equal.
b. From 1980 to 2010, the distribution of income has remained the same.
c. From 1980 to 2010, the distribution of income has become more equal.
d. None of the above is correct.
4972 Income Inequality and Poverty
45. Refer to Table 20-9. In 2010, the top fifth of the US population had
a. 50.2% more income than the remainder of the population.
b. a lower share of income than the top fifth in 1980.
c. about 15 times as much income as the bottom fifth.
d. about 6 times as much income as the middle fifth.
46. When we compare the income distribution of the United States to those of other countries, we
find that the U.S. has
a. an income distribution similar to Japan’s.
b. an income distribution similar to South Africa’s.
c. one of the most unequal income distributions.
d. a bit more inequality than the typical country.
Income Inequality and Poverty 4973
47. Of the four countries below, which has the highest degree of income inequality?
a. Germany
b. Turkey
c. South Africa
d. Mexico
48. Of the four countries below, the country that has the most income equality is
a. Ethiopia.
b. France.
c. Russia.
d. Thailand.
4974 Income Inequality and Poverty
49. The United States has greater income disparity than
a. Japan.
b. India.
c. South Africa.
d. Both a and b are correct.
50. The United States has less income inequality than
a. Ethiopia.
b. United Kingdom.
c. Vietnam.
d. Mexico.
Income Inequality and Poverty 4975
51. The United States has greater income
a. disparity than most other economically advanced countries, but a more equal income
distribution than some developing countries.
b. disparity than both other economically advanced and all developing countries.
c. equality than most other economically advanced countries but greater income disparity than
some developing countries.
d. equality than both other economically advanced and developing countries.
52. Which of the following statements is correct?
a. The United States has a more equal distribution of income than other developed countries such
as Japan and Germany.
b. The statement “a rising tide lifts all boats” illustrates how economic growth reduces the number
of people with income levels below the poverty line.
c. The economic life cycle explains why people base spending decisions on transitory income.
d. The United States has more income inequality than developing countries, including Mexico and
Brazil.
4976 Income Inequality and Poverty
53. When comparing the percentage of income (or expenditure) of the lowest and highest 10 percent
of the population,
a. South Africa has a more equal income distribution than the United States.
b. South Africa has a more equal income distribution than Japan.
c. Japan has a more equal income distribution than the United States.
d. Mexico has a more equal income distribution than Germany.
54. Which of the following lists correctly ranks countries from most equal to least equal distribution of
income?
a. Nigeria, India, Mexico, Germany
b. Brazil, United States, India, Japan
c. United States, Ethiopia, Japan, South Africa
d. Japan, India, United States, Brazil
Income Inequality and Poverty 4977
55. Comparing the US to other countries ranked by inequality,
a. the US has a less equal distribution of income than some countries, but a more equal distribution
of income than others.
b. the US has one of the most equal distributions of income.
c. the US has one of the least equal distributions of income.
d. the US has a more equal distribution of income than other economically advanced countries
such as Japan, Germany, and France.
4978 Income Inequality and Poverty
Table 20-10
Country
Gini Coefficient*
Sweden
0.240
France
0.275
Italy
0.319
United Kingdom
0.324
Portugal
0.375
Latvia
0.387
*A Gini coefficient is a commonly used measure of income inequality, with values between 0 and
1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1
corresponds to perfect inequality where one person has all the income, while everyone else has
zero income).
Source: The World Bank
56. Refer to Table 20-10. Which country has the most equal income distribution?
a. Latvia
b. Italy
c. France
d. Sweden
57. Refer to Table 20-10. Which country has the most unequal income distribution?
a. Latvia
b. Italy
c. France
d. Sweden
Income Inequality and Poverty 4979
58. Refer to Table 20-10. Which of the following statements is correct?
a. Latvia has the most unequal distribution of income.
b. France has a more equal distribution of income than Italy.
c. Sweden has the most equal distribution of income.
d. All of the above are correct.
59. Which of the following is not correct?
a. Many measures of inequality are based on income, which may not reflect a person’s standard
of living.
b. Because many of the poorest families receive in-kind transfers, more families have lower
standards of living when compared to poverty rates based on income.
c. Because people can borrow and save to smooth out life cycle changes in income, equality
measures based only on income may not reflect a person’s standard of living.
d. A person’s standard of living depends more on her permanent income than her transitory
income, so inequality measures based on current income may be misleading.
4980 Income Inequality and Poverty
60. When John F. Kennedy said, “A rising tide lifts all boats,” to what was he referring?
a. With government intervention, all citizens receive a greater allocation of resources.
b. With market forces working independently, everyone receives an equitable share of resources.
c. With economic growth, more families are pushed above the poverty line.
d. None of the above are correct.
61. The poverty rate is based on a family’s
a. income, in-kind transfers, and other government aid.
b. income and in-kind transfers.
c. in-kind transfers only.
d. income only.
62. The poverty rate is a measure of the percentage of people whose incomes fall below
a. a relative level of income.
b. an absolute level of income.
c. the median income for a family of three.
d. the bottom 20 percent of the income distribution.
