Chapter 30 Income, Poverty, and Health Care 1041
23) The idea that the Lorenz curve should be along the 45 degree line is consistent with
A) the productivity standard. B) the egalitarian principle.
C) the conservative principle. D) none of the above.
24) Which of the following is NOT correct regarding the theories of income distribution?
A) Dealing with how income ought to be distributed is a normative issue.
B) The productivity standard for the distribution of income is stated to each according to
what they produce.
C) The egalitarian principle of income distribution is to each exactly the same.
D) Dealing with how income should be distributed is a positive economic issue.
25) To each according to what he or she produces describes the ________ theory of income
determination.
A) productivity B) egalitarian C) equity D) needs
26) A person s productive contribution in a capitalist society is measured by determining the
A) market value of the individual s output.
B) comparable output of other workers in similar jobs.
C) total number of goods produced by the individual.
D) index of occupational values.
27) Explain the two theories of desired income distribution: the egalitarian principle and the
productivity standard.
28) Compare and contrast the two normative standards to income distribution discussed in the text:
The productivity standard and the egalitarian principle.
30.4 Poverty and Attempts to Eliminate It
1) The lowest percentage of the U.S. population in poverty is found when using which
measurement of household resources?
A) Private income only
B) Private income plus cash benefits
C) Private income with cash and in kind benefits
D) Private income with Social Security payments subtracted
2) The Social Security system is financed by
A) a tax on individual retirement accounts.
B) a payroll tax paid only by employers.
C) a payroll tax paid by both employers and employees.
D) a tax on luxury goods.
3) The Social Security system is a(n)
A) ad valorem system. B) ability to pay system.
C) progressive tax system. D) pay as you go system.
4) The government finances Social Security through
A) excise taxes. B) payroll taxes.
C) the sale of goods and services. D) state taxes.
5) Which of the following statements is correct?
A) The Social Security program funnels transfers from retired individuals to the youngest
children of low income families.
B) Social Security is an entitlement which is available to everyone, including those who have
not contributed to the fund during their active work years.
C) Social Security benefits are received by people who had contributed to the fund during
their active work years.
D) As a public transfer payment, Social Security benefit is available only to the poor.
6) The Social Security Fund is designed as
A) a pay as you go system.
B) an investment portfolio that individual contributors can make periodic payments into.
C) an account that allows periodic withdrawals by contributors.
D) an individual account with a federal reserve bank.
7) Social Security is a pure transfer program because
A) it transfers funds from current workers to the poor.
B) the government transfers funds from middle income workers to welfare recipients.
C) current payroll taxes are used to pay the eligible retirees.
D) the government subsidizes the medical bill of the poor.
8) Since Social Security is a pay as you go program, the funds for the people retiring today
A) come from those of us working today and in the future.
B) come from the Federal Reserve.
C) come from import taxes.
D) come from foreign sales of gold.
9) The original impetus for Social Security was
A) to provide retirement fund for all persons.
B) to prevent future depressions.
C) the result of social engineering by politicians.
D) a proper response to the stock market crash of 1929.
10) The official poverty level is based on
A) total net worth.
B) pretax income, and includes cash subsidies but does not include in kind subsidies such as
food stamps.
C) after tax income, and includes both cash and in kind government subsidies.
D) wages and salaries, plus any unreported amounts of income from the underground
economy.
11) The threshold income level originally used to determine official poverty statistics was based on
A) an income three times the amount of money needed to purchase a nutritionally adequate
diet.
B) standards provided by the United Nations based on studies done in poor countries around
the world.
C) the highest income of the lowest one fifth of families in the country.
D) a per capita income of $1,000 in 1958 prices.
12) Which of the following CANNOT be eliminated in a growing economy such as the U.S.
economy?
A) absolute poverty
B) relative poverty
C)
b
oth absolute and relative poverty
D) Neither absolute nor relative poverty can be eliminated.
13) When poverty is defined by an absolute real income level, what will happen to the poverty rate
if income per capita in a country continues to grow?
A) The poverty rate will increase forever.
B) The poverty rate will eventually be zero.
C) The poverty rate will increase and then decrease.
D) The poverty rate will never change.
14) When poverty is defined by an relative real income level, what will happen to the poverty rate if
the distribution of income is not perfectly equal?
A) The poverty rate will increase forever.
B) The poverty rate will eventually be zero.
C) The poverty rate will always remain constant.
D) The poverty rate will change, but always exist.
15) Relative poverty
A) has been eliminated in the United States.
B) will always be with us.
C) has never existed in the United States.
D) can be eliminated in the next 20 years.
16) Relative poverty refers to
A) how a family s income compares to the incomes of those around them.
B) poverty levels at a stated income cutoff.
C) the number of poor in one state relative to another.
D) None of the above.
17) If we include cash benefits and in kind benefits available to low income people, the share of the
U.S. population in poverty
A) drops dramatically. B) increases somewhat.
C) increases dramatically. D) does not change.
18) If an individual receives in kind transfers from the government in the form of food stamps,
public housing, and so on, his money income is
A) less than his total income.
B) greater than his total income.
C) the same as his total income.
D) equal to his in kind income plus his wages.
19) Which of the following statements about the Social Security (OASDI) program is FALSE?
A) Benefits are paid to individuals who would be financially secure in their absence.
B) Benefits are based on need.
C) Benefits are an intergenerational transfer program from those who work to those who
don t work.
D) When an insured worker dies, benefits continue for widows or other dependents.
20) Which of the following statements is an accurate statement about the Social Security (OASDI)
program?
A) The program is financed by voluntary contributions.
B) Only 50 percent of workers are covered by OASDI.
C) Benefits are based on financial need.
D) The program transfers income from those who work to those who do not work.
21) Which of the following statements about Social Security is FALSE?
A) Social Security is an intergenerational transfer where the benefits paid are only roughly
related to past earnings.
B) Over 90 percent of all employed workers in the United States are covered by Social
Security.
C) Benefit payments under Social Security are based on the recipient s need.
D) Benefit payments under Social Security redistribute income from young to old.
22) Which of the following statements about the Supplemental Security Income (SSI) program is
FALSE?
A) It is designed to establish nationwide minimum incomes for the aged, the blind, and the
disabled
B) Benefits are based on need.
C) Recipients who receive benefit payments under Social Security are also eligible for SSI.
D) It covers children and individuals with mental disabilities, including drug addicts and
alcoholics.
23) Which of the following statements about the Earned Income Tax Credit Program (EITC)
program is FALSE?
A) On net the EITC discourages work by low or moderate income earners more than it
rewards work.
B) It provides rebates of Social Security taxes to low income workers.
C) Recipients who receive benefit payments under Social Security are also eligible for SSI.
D) It is the largest poverty reduction program in the U.S..
24) All of the following are social insurance programs designed to attack poverty EXCEPT
A) Social Security. B) temporary assistance to needy families.
C) food stamps. D) tuition assistance.
25) Which of the following income maintenance programs is designed to establish nationwide
minimum incomes for the aged, the blind, and the disabled?
A) The Old Age Survivors and Disability Insurance (OASDI) program
B) The Supplemental Security Income (SSI) program
C) The Temporary Assistance to Needy Families (TANF) program
D) The food stamps program
26) Under the Social Security program currently in existence,
A)
b
enefits are based on need.
B)
b
enefits are determined by whether or not one contributed to the system.
C)
b
enefits are provided to everyone who contributed to the system EXCEPT those under
private retirement programs that provide an annual income in excess of $13,500.
D)
b
enefits are guaranteed to be no lower for future retirees than for current retirees.
27) The funds paid to the government today for Social Security taxes are
A) invested to provide for the future benefits of the taxpayers.
B) saved to ensure sufficient resources in the future to pay the benefits of workers today
when they reach retirement age.
C) used by the government to purchase goods and services that will enhance the future
productivity of business in the country.
D) used to pay the benefits of those who are currently retired.
28) The purpose of the Supplemental Security Income program is
A) to provide a minimum income for all households with children.
B) to provide a guaranteed minimum income for all Americans.
C) to provide a minimum income for the aged, blind, and the disabled.
D) to supplement Social Security for the elderly with medical problems.
29) The purpose of the Temporary Assistance to Needy Families program is
A) to provide rebates of Social Security taxes to low income workers.
B) to provide cash assistance and supportive services to assist the family, helping them
achieve economic self sufficiency.
C) to provide a minimum income for the aged, blind, and the disabled.
D) to supplement Social Security for the elderly with medical problems.
30) Current income maintenance programs
A) often provide benefits to people who are working and earning substantially more than the
poverty level.
B) reduce the incentive of recipients to work.
C) have safeguards to ensure that recipients work whenever physically able.
D) fail to make the income distribution more equal.
31) The purpose of the Earned Income Tax Credit Program (EITC) is to
A) provide rebates of Social Security taxes to low income workers.
B) encourage low and moderate income workers to take second jobs to increase their
income.
C) provide in kind services such as food stamps and public housing to those individuals who
have poor credit.
D) give tax credits to low income individuals who do volunteer work in their communities.
32) The official number of poor in the United States
A) is higher today than at any other time in our history.
B) has risen steadily since 1981.
C) was lowest in the late 1960s.
D) is lowest today.
33) Originally, the threshold income level used to determine official poverty statistics was based on
A) a per capita income of $3000 in 1955 prices.
B) the lowest income of the second quartile of families in the country.
C) an income three times greater than necessary to purchase a nutritionally adequate diet.
D) figures developed by a committee in the American Economic Association.
34) Which of the following statements is TRUE?
A) A growing economy should see a decline in relative poverty but not in absolute poverty.
B) A growing economy should see a decline in absolute poverty but not in relative poverty.
C) A growing economy should see a decline in both absolute and relative poverty.
D) A growing economy is usually unrelated to changes in either absolute or relative poverty.
35) Which of the following statements is FALSE?
A) The official absolute poverty level in the United States is far above the average income of
many countries in the world.
B) In a relative sense, the problem of poverty will always exist.
C) An equal distribution of income would eliminate relative poverty.
D) An equal distribution of income would eliminate absolute poverty.
36) Many argue the poor are getting poorer, at least in a relative sense. Evidence that contradicts
this is that
A) household income of the lowest twenty percent of households relative to the highest
twenty percent of households has fallen over the last thirty years.
B) the official poverty level of income has increased over the years.
C) household spending of the lowest twenty percent of households relative to the highest
twenty percent of households has held constant over the last thirty years.
D) the pretax distribution of income is more equal than the after tax distribution of income.
37) The official poverty level is based on pretax income including cash. Which of the following
statements is correct regarding this official specification of poverty?
A) This is a good definition of poverty since it is made up of the income from productive
resources.
B) This is not a good definition of poverty because our tax structure consists of different tax
brackets based on income.
C) This is not a good definition of poverty because it does not include in kind subsidies.
D) This is a good definition of poverty because it is easy to measure.
38) Social Security is
A) an insurance program operated by the federal government.
B) a retirement program that invests the person s contributions into interest earning financial
assets so the proceeds can fund the person s retirement.
C) a social insurance program that guarantees that an elderly person will never fall below the
poverty level.
D) an intergenerational transfer program that only vaguely relates to past earnings.
39) The income transfers that a person receives from Social Security
A) is not related to the amount that they have contributed.
B) is a yearly proportion of the amount contributed.
C) is the same for everyone whether they contributed to the system or not.
D) depends entirely on the amount received from private pensions.
40) Which program provides assistance to the aged, blind and disabled?
A) Social Security Program B) Supplemental Security Income program
C) TANF D) Earned Income Tax Credit
41) The government program that provides aid to families in need is
A) TANF.
B) Social Security program.
C) Supplemental Security Income program.
D) Earned Income Tax Credit.
42) Which income maintenance program was started to support the nation s farmers?
A) Supplemental Security Income B) Food Stamps
C) Earned Income Tax Credit Program D) AFDC
43) The program that was created to provide rebates of Social Security taxes to low income workers
is
A) Supplemental Security Income. B) Food Stamps.
C) Earned Income Tax Credit Program. D) TANF.
44) Since the War on Poverty was started in 1965, the United States has spent more than $12 trillion
on income maintenance programs. The effect has been to
A) reduce poverty levels substantially.
B) reduce poverty levels moderately.
C) have virtually no effect on poverty levels.
D) increase poverty substantially.
45) In an attempt to reduce the poverty rate, there has recently been a movement away from income
maintenance programs to
A) Supplemental Security Income programs.
B) reducing the age a person can retire at.
C) encouraging people to get jobs.
D) incorporating the Lorenz policy in decisions.
46) The USDA threshold income level was originally based on the cost of
A) housing. B) transportation.
C)
b
asic clothing. D) a nutritionally adequate food plan.
47) Which of the following groups of U.S. residents would likely qualify for SSI benefits?
A) college students B) incarcerated murderers
C) the disabled D) new federal retirees
48) The ________ program was created in 1975 to provide rebates of Social Security taxes to
low income workers.
A) food stamp B) SSI C) TANF D) EITC
49) Which of the following statements is FALSE regarding the definition of poverty?
A) A threshold income level is used to define poverty.
B) Adjustments to the poverty level are made on the basis of changes in the Consumer Price
Index.
C) Real incomes in the United States have been growing at a compounded annual rate of
almost 2 percent per capita.
D) Poverty cannot be defined in relative terms.
50) In a growing economy, it is possible to eliminate
A) absolute poverty. B) relative poverty.
C)
b
oth absolute and relative poverty. D) either absolute nor relative poverty.
51) All of the following are governmental efforts to decrease poverty EXCEPT
A) Supplemental Security Income B) the earned income program.
C) transfer payments. D) tariffs.
52) The official poverty rate in the United States includes
A) less than 5 percent of the population.
B)
b
etween 10 and 15 percent of the population.
C)
b
etween 20 to 25 percent of the population.
D) over 35 percent of the population.
53) The poverty income threshold in the United States was originally calculated by
A) multiplying a nutritionally adequate food plan for emergency use by 4.
B) multiplying a nutritionally adequate food plan for emergency use by 2.
C) multiplying a nutritionally adequate food plan for emergency use by 3.
D) multiplying a nutritionally adequate food plan for emergency use by 5.
54) Which of the following is NOT a program designed to attack poverty?
A) Supplementary Security Income B) food stamps
C) Social Security D) federal corporate income tax
55) Official poverty rates in the last 40 years have
A) fallen dramatically. B) risen dramatically.
C) stayed roughly the same. D)
b
een eliminated.
56) The official definition of poverty is
A) exactly the 12 percent of U.S. residents with the lowest incomes.
B) exactly the 20 percent of U.S. residents with the lowest incomes.
C) an absolute measure.
D) a relative measure.
57) The federal government began officially measuring poverty in the
A) 1860s. B) 1900s. C) 1930s. D) 1960s.
58) The incidence of absolute poverty is reduced by
A) annual recalculations of the poverty line.
B) government welfare programs.
C) economic growth.
D) the size of the budget deficit.
59) All of the following aim to reduce income inequality EXCEPT
A) Social Security payments. B) earned income tax credits.
C) regressive taxes. D) food stamp programs.
60) Attempts to alleviate poverty have included all of the following income maintenance programs
EXCEPT
A) Social Security. B) temporary assistance to needy families.
C) 401(k) plans. D) food stamps.
61) Some economists argue that the official poverty figures overstate poverty in this country. Why?
62) How can absolute poverty be eliminated? How can relative poverty be eliminated? Does the
elimination of one lead to the elimination of the other? Explain.
63) Describe four of the five major income maintenance programs in the United States that were
discussed in the text.