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5152 Income Inequality and Poverty
28. The regular pattern of income variation over a person’s life is called the .
29. The life-cycle pattern of income variation causes inequality in the distribution of annual income,
but it does not necessarily represent .
30. People can borrow and lend money to smooth out short term variations in income known as what
kind of changes?
Income Inequality and Poverty 5153
31. On what type of income do many economists believe that people base their consumption?
32. Economists Cox and Alm compared the gap between rich and poor and found that the richest
20% was about 15 times better off than the poorest 20% when they compared what data?
33. Economists Cox and Alm compared the gap between rich and poor and found that the richest
20% was about 2 times better off than the poorest 20% when they compared what data?
5154 Income Inequality and Poverty
34. In a typical 10-year period, about one in four families falls below the poverty line in at least one
year. What percentage of families are poor for eight or more years?
35. If a father earns 20% above his generation’s average income, his son will most likely earn what
percent above his generation’s average income? What does this statistic indicate?
36. In the US, is it more likely that someone will become a millionaire by making money on his/her
own or by inheriting a fortune?
Income Inequality and Poverty 5155
37. Which political philosophy argues that the government should choose policies to maximize the total
utility of everyone in society?
38. What is the term for a measure of happiness or satisfaction a person receives from his or her
circumstances?
39. Which political philosophy argues that the government should choose policies deemed just, as
evaluated by an impartial observer?
40. Which philosopher claimed that the government should aim to maximize the well-being of the
worst-off person in society?
5156 Income Inequality and Poverty
41. Jermaine believes that it is important to maximize the well-being of the worst-off person in society.
He believes in the principle called the .
42. A government policy aimed at protecting people against the risk of adverse events is called .
43. Which of the three political philosophies discussed in the textbook, if any, view the total income of
society as a shared resource that a social planner can freely redistribute to achieve some social
goal?
44. Which political philosophy concludes that equality of opportunities is more important than equality
of outcomes?
Income Inequality and Poverty 5157
45. Which of the three political philosophies discussed in the textbook, if any, think the government
should not take from some individuals and give to others to achieve any particular distribution of
income?
46. With a minimum wage law, the workers who remain employed benefit from a .
47. Aniella believes that the demand for unskilled labor is relatively inelastic. Carmella believes that
the demand for unskilled labor is relatively elastic. Which is an advocate of minimum-wage laws?
5158 Income Inequality and Poverty
48. Aniella believes that the demand for unskilled labor is relatively inelastic. Carmella believes that
the demand for unskilled labor is relatively elastic. Which believes that a minimum-wage law will
result in significant unemployment?
49. Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) are
examples of .
50. Suppose the government used the following formula to compute a family’s tax liability:
Taxes owed = 28% of income - $8,000. How much would a family that earned $75,000 owe?
Income Inequality and Poverty 5159
51. Suppose the government used the following formula to compute a family’s tax liability:
Taxes owed = 28% of income - $8,000. How much would a family that earned $18,000 owe?
Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car accident. She
earns $20,000 per year working as a cashier at a grocery store. The government uses a negative
income tax system in which Taxes owed = (1/4 of income) - $15,000.
52. Refer to Scenario 20-7. Does Zooey owe or receive money from the government? How much?
53. Refer to Scenario 20-7. One of Zooey’s friends tells her she would have more money for the
year if she quit her job and filed her tax return with $0 in income. Is her friend correct? Why or
why not?
5160 Income Inequality and Poverty
54. Refer to Scenario 20-7. Zooey’s friend Alfredo owes $0 in taxes. How much does he earn?
55. Refer to Scenario 20-7. Zooey’s brother Zander owes $10,000 in taxes. How much does he
earn?
56. The Earned Income Tax Credit (EITC) is a tax provision that allows poor working families to
receive income tax refunds greater than the taxes they paid during the year. Therefore, the EITC
works much like a .
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57. What is one argument made by proponents of in-kind transfers over cash payments to the needy?
58. A system in which anyone collecting antipoverty program benefits must accept a government-
provided job is called .
59. One way of expressing the tradeoff between income equality and efficiency is to say the more
equally the pie is divided, the .
