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Class:
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Chapter 18: Poverty and Redistribution
True / False
1. The most recent data on the distribution of income in the United States indicates households in the top fifth of the
income distribution earn more than ten times as much income as those in the bottom fifth.
a.
True
b.
False
True
2. Recent data on the distribution of income in the United States indicates households in the top fifth of the income
distribution earn as much income as the bottom four fifths combined.
a.
True
b.
False
True
3. Taxes and in-kind transfers make the distribution of income more unequal.
a.
True
b.
False
False
4. The U.S. Census Bureau considers in-kind transfers (such as employer provided benefits) when measuring income.
a.
True
b.
False
False
5. The Lorenz curve is a way of illustrating the distribution of income in an economy.
a.
True
b.
False
True
6. When income is distributed perfectly equally in an economy, the Lorenz curve is a 45-degree straight line from the
origin.
a.
True
b.
False
True
7. The income distribution in the United States became more equal between 1980 and 2013.
a.
True
b.
False
False
8. One of the reasons why household incomes differ is that the number of household members who are working differs.
a.
True
b.
False
True
9. In a given population, the median income will always be the same as the average income.
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Chapter 18: Poverty and Redistribution
a.
True
b.
False
False
10. In the United States, the median income for households with two earners is lower than that for households with only
one earner.
a.
True
b.
False
False
11. In every age group, average income in the United States increases with education.
a.
True
b.
False
True
12. On an average, college graduates earn significantly more income than those with less education and the disparity tends
to widen into middle age.
a.
True
b.
False
True
13. The problem with allocating income according to productivity is that some people would have difficulty earning
income.
a.
True
b.
False
True
14. Evidence suggests that spending by quintiles is more evenly distributed than income by quintiles.
a.
True
b.
False
True
15. In determining the poverty level, the U.S. Census Bureau understates the actual amount of antipoverty transfers made.
a.
True
b.
False
True
16. The lower the unemployment rate, the higher the poverty rate.
a.
True
b.
False
False
17. Government social welfare expenditures have increased more rapidly than other welfare programs since the 60s in the
United States.
a.
True
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Chapter 18: Poverty and Redistribution
b.
False
True
18. Eligibility for income assistance benefits requires a prior financial contribution from the individual covered; eligibility
for social insurance programs does not.
a.
True
b.
False
False
19. The 1997 replacement of Aid to Families with Dependent Children with Temporary Assistance for Needy Families
was one of the biggest reforms in the welfare system in the United States in the last 70 years.
a.
True
b.
False
True
20. Food stamps are in-kind transfer programs.
a.
True
b.
False
True
21. As most welfare programs are administered by the federal government, there is uniformity in both eligibility and the
dollar value of benefits across states.
a.
True
b.
False
False
22. Social Security and Medicare make up the greatest share of federal redistribution programs since 1959.
a.
True
b.
False
True
23. One reason elected officials in U.S. government are sensitive to demands by the elderly is that the elderly have higher
voter participation rates than members of other age groups.
a.
True
b.
False
True
24. There has been a redistribution of wealth to the elderly in the United States in recent years because public policies in a
democracy are determined by the political influence of various interest groups.
a.
True
b.
False
True
25. In the United States, the poverty rate is highest among young families with a head of household under 25.
a.
True
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Chapter 18: Poverty and Redistribution
b.
False
False
26. Transfer payments have reduced poverty among the elderly, but poverty among females has not reduced.
a.
True
b.
False
True
27. Children of female headed-households are five times more likely to live in poverty than other children.
a.
True
b.
False
True
28. The U.S. poverty rate is higher among households headed by African-American married couples than those headed by
white females.
a.
True
b.
False
False
29. The feminization of poverty has been less in African-American households compared to other households.
a.
True
b.
False
False
30. The distribution of income among African-American families is more even than it is for the population as a whole.
a.
True
b.
False
False
31. Generally speaking, the percentage of people living in poverty in the United States is larger in the south than in the
north.
a.
True
b.
False
True
32. Poverty rates are very high along the Northeast corridor from New Hampshire to Virginia.
a.
True
b.
False
False
33. The wage gap between African-American and white workers in the United States has narrowed since 1993.
a.
True
b.
False
True
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Chapter 18: Poverty and Redistribution
34. Firms that are required to participate in affirmative action programs do end up hiring more minority employees.
a.
True
b.
False
True
35. Since 1970, the number of African-American professionals (e.g., doctors, lawyers) in the labor force has increased
dramatically.
a.
True
b.
False
True
36. Poor welfare recipients often face very high marginal tax rates.
a.
True
b.
False
True
37. In some cases, welfare benefits can exceed the income earned by workers from full-time employment.
a.
True
b.
False
True
38. Economists have no concern that children on welfare might be more likely to end up on welfare as adults.
a.
True
b.
False
False
39. Programs involving mandatory job searches can increase employment, but they involve very high operational costs.
a.
True
b.
False
False
40. The percentage of the U.S. population on welfare has declined after the welfare reforms in 1996.
a.
True
b.
False
True
41. There is much agreement among policy analysts and researchers that the 1996 welfare reform in the United States has
failed.
a.
True
b.
False
False
42. People on welfare programs who are going to work do not receive food vouchers or Medicaid.
a.
True
b.
False
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Chapter 18: Poverty and Redistribution
Multiple Choice
43. In a market economy, income depends mostly on:
a.
productivity.
b.
luck.
c.
age.
d.
sex.
e.
government policies.
a
44. If income were distributed solely according to marginal productivity, _____.
a.
every family would be above the poverty level
b.
it would be distributed evenly
c.
it would be distributed normally
d.
workers in capital-intensive industries would earn less than workers in labor-intensive industries
e.
some individuals would not receive any income
e
45. In a market economy, the level of earnings is primarily determined by:
a.
the productivity of resources.
b.
the level of transfer payments.
c.
government monetary and fiscal policy.
d.
the geographic distribution of resources.
e.
the amount of financial assets owned by households.
a
46. In the United States, most income comes from:
a.
capital gains.
b.
owning stocks and bonds of firms.
c.
providing labor resources.
d.
illegal transactions.
e.
government transfer payments.
c
47. If the marginal productivity of labor was the sole determinant of household income in the United States, then _____.
a.
no households would be poor according to the official definition of poverty
b.
no households would be poor according to the relative definition of poverty
c.
the distribution of income would be unequal
d.
every household would have sufficient income to meet the basic needs
e.
there would be no need for government programs to redistribute income
c
False
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Chapter 18: Poverty and Redistribution
48. Census data on the income distribution among families in the United States from 1980 to 2013 show:
a.
a rising share earned by the top fifth and a declining share earned by the bottom fifth.
b.
a rising share earned by the bottom fifth and a declining share earned by the top fifth.
c.
that the share earned by the both the top fifth and the bottom fifth are rising.
d.
that the share earned by the both the top fifth and the bottom fifth are falling.
e.
a decrease in the total income earned by the top fifth of the population.
49. In the United States, the dramatic increase in government social spending since the mid-1960s has:
a.
made the distribution of income more unequal in the economy.
b.
brought about equality in the distribution of income in the economy.
c.
not greatly increased the money income share of the poorest fraction of the population.
d.
greatly increased the money income share of the richest fraction of the population.
e.
decreased the percentage of families in the lowest fifth.
50. Identify the correct statement about the distribution of income in the United States in the last two decades.
a.
The share of income of the highest fifth quantile has increased in the last two decades because of an increase
in the number of double-income households.
b.
The share of income of the lowest fifth quantile has increased in the last two decades because of an increase in
the number of double-income households.
c.
The share of income of the highest fifth quantile has decreased in the last two decades because of an increase
in the number of single-parent households.
d.
The share of income of the lowest fifth quantile has decreased in the last two decades because of a decrease in
in-kind transfers.
e.
The share of income of the highest fifth quantile has increased in the last two decades because of an increase
in transfer payments.
51. Which of the following is not true about income quintiles in the United States?
a.
Only one in seven households in the bottom quintile has anybody working full time.
b.
Only one in three households in the top quintile has anybody working at all.
c.
A primary contributor to the smaller share of income going to the bottom quintile has been the growth of
single-parent households.
d.
Three out of four households in the top quintile have two or more working members.
e.
A primary contributor to the larger share of income going to the top quintile has been the growth of two-earner
households.
52. The share of the bottom fifth of the population in total income in the last two decades has:
a.
decreased in the United States due to the growth of single-parent households.
b.
increased in the United States due to an increase in the employment opportunities available to them.
c.
decreased in the United States due to a decrease in their marginal productivity.
d.
increased in the United States due to an improvement in their level of education.
e.
decreased in the United States due to an increase in income tax rates.
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Chapter 18: Poverty and Redistribution
53. A Lorenz curve shows the:
a.
functional distribution of income.
b.
personal distribution of income.
c.
relative percentage of income going to each of the resources used in the production process.
d.
demand for unskilled versus unskilled labor in an economy.
e.
cumulative percentages of income received by cumulative percentages of households.
54. One of the main tools used by economists to measure the actual distribution of income in an economy is:
a.
the Lorenz curve.
b.
the Golden Rule.
c.
the MR = MC rule.
d.
the MRP = MRC rule.
e.
the capital/labor ratio.
55. Using the Lorenz curve, the degree of income inequality is measured by:
a.
the line connecting all points for which a given percentage of families receives exactly the cumulative
percentage of income.
b.
the distance of the Lorenz curve from the line of perfect equality.
c.
the slope of the curve.
d.
the number of times the Lorenz curve crosses the line of perfect equality.
e.
dividing the number of people below the poverty line by the total population.
56. If 15 percent of households receive 15 percent of the total income in an economy, _____.
a.
the Lorenz curve will lie above the line of equality
b.
the Lorenz curve will lie below the line of equality
c.
the slope of the Lorenz curve will be equal to zero
d.
the slope of the Lorenz curve will be equal to one
e.
the slope of the Lorenz curve will be equal to infinity
57. The Lorenz curve for the United States economy has:
a.
shifted further away from the line of equal distribution over the years.
b.
shifted toward the line of perfect equality over the years.
c.
coincided with the line of perfect equality in recent years.
d.
become a vertical line in recent years.
e.
become horizontal line in recent years.
58. When household incomes are ranked from lowest to highest, the middle income is known as the:
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Chapter 18: Poverty and Redistribution
a.
median income.
b.
mean income.
c.
means-tested income.
d.
official poverty level.
e.
transfer income.
a
59. In the United States, _____.
a.
there is no relationship between income level and educational attainment
b.
those who have a professional degree earn almost five times more than those without a high school diploma
c.
average earnings are higher for those with more education but only if they are over the age of 60
d.
average earnings are lower for those with more education but only if they are under the age of 60
e.
income levels peak at a younger age for those with college educations than they do for those with only
elementary educations
60. Identify the correct statement about workers.
a.
Their contribution to the productive process remains constant with an increase in their ages and they earn less.
b.
They acquire job experience and their earnings increase with an increase in their ages.
c.
Industrial deregulation has increased the pay for workers with less education.
d.
Declining unionization has increased the pay for workers with less education.
e.
Migration of workers has increased the pay for workers with less education.
61. The normal life cycle pattern of income reflects differences in earnings based on:
a.
race and education.
b.
gender and education.
c.
age and education.
d.
race.
e.
household size.
c
62. The same households do not necessarily remain rich or poor over time because:
a.
the normal life cycle pattern of income changes over time.
b.
the productivity of workers vary with on-the-job training.
c.
an economy experiences fluctuations in the level of economic activities.
d.
an economy experiences changes in inflation rates over time.
e.
technological changes influence the income earned by workers.
a
63. Of the following, who would probably have the highest income?
a.
A couple, both of whom have high school educations and work at Walmart
b.
A husband who has a high school degree and a middle-management job, and his wife, who is a stay-at–home
mother
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Chapter 18: Poverty and Redistribution
c.
A couple, both of whom have high school educations; he is a primary school teacher and she is a waitress
d.
A husband who has a college degree and is a high school teacher and his wife, who has an MBA and works as
an insurance company executive
e.
A couple, both of whom have college degrees and are high school teachers
64. Industrial deregulation and a decline in the unionization of the labor force in the United States have:
a.
decreased the pay for workers who have limited education.
b.
increased the pay for all workers in the industrial sector.
c.
increased the pay for all workers who are employed in the service sector.
d.
decreased the pay for workers who are highly educated.
e.
decreased the pay for African-American workers.
a
65. The income earned by less-educated workers has decreased primarily because of:
a.
progressive taxation.
b.
immigration.
c.
free international trade.
d.
marriage trends.
e.
affirmative action.
c
66. An increasing fraction of jobs in the U.S. labor market:
a.
pay workers on the basis of the bargaining power of labor unions.
b.
are designed to employ retired people.
c.
are reserved for widows with young children.
d.
pay workers for their productivity using bonus pay and commissions.
e.
reward workers on the basis of the number of years they work in a company.
67. In the U.S. labor market, _____.
a.
the distribution of income based on labor productivity has increased the supply of low-skilled workers
b.
computers have decreased the demand for low-skilled workers and increased the demand for highly-skilled
workers
c.
the supply of highly-educated workers has increased at a higher rate than the supply of less-educated workers
d.
the supply of highly-educated workers has increased at a higher rate than the demand for highly-educated
workers
e.
technological changes have benefited workers with low level of skills
68. Identify the correct statement about the supply of labor in the U.S. economy.
a.
The supply of less-educated workers has increased more than the supply of more-educated workers, thus
increasing the rewards of education.
b.
Immigration has decreased the supply of relatively less-educated workers, thus increasing the wages.
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Chapter 18: Poverty and Redistribution
c.
Immigration has increased the supply of relatively less-educated workers, thus increasing the wage rates.
d.
Computer-controlled machinery has substituted low-skilled workers in the manufacturing process, thus
increasing their wages.
e.
Technological change has benefitted only the low-skilled, less-educated workers at the cost of the highly-
skilled, highly-educated workers.
69. A fair distribution of income for the U.S. economy is:
a.
not an economic issue.
b.
defined by the Department of Agriculture.
c.
a positive economic question.
d.
a normative economic question.
e.
a state and local issue but not a national one.
70. Families primarily receive income from:
a.
resource earnings and transfers payments.
b.
transfers and subsidies.
c.
wages and rents.
d.
transfers and gifts.
e.
interests and dividends.
71. Compared to the distribution of money income, the distribution of income that takes into consideration the effects of
taxes and in-kind benefits:
a.
is less equal.
b.
is the same.
c.
is more equal.
d.
focuses more on the average income earned by the richest five percent of the population.
e.
ignores the effects of income redistribution on the poor.
72. If the official U.S. poverty statistics included the effect of in-kind transfer payments, _____.
a.
the poverty rate would be higher
b.
the poverty rate would be lower
c.
the unemployment rate would be lower
d.
the unemployment rate would be higher
e.
the top 10 percent of the population would be wealthier
73. The official poverty level in the United States is defined as:
a.
the income earned by the bottom 10 percent of the population.
b.
the income level of the poorest 2 million households.
c.
income less than $15,000 annually.
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Chapter 18: Poverty and Redistribution
d.
income equal to three times the estimated cost of a nutritionally adequate diet.
e.
the ratio of total annual income of households to the cost of a nutritionally adequate diet.
74. The official poverty level in the United States:
a.
has been the same since 1980.
b.
is the same as in other developed countries because it is based on a United Nations definition.
c.
is defined by the United Nations.
d.
is defined by the Department of Agriculture and based on food costs.
e.
has been adjusted for inflation but not for changes in family size.
75. Which of the following is an assumption for the calculation of the poverty level in the United States?
a.
The poor spend about half of their income on clothing.
b.
The rich spend about half of their income on clothing.
c.
The rich spend about one-third of their income on food.
d.
The poor spend about one-third of their income on food.
e.
The rich and the poor both spend an equal proportion of their income on food.
76. The official poverty level in the United States:
a.
remains constant every year.
b.
decreases every year, based on the annual average income of households.
c.
increases every year, based on the annual average income of households.
d.
changes based on family size and inflation.
e.
changes based on the unemployment rate and the total income of households.
77. Measurement of the official poverty level in the United States:
a.
includes all transfer payments.
b.
excludes all transfers payments.
c.
includes cash transfers but not in-kind transfers.
d.
includes in-kind transfers but not cash transfers.
e.
is always measured in real rather than nominal terms.
c
78. Which of the following is included in the calculation of the official poverty level in the United States?
a.
Medicare
b.
Medicaid
c.
Pretax money income
d.
Food vouchers
e.
Employer-provided health insurance
c
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Chapter 18: Poverty and Redistribution
79. According to the United States Census Bureau, ______.
a.
a greater percentage of families are below the poverty level now than in 1960
b.
a smaller percentage of families are below the poverty level now than in 1960
c.
the same percentage of families are below the poverty level now as in 1960
d.
the percentage of families below the poverty level was the lowest in 2007–2009
e.
30 percent of families were below the poverty level in 2013
80. The largest drop in the percentage of families below the poverty level occurred:
a.
in the 1960s.
b.
during 2007–2009.
c.
in the 1980s.
d.
in the early 1990s.
e.
during the recession of the early 1980s.
81. A problem with official United States poverty data is that it:
a.
omits the rural poor.
b.
does not account for inflation.
c.
omits in-kind transfers such as food stamps.
d.
does not reflect changes in the cost of living.
e.
omits dividends and interest.
82. Poverty is:
a.
a relative concept.
b.
an absolute concept.
c.
more prevalent in North American countries than in other areas.
d.
more prevalent in the northern states of the United States.
e.
the same in all countries.
83. When an economy experiences high rates of economic growth and the growth is inclusive is nature, _____.
a.
the number of families in the bottom 10 percent of the income distribution is likely to decrease
b.
the income of the families in the bottom of the income distribution is likely to increase
c.
only the income of the families in the top of the income distribution is affected
d.
the accompanying inflation cancels out any change in income distribution
e.
the rich are no better off because taxes rise with income
84. An effective government policy for reducing poverty is to:
a.
increase discrimination in the job market based on gender and race.
b.
abandon all government programs and rely on the market forces.
c.
reduce programs that promote education and training of the poor.