Deck 20: Income Inequality and Poverty

Question 1

In what way does the invisible hand of the marketplace act to allocate resources

A)efficiently, but not necessarily ensuring fairness
B)not only fairly but also efficiently
C)fairly, but not necessarily ensuring efficiency
D)not only efficiently but also equitably

Answer 1

efficiently, but not necessarily ensuring fairness

Question 2

When a government enacts policies that redistribute income,which outcome will occur

A)The government will not distort incentives.
B)A fair distribution of income will be ensured.
C)People will alter their market behaviour.
D)Markets will become more efficient at allocating resources to their highest-valued use.

Answer 2

People will alter their market behaviour.

Question 3

Based on data from 2011,approximately what percentage of all income in Canada did the fourth fifth of all families receive

A)24
B)43
C)51
D)78

Answer 3

24

Question 4

In general,how efficiently and fairly does the invisible hand of the marketplace act to allocate resources

A)neither efficiently nor fairly
B)fairly but not necessarily efficiently
C)both efficiently and fairly
D)efficiently but not necessarily fairly

Question 5

Which outcome do government programs that take money from high-income people to give it to low-income people typically achieve

A)They improve economic efficiency by reducing poverty.
B)They reduce economic efficiency because they distort incentives.
C)They improve economic efficiency by redistributing income.
D)They reduce economic efficiency because they reduce equity.

Question 6

For which question does a measurement of the distribution of income NOT provide an answer

A)How much inequality is there in our society?
B)How many people live in poverty?
C)How often do people receive raises?
D)How is inequality measured?

Question 7

What are the effects of a government policy of redistributing income

A)It makes income distribution more equitable, and it also makes the allocation of resources more efficient.
B)It makes income distribution more equitable, but it makes the allocation of resources less efficient.
C)It makes income distribution less equitable, and it also makes the allocation of resources less efficient.
D)It makes income distribution less equitable, but it makes the allocation of resources more efficient.

Question 8

Based on data from 2011,approximately what percentage of all income in Canada did the bottom fifth of all families receive

A)1
B)8
C)12
D)48

Question 9

Based on Canadian income data from 2011,approximately how many times as much income as the bottom fifth did the top fifth of all families receive

A)25
B)40
C)50
D)65

Question 10

When measuring income distribution,what is the income share of the top fifth of all families

A)over 50 percent
B)about 30 times the income of the bottom fifth
C)around 25 percent
D)about the same as the income of the top 5 percent

Question 11

How does the marketplace act to allocate resources

A)fairly
B)evenly
C)efficiently
D)equitably

Question 12

Based on data from 2011,approximately what percentage of all income in Canada did the top fifth of all families receive

A)32
B)43
C)52
D)78

Question 13

If income were equally distributed among households,what would be the result

A)The household's relative share of income would increase.
B)The household's relative share of income would decline.
C)Fifty percent of the households would receive exactly 50 percent of the income.
D)All households would become rich.

Question 14

The government enacts policies to bring about which result

A)a more efficient distribution of income
B)a fairer distribution of income
C)a more efficient redistribution of income
D)a fairer and more efficient redistribution of income

Question 15

What does a person's earnings depend on

A)whether or not the economy is experiencing inflation
B)how well the economy is doing
C)how much profit her employer is able to make
D)the supply and demand for her labour

Question 16

How is income inequality in an economy traditionally measured

A)by calculating the bell curve of ability, effort, and chance that exists in an economy
B)by calculating the percentage of families that fall into broad income classifications
C)by referring to standard international distribution tables
D)by using the normal distribution

Question 17

Based on Canadian income data from 2011,the fourth fifth of all families received approximately how many times as much income as the bottom fifth

A)10
B)15
C)20
D)25

Question 18

Based on data from 2011,approximately what percentage of all income in Canada did the second fifth of all families receive

A)7
B)12
C)20
D)78

Question 19

In Canada,what percent of total income are labour earnings

A)55
B)65
C)75
D)85

Question 20

How is the income distribution in a society largely determined

A)by the government's policies
B)by business decisions
C)by factors that determine wages
D)by geographic sectors of the country

Question 21

What is a commonly used gauge of the distribution of income

A)income inequality rate
B)average income rate
C)poverty rate
D)social inequality rate

Question 22

Based on Canadian income data from 2011,what was the top fifth of all families' average income after transfers and taxes

A)$90,000
B)$115,300
C)$145,800
D)$176,900

Question 23

What does the poverty rate include

A)income, in-kind transfers, and other government assistance aid
B)income, in-kind transfers, and housing assistance only
C)income and in-kind transfers only
D)income only

Question 24

Based on Canadian income data from 2011,what was the second fifth of all families' average income after transfers and taxes

A)$21,000
B)$26,000
C)$35,900
D)$38,000

Question 25

Based on Canadian income data from 2011,what was the bottom fifth of all families' average income after transfers and taxes

A)$10,100
B)$12,100
C)$13,600
D)$15,500

Question 26

Based on Canadian income data from 2011,what was the middle fifth of all families' average income after transfers and taxes

A)$39,900
B)$48,900
C)$54,900
D)$57,500

Question 27

Based on Canadian income data from 2011,what was the fourth fifth of all families' average income after transfers and taxes

A)$58,300
B)$73,255
C)$89,100
D)$95,000

Question 28

Although no official measure of the poverty line exists in Canada,what is often used to estimate the poverty line by Statistics Canada

A)LICO
B)MASLO
C)MBM
D)DMI

Question 29

Which question does studying distribution of income help to answer

A)How much do people earn?
B)How much experience is needed in different jobs?
C)How is inequality in our society measured?
D)How do people adjust their behaviour due to taxation?

Question 30

Which conclusion about equality of income in Canada is supported by cross-country comparisons of distribution of income

A)Canada has relatively high equality among the developed countries but less equality than the developing countries.
B)Canada has relatively high equality among the developed countries and also more equality than the developing countries.
C)Canada has relatively high inequality among the developed countries and also less equality than the developing countries.
D)Canada has relatively high inequality among the developed countries but has more equality than the developing countries.

Question 31

In Canada,the poverty rate is a measure of the percentage of people whose income falls below what

A)the high-income cutoff
B)the low-income cutoff
C)the median family of four income
D)an absolute measure which is calculated annually

Question 32

In 2011,what was the approximate poverty rate in Canada based on LICO

A)4 percent
B)6 percent
C)7 percent
D)9 percent

Question 33

Which function must a measurement instrument of the distribution of income in our society perform

A)It must explain inequality.
B)It must explain why people live below poverty.
C)It must tell how many people live in poverty.
D)It must explain why the income gap is large and growing.

Question 34

What is NOT an example of in-kind transfers

A)food stamps
B)healthcare
C)the Earned Income Tax Credit
D)housing vouchers

Question 35

Based on Canadian income data from 2011,approximately how many times as much income as the bottom fifth did the middle fifth of all families receive

A)7
B)10
C)12
D)15

Question 36

Based on Canadian income data from 2011,approximately how many times as much income as the bottom fifth did the second fifth of all families receive

A)3.4
B)6.0
C)7.2
D)9.0

Question 37

According to the Human Resources and Skills Development Canada measure of poverty,what was Canada's poverty rate in 2007

A)10.1 percent
B)11.6 percent
C)13.7 percent
D)14.9 percent

Question 38

What does a cross-country comparison of income distributions suggest about Canada

A)Canada has one of the most unequal income distributions.
B)Canada has a higher percentage of poor families and a higher percentage of rich families than most countries.
C)Canada has a distribution in the middle of the group of countries that collected data.
D)Canada has relatively low income inequality.

Question 39

Which country has the highest inequality of income

A)United States
B)China
C)Russia
D)South Africa

Question 40

Table 20-1
The poverty line in the country of Equalia is $10,000. The distribution of income for Equalia is as follows:


Refer to Table 20-1.What is the poverty rate in Equalia

A)11.1 percent
B)16.7 percent
C)30.0 percent
D)55.5 percent

Question 41

Which factor is NOT a reason that data on income distribution and the poverty rate give an incomplete picture of inequality

A)in-kind transfers
B)the economic life cycle
C)transitory income
D)economic immobility

Question 42

What is NOT an aspect of income as included in the economic life cycle

A)Incomes are low for young workers.
B)Incomes rise sharply at retirement.
C)Incomes rise as the worker gains experience.
D)Incomes peak at around age 50.

Question 43

Which problem in measuring inequality is related to the extent that a family saves and borrows to buffer itself

A)in-kind transfers
B)economic life cycle
C)transitory versus permanent income
D)economic mobility

Question 44

What does a family's ability to buy goods and services largely depend on

A)its in-kind transfers
B)its annual income
C)its transitory income
D)its permanent income

Question 45

How does the life cycle effect characterize a lifetime income profile

A)It tends to follow a seasonal pattern.
B)It rises as a worker gains maturity and experience.
C)It rises and falls in conjunction with the business cycle.
D)It falls during the early years of market activity and peaks at retirement.

Question 46

Saving and borrowing behaviour is indicative of a family that best fits which description

A)a family that is likely to be poor
B)a family that has a difficult time balancing its standard of living
C)a family adjusting its standard of living to reflect transitory changes in income
D)a family that is most likely to be on the upper end of the income distribution

Question 47

What do economists call the regular pattern of income variation over a person's lifetime

A)the life cycle
B)the life pattern effect
C)the cyclical redundancy effect
D)the periodic cycle

Question 48

Given that people can borrow when they are young,what would the life cycle theory suggest that one's standard of living depends on

A)lifetime income rather than annual income
B)aggregate income rather than annual personal income
C)annual extended family income rather than annual personal income
D)income averaged across seasons rather than across years

Question 49

What problematic aspect of measuring inequality relates to the statement "Measures of the distribution of income are based on money income"

A)in-kind transfers
B)the economic life cycle
C)transitory versus permanent income
D)economic mobility

Question 50

Why is measuring poverty using an absolute income scale (like the poverty line) likely to be deceptive

A)Income measures don't include the value of in-kind transfers.
B)Money is more highly valued by the poor than by the rich.
C)The poor are not likely to participate in the labour market.
D)Income is not correlated with job satisfaction.

Question 51

What problem in measuring inequality does the fact that the young often borrow and then repay these loans when they are older relate to

A)in-kind transfers
B)the economic life cycle
C)transitory versus permanent income
D)economic mobility

Question 52

How are in-kind transfers best described

A)They are obtained only by those who are crafty and politically connected.
B)They are the only form of transfer that is provided by the government.
C)They are nonmonetary items given to the poor through government programs.
D)They are obtained primarily through homeless shelters.

Question 53

Which aspect of measuring inequality raises no problematic issues

A)The measurements usually do not include in-kind transfers.
B)The measurements use lifetime incomes rather than annual incomes.
C)The measurements should use permanent income, not including transitory changes.
D)The measurements should use annual incomes, rather than lifetime incomes.

Question 54

What kind of income for a farmer would a hail storm affect

A)permanent income
B)economic life cycle income
C)transitory income
D)natural income

Question 55

In Canada,at what age do workers reach their highest income

A)around age 40
B)around age 45
C)around age 50
D)around age 65

Question 56

When do people have their highest saving rates

A)when they are retired
B)when they are middle-aged
C)when they are married with young children
D)when they are young and single

Question 57

Which statement best explains the difference between annual income and lifetime income

A)The distribution of annual income accurately reflects the distribution of living standards.
B)Lifetime incomes are more equally distributed than annual incomes.
C)Transitory changes in income generally have a significant impact on a family's standard of living.
D)Annual income is more equally distributed than permanent income.

Question 58

What can we say about measures of poverty that fail to account for the value of in-kind transfers

A)They understate the actual poverty rate.
B)They have little effect on the validity of reported poverty rates.
C)They are generally more reliable in accounting for annual variation in actual poverty rates.
D)They overstate the actual poverty rate.

Question 59

Which of the following is an example of a transitory change in income

A)the annual cost of living adjustment to your salary
B)the increase in income that results from a job promotion linked to your education
C)the declining income from freezing rain damage to maple syrup producers
D)the increase in income that results from a worker moving to take a better job

Question 60

Permanent income theory suggests that a person's income is composed of predictable life cycle variation and which of the following

A)structural change in the economy
B)random and transitory forces in the economy
C)aggregate fluctuations from business cycles
D)permanent changes that reflect the seasonal capacity of the economy

Question 61

Which of the following will NOT occur when government policies are enacted to make the distribution of income more equitable

A)Behaviour is altered.
B)Incentives are distorted.
C)Total utility is constant.
D)The allocation of resources is less efficient.

Question 62

Suppose that income is assumed to have constant marginal utility.From a utilitarian perspective,which conclusion would apply

A)Some income redistribution from rich to poor would increase social welfare.
B)Some income redistribution from poor to rich would increase social welfare.
C)Any income redistribution would probably reduce social welfare.
D)Any income redistribution would probably increase social welfare.

Question 63

What is one reason for movement up the income ladder

A)good luck
B)minimum-wage law
C)welfare transfer
D)inflation

Question 64

Whether or not policymakers should try to make our society more egalitarian is largely a matter of which of the following

A)economic efficiency
B)political philosophy
C)egalitarian principles
D)enhanced opportunity

Question 65

Which political philosophy would be more closely associated with evaluating the process by which economic outcomes arise rather than the economic outcomes themselves

A)utilitarianism
B)liberalism
C)libertarianism
D)monetarism

Question 66

In the parable of the leaky bucket,a fundamental problem with government redistribution programs is identified.As long as the government only has "leaky buckets" at its disposal,what can we conclude

A)Affirmative action programs are doomed to failure.
B)The government should not try to reach complete equality in income.
C)Full egalitarian policies will always dominate competing policy options.
D)Equality of economic opportunity is an unattainable goal.

Question 67

When the government taxes income as part of a redistribution program,what happens

A)The poor pay higher taxes.
B)The rich always benefit more than the poor.
C)Incentives for the poor to work are enhanced.
D)Incentives to earn income are diminished.

Question 68

Why is the "American dream" more likely in Canada than the United States

A)Canada has more economic mobility and opportunity than the United States
B)Canadian economy develops faster than the United States.
C)Income distribution has more dispersion in Canada than in the United States.
D)Canada has more university graduates than the United States.

Question 69

What is one reason for movement down the income ladder

A)income tax
B)bad luck
C)inflation
D)nepotism

Question 70

Which political philosophy's prime objective is to raise total utility

A)utilitarianism
B)liberalism
C)libertarianism
D)communitarianism

Question 71

Suppose that income is assumed to have increasing marginal utility.From a utilitarian perspective,what can be concluded

A)Some income redistribution from rich to poor would increase social welfare.
B)Some income redistribution from poor to rich would increase social welfare.
C)Any income redistribution would probably reduce social welfare.
D)Any income redistribution would probably increase social welfare.

Question 72

What problem of inequality relates to the old saying,"From shirtsleeves to shirtsleeves in three generations"

A)in-kind transfers
B)the economic life cycle
C)transitory versus permanent income
D)economic mobility

Question 73

As a result of the tradeoff between income equality and incentives to work,what do we know about an optimal redistribution policy

A)It can never be funded through taxes on wage income.
B)It must always achieve a full egalitarian society.
C)It is only consistent with transfers to the middle class.
D)It always falls short of achieving a full egalitarian society.

Question 74

What do income mobility studies suggest about poverty

A)It cannot be alleviated by privately sponsored antipoverty programs.
B)It cannot be alleviated by government sponsored antipoverty programs.
C)It is a long-term problem for a relatively large number of families.
D)It is not a long-term problem for most families.

Question 75

A father earns 10 percent above his generation's average income.What have economists who study economic mobility found that,in Canada,his son will most likely earn

A)5.0 percent below his generation's average income
B)an income equal to his generation's average income
C)1.9 percent above his generation's average income
D)3.5 percent above his generation's average income

Question 76

What have economists who study economic mobility discovered about intergenerational elasticity of earnings between father and son across high-income countries

A)There is a small variation in the degree of intergeneration mobility across countries.
B)The United States exhibit a higher degree of economic mobility than Canada.
C)Canada is in a group that shows a higher degree of economic mobility.
D)Higher intergenerational mobility is related to higher intergenerational elasticity of earnings.

Question 77

What does economic mobility refer to

A)the government's attempt to move monetary assistance to areas most in need
B)the ability of families to freely move to find good jobs
C)the movement of people among income classes
D)the movement of resources from one industry to another

Question 78

"An extra dollar of income is worth more additional satisfaction to a poor person than to a rich person." This is an important assumption of which political philosophy

A)utilitarianism
B)liberalism
C)libertarianism
D)marshallism

Question 79

Which political philosophy believes in balancing the gains from greater equality against the losses from distorted incentives

A)utilitarianism
B)liberalism
C)libertarianism
D)monetarism

Question 80

According to utilitarians,what is the ultimate objective of private and public actions

A)to enhance the income of the rich
B)to ensure an egalitarian distribution of income
C)to maximize the sum of individual satisfaction toward their life
D)to provide for the betterment of the poor