Deck 20: Income Inequality and Poverty

Question 1

The United States has more income inequality than Brazil and South Africa.

Answer 1

False

Question 2

The invisible hand of the marketplace acts to allocate resources efficiently, but it does not necessarily ensure that resources are allocated fairly.

Answer 2

True

Question 3

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

Answer 3

True

Question 4

The United States has more income inequality than Japan, Germany, and France.

Question 5

The United States has a more equal income distribution than many developing economies such as Mexico, South Africa, and Brazil.

Question 6

When the government enacts policies to make the distribution of income more equitable, it distorts incentives, alters behavior, and makes the allocation of resources less efficient.

Question 7

In the United States from 1935 to 2011 the share of total income earned by the bottom fifth of income earners rose and then fell.

Question 8

An income distribution may not give an accurate picture of the standard of living for the poor because it does not include in-kind transfers.

Question 9

The measured poverty rate may not reflect the true extent of economic deprivation because it does not include some forms of government assistance.

Question 10

In 2011 the top 20% of income earners accounted for over 80% of all income received by United States' families.

Question 11

Despite continued growth in average income since the early 1970s, the poverty rate has not declined below the level reached in 1973.

Question 12

In 2011 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

Question 13

The poverty line is set by the government so that 10 percent of all families fall below that line and are thereby classified as "poor."

Question 14

Even though the average income in the United States has continued to grow, the poverty rate has increased to over 20% since the early 1970s.

Question 15

In the United States in 2011, the bottom fifth of the income distribution had incomes below $27,218.

Question 16

Among all countries in the world, the United States has the most income inequality.

Question 17

Since 1970 the United States' income distribution has become more equal.

Question 18

The poverty line is an absolute standard and is based on the cost of providing an adequate diet.

Question 19

A U.S. family earning $80,000 would be in the top 20 percent of income distribution in 2011.

Question 20

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

Question 21

According to libertarians, the government should redistribute income from rich individuals to poor individuals to achieve a more equal distribution of income.

Question 22

About four out of five millionaires in the United States earned their money rather than inherited it.

Question 23

The elderly represent the largest demographic group in poverty.

Question 24

Utilitarians believe that the proper goal of the government is to maximize the sum of the utilities of everyone in society.

Question 25

The maximin criterion is the idea that the government should aim to maximize the well-being of the worst-off person in society.

Question 26

A follower of liberalism would not support a redistribution of income but rather would focus on equalizing opportunities.

Question 27

The poverty rate is the percentage of the population whose family income falls below the poverty line..

Question 28

About half of black and Hispanic children in female-headed households live in poverty.

Question 29

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Question 30

Most economists believe that a family bases its spending decisions on its transitory income.

Question 31

Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.

Question 32

Fewer than three percent of families are poor for eight or more years.

Question 33

There is very little economic mobility in the United States, which means that once a family is poor, it is very likely to remain poor for at least a decade.

Question 34

The poverty line is based on the percentage of people who cannot afford an adequate diet.

Question 35

Standard measurements of the degree of income inequality take both money income and in-kind transfers into account.

Question 36

The poverty rate is an absolute level of income set by the federal government for each family size. A family with income below this rate is deemed to be in poverty.

Question 37

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Question 38

According to a study by Michael Cox and Richard Alm, consumption per person in the richest 20% of households was only 2.1 times consumption per person in the poorest 20% of households.

Question 39

If a government could successfully achieve the maximin criterion, each member of society would have an equal income.

Question 40

John Rawls, who developed the way of thinking called liberalism, argued that government policies should be aimed at maximizing the sum of utility of everyone in society.

Question 41

Since 1970, has the distribution of income in the US become more equal, less equal, or remained unchanged?

Question 42

Temporary Assistance for Needy Families (TANF) is an example of a negative income tax program.

Question 43

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
Refer to Scenario 20-8. A family earning $40,000 before taxes will owe tax.​

Question 44

Who said "The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries"?

Question 45

One existing government program that works much like a negative income tax is the Earned Income Tax Credit.

Question 46

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
Refer to Scenario 20-8. This negative income tax ensures that families earn at least $56,000​.

Question 47

Critics argue that a disadvantage of the Earned Income Tax Credit is that it does not effectively target the working poor because many recipients are the teenage children of middle-income families.

Question 48

In 2011, the top 20% of US families had more than times as much income as the bottom 20%.

Question 49

A disadvantage of the Earned Income Tax Credit (EITC) program is that it does not help alleviate poverty due to unemployment, sickness, or other inability to work.

Question 50

An advantage of a negative income tax is that it does not encourage the breakup of families because the only criterion for assistance is family income.

Question 51

Approximately what fraction of total income in the US economy comes from labor earnings?

Question 52

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
Refer to Scenario 20-8. A family earning $56,000 before taxes will have $56,000 after tax.​

Question 53

One existing government program that works much like a negative income tax is Medicaid.

Question 54

A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes.

Question 55

If greater equality is the benefit of government intervention into the allocation of society's resources, what is the cost?

Question 56

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
Refer to Scenario 20-8. The government does not receive any tax revenue through this negative income tax if the family with the highest income earns $56,000.

Question 57

Libertarians believe that the government should enforce individual rights to ensure that all people have the same opportunities to use their talents to achieve success.

Question 58

The Supplemental Security Income (SSI) program focuses on the poor who are sick or disabled.

Question 59

Critics argue that a disadvantage of minimum-wage laws is that they do not effectively target the working poor because many minimum-wage workers are the teenage children of middle-income families.

Question 60

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
Refer to Scenario 20-8. The government does not have to pay a subsidy to any family through this negative income tax if the family with the lowest income earns $50,000.

Question 61

What measure does the federal government use when setting the official poverty line in the US?

Question 62

Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. The Human Development Report computes a measure of inequality by dividing the income of the richest 10% of the population by the income of the poorest 10%. What is the value for this measure of inequality in Imagination?

Question 63

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau
Refer to Table 20-14. In percentage terms, how much less income did the bottom 40% of families have in 2010 than in 1980?

Question 64

The percentage of the population whose family income falls below an absolute level is call the

Question 65

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau
Refer to Table 20-14. In 2010, what percentage of total income in the US did the bottom 20% of families have?

Question 66

Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. If the poverty rate in Imagination is 25%, in what income range on the table is the poverty line?

Question 67

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau
Refer to Table 20-14. In 2010, how many more percentage points of total income did the top fifth of the population earn compared to if the income distribution were completely equal?

Question 68

Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. If the poverty line in Imagination is $18,000, what is the poverty rate?

Question 69

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau
Refer to Table 20-14. If the distribution of income were completely equal, what percentage of income would the bottom fifth of the population earn?

Question 70

Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. The Human Development Report computes a measure of inequality by dividing the income of the richest 10% of the population by the income of the poorest 10%. If the value for this measure of inequality in the US is 15.9 and the value for India is 8.6, how does Imagination compare to these two nations?

Question 71

Of the following countries, which has the most equal distribution of income? United States, Brazil, Mexico, China, Japan, Germany, United Kingdom, Russia

Question 72

Table 20-15
Income Inequality in 2010 in the United States by Race
The values in the table reflect the percentages of pre-tax-and-transfer income. Source: US Census Bureau
Refer to Table 20-15. Which race shows the least equal distribution of income?

Question 73

Table 20-15
Income Inequality in 2010 in the United States by Race
The values in the table reflect the percentages of pre-tax-and-transfer income. Source: US Census Bureau
Refer to Table 20-15. In percentage point terms, how much more did the top 5% of the Asian population earn than it would have if income were distributed equally?

Question 74

With which three demographic variables is poverty correlated?

Question 75

What is the primary problem in comparing income inequality in the US with income inequality in other countries?

Question 76

Table 20-13
Distribution of Income in Imagination
Refer to Table 20-13. If the poverty rate in Imagination is 10%, what is the poverty line?

Question 77

The poverty rate is the percentage of the population whose family income falls below an absolute level called the .

Question 78

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau
Refer to Table 20-14. The trend in income inequality from 1980 to 2010 is .

Question 79

Of the following groups, which group is least likely to live in poverty - whites, blacks, Hispanics, Asians?

Question 80

Of the following groups, which group is most likely to live in poverty - children, elderly, married-couple families, female household with no spouse present?