1. Governments enact policies to
a.
make the distribution of income more efficient.
b.
make the distribution of income more equal.
c.
maximize the use of the welfare system.
d.
minimize the use of in-kind transfers.
2. Which of the following is not a question that economists try to answer when measuring the distribution of income?
a.
How many people live in poverty?
b.
How often do people receive a raise at work?
c.
How often do people move among income classes?
d.
What problems arise in measuring the amount of inequality?
3. Economists study poverty and income inequality to answer which of the following questions?
a.
What are people’s wages?
b.
How does labor-force experience affect wages?
c.
How much inequality is there in society?
d.
How do people adjust their behavior due to taxation?
4. Comparing the United States household income distribution to other countries is
a.
easy, because data is available for all countries in the world.
b.
easy, because some countries collect data on expenditures instead of incomes.
c.
problematic, because international agreements require countries to standardize their income accounting
procedures.
d.
problematic, because countries collect data in different ways.
5. The income distribution in the United States shows that the income share of the top fifth of all families is
a.
over 60 percent.
b.
around 21 percent.
c.
more than 12 times the income of the bottom fifth.
d.
less than 10 times the income of the bottom fifth.
6. Based on data from 2011, the top fifth of all families received approximately what percent of all income in the United
States?
a.
83 percent
b.
49 percent
c.
41 percent
d.
21 percent
7. Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all
income?
a.
48.9 percent
b.
21.3 percent
c.
8.6 percent
d.
3.8 percent
8. Based on U.S. income data from 2011, the top fifth of all families received
a.
about 3.8 percent more than the bottom fifth.
b.
about 49 percent more than the bottom fifth.
c.
approximately 5 times more income than the bottom fifth.
d.
more than 12 times more income than the bottom fifth.
9. The 2011 U.S. distribution of income shows that the top 20 percent of all families have
a.
more than twelve times the income of the bottom 20 percent.
b.
more than six times the income of the bottom 20 percent.
c.
more than 100 percent more income than the bottom 20 percent.
d.
the same share of income as the bottom 20 percent.
10. The 2011 U.S. distribution of income shows that the top 5 percent of families have approximately what share of
income?
a.
4 percent
b.
9 percent
c.
21 percent
d.
49 percent
11. The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of
income?
a.
20 percent
b.
35 percent
c.
50 percent
d.
80 percent
12. The 2011 U.S. distribution of income shows that the top 5 percent of families earn approximately how much income
per year?
a.
$170,000 and over
b.
$205,000 and over
c.
$250,000 and over
d.
$325,000 and over
13. In 2011, what percentage of U.S. families had income levels below $75,000?
a.
20 percent
b.
40 percent
c.
60 percent
d.
80 percent
14. In 2011, what percentage of U.S. families had income levels above $115,866?
a.
10 percent
b.
20 percent
c.
60 percent
d.
80 percent
15. If income were equally distributed among households,
a.
each household’s relative share of income would increase.
b.
each household’s relative share of income would decrease.
c.
the top fifth of households would have 50 percent of the income.
d.
50 percent of the households would receive exactly 50 percent of the income.
16. U.S. income data over the last 75 years suggests that the distribution of income
a.
has gradually become more equal over the entire time period.
b.
has gradually become less equal over the entire time period.
c.
gradually became less equal until about 1970, then became more equal from 1970 to 2011.
d.
gradually became more equal until about 1970, then became less equal from 1970 to 2011.
17. Since about 1970 in the U.S.,
a.
decreases in the wages of unskilled workers, relative to skilled workers, have led to increased inequality in
family incomes.
b.
increases in the wages of unskilled workers, relative to skilled workers, have led to increased equality in
family incomes.
c.
inequality in family incomes has increased, despite increases in the wages of unskilled workers relative to
skilled workers.
d.
inequality in family incomes has decreased, despite increases in the wages of skilled workers relative to
unskilled workers.
18. When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually
became
a.
more equal between 1935 and 2011.
b.
more equal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
c.
more unequal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
d.
more unequal between 1935 and 2011.
19. Which of the following does not explain the rise in income inequality in the United States from 1970 to 2011?
a.
Changes in technology.
b.
An increase in minimum wages.
c.
A reduction in the demand for unskilled labor.
d.
Increased international trade with low-wage countries.
20. The lack of progress in reducing the poverty rate since the early 1970s is most closely related with which of the
following factors?
a.
increasing income inequality
b.
a reduction in the poverty line
c.
rapid economic growth
d.
a reduction in international trade
21. Which of the following explains the rise in income inequality in the United States from 1970 to 2011?
a.
An increase in minimum wages.
b.
An increase in the demand for skilled labor.
c.
An increase in the demand for unskilled labor.
d.
Reduced international trade with low-wage countries.
Table 20-1
The following table shows the distribution of income in Marysville.
Group
Annual Family Income
Top Quartile (25%)
$90,000 and over
Second Quartile
$60,000 to $89,999
Third Quartile
$30,000 to $59,999
Bottom Quartile
Under $30,000
22. Refer to Table 20–1. Seventy-five percent of all families have incomes below what level?
a.
$30,000
b.
$60,000
c.
$90,000
d.
There is insufficient information to answer this question.
23. Refer to Table 20–1. Seventy-five percent of all families have incomes above what level?
a.
$30,000
b.
$60,000
c.
$90,000
d.
There is insufficient information to answer this question.
24. Refer to Table 20–1. Fifty percent of all families have incomes below what level?
a.
$30,000
b.
$60,000
c.
$90,000
d.
There is insufficient information to answer this question.
25. Refer to Table 20–1. If the poverty line were $23,021, what would be the poverty rate?
a.
less than 25%
b.
between 25% and 50%
c.
between 50% and 75%
d.
There is insufficient information to answer this question.
26. Refer to Table 20–1. If the poverty line was $31,852, what would be the poverty rate?
a.
less than 25%
b.
between 25% and 50%
c.
between 50% and 75%
d.
There is insufficient information to answer this question.
Table 20-2
Percentage of Before-Tax Income Received by Families in Hapland
Group
Percentage of
Family Income
Percentage of
Family Income
in 2000
in 1950
Top Fifth
50.7
45.9
Fourth Fifth
26.9
25.8
Middle Fifth
12.1
13.6
Second Fifth
6.2
7.2
Bottom Fifth
4.1
5.5
27. Refer to Table 20–2. According to the table, from 1950 to 2000, the Hapland income distribution became
a.
less equal.
b.
more equal.
c.
more equal at the lowest level of income but less equal at highest level of income.
d.
less equal at the lowest level of income but more equal at highest level of income.
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.
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
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
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.
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.
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%
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
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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
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.
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.