Question 1

If permanent income were utilized to measure the income distribution instead of current annual income, the income distribution would appear to be wider.

Accepted Answer

Permanent income tends to smooth out temporary fluctuations in income, leading to a narrower distribution compared to current annual income, which can vary significantly year to year.

Question 2

Figure 1  ​
-Refer to figure 1. The top 20% of the population have what % of the income

Accepted Answer

The graph shows that the top 20% of the population have approximately 60% of the income, as indicated by the red line on the graph.

Question 3

The distribution of income in the UK became more equal between 1979 and 2000.

Accepted Answer

The distribution of income in the UK became less equal between 1979 and 2000, as income inequality increased during this time period.

Question 4

Figure 2 
-Refer to figure 2. The Gini coefficient is calculated by

Accepted Answer

The answer of Figure 2 
-Refer to figure 2. The...

Question 5

There is an easy and perfectly acceptable solution to the problem of poverty traps: recipients' benefit income should be reduced more gradually as they increase their earnings.

Accepted Answer

The answer of There is an easy and perfectly acceptable...

Question 6

It is more efficient for the government to provide in-kind transfers instead of cash payments.

Accepted Answer

In-kind transfers can be less efficient than cash payments because they limit recipients' choice and may not align with their most urgent needs, whereas cash allows for more flexibility and personal decision-making.

Question 7

Figure 1 
-Refer to figure 1. The red line refers to

Accepted Answer

The red line in Figure 1 represents the Lorenz curve, which is a graphical representation of income inequality. It plots the cumulative percentage of total income received against the cumulative percentage of the population. The closer the Lorenz curve is to the line of perfect equality (indicated by the diagonal dashed line), the more equal the distribution of income. Therefore, B is the correct choice. Choice A is incorrect because Gini coefficient is a numerical measure of income inequality, not a graphical representation. Choices C and D are incorrect because they refer to theoretical lines but not the actual line in the figure.

Question 8

A Gini coefficient of .7 suggests a country has a very unequal distribution of income.

Accepted Answer

A Gini coefficient of .7 suggests a very high level of income inequality in a country, with a small proportion of the population owning a large proportion of the country's wealth. A Gini coefficient of 0 represents perfect equality, while a coefficient of 1 represents perfect inequality, where one person has all the income and everyone else has none.

Question 9

When households are divided into deciles, each group covers what percentage of the population?

Accepted Answer

Deciles divide the population into 10 equal parts, so each group would cover 10% of the population. Therefore, the correct choice is B, which represents 10%.

Question 10

Utilitarianism is based on the assumption of diminishing marginal product.

Accepted Answer

Utilitarianism is an ethical theory focused on maximizing overall happiness or utility, not an economic concept like diminishing marginal product, which relates to the decrease in output from adding an additional unit of input.

Question 11

The political philosophies of utilitarianism and liberalism both suggest that income should be equalized across the population.

Accepted Answer

Utilitarianism emphasizes the greatest happiness for the greatest number of people, while liberalism emphasizes individual freedoms and limited government intervention in the economy. Neither philosophy necessarily suggests that income should be equalized across the population.

Question 12

Libertarians are more concerned with equal opportunity than with equal outcome.

Accepted Answer

Libertarians believe that individuals should be free to succeed or fail based on their own efforts and abilities, and that this can best be achieved through equal opportunity. They do not believe that outcomes should be forcibly equalized through government intervention.

Question 13

Figure 1  ​
-Refer to figure 1. The middle quintile group earn

Accepted Answer

The figure shows the income distribution of households in the United States divided into quintiles. The middle quintile group is represented by the dark blue section labeled "20-40%". Therefore, the correct answer is B) 20%.

Question 14

The UK Gini coefficient suggests that

Accepted Answer

The Gini coefficient is a measure of income inequality, with 0 indicating perfect equality and 1 indicating perfect inequality. The UK's Gini coefficient has increased over the past 30 years, indicating that income distribution has become more unequal. Therefore, choice C is the best answer.

Question 15

Figure 2 
-Refer to figure 2. The Gini coefficient is

Accepted Answer

The Gini coefficient measures income inequality, with 0 indicating perfect equality and 1 indicating perfect inequality. A coefficient less than 0.3 suggests relatively low inequality, which is a common range for many developed countries.

Question 16

Because of in-kind transfers to the poor and because people's incomes vary from year to year and across their lifetimes, standard measures of income distribution exaggerate the degree of inequality in standards of living.

Accepted Answer

In-kind transfers such as food stamps and Medicaid help reduce the actual level of inequality in standards of living, while income fluctuation over time further complicates the measurement of income distribution. Therefore, standard measures of income distribution tend to overestimate the degree of inequality.

Question 17

Permanent income is

Accepted Answer

Permanent income refers to a person's normal, or average, income over time, and is not dependent on temporary fluctuations or changes in income. It takes into account a person's long-term earning potential and is used in economic models to understand consumption patterns and behavior.

Question 18

Figure 1 
-Refer to figure 1. The blue 45 degree line refers to

Accepted Answer

The blue 45 degree line in Figure 1 represents the line of perfect equality. It shows what the distribution of income or wealth would look like if every person had an equal amount.

Question 19

John Rawls argues that economic justice would result if society chose a set of rules for the redistribution of income from behind a "veil of ignorance" and he argues that the set of rules would be the maximin criterion.

Accepted Answer

The answer of John Rawls argues that economic justice would...

Question 20

Because in-kind transfers are not accounted for in standard measures of income distribution, the standard measures of income distribution

Accepted Answer

Standard measures of income distribution often do not include in-kind transfers, which can provide significant benefits to recipients. As a result, these measures may exaggerate the inequality of living standards by not accounting for the additional resources provided through these transfers.

Quiz 18: Income Inequality and Poverty

If permanent income were utilized to measure the income distribution instead of current annual income, the income distribution would appear to be wider.

Figure 1 -Refer to figure 1. The top 20% of the population have what % of the income

The distribution of income in the UK became more equal between 1979 and 2000.

Figure 2 -Refer to figure 2. The Gini coefficient is calculated by

There is an easy and perfectly acceptable solution to the problem of poverty traps: recipients' benefit income should be reduced more gradually as they increase their earnings.

It is more efficient for the government to provide in-kind transfers instead of cash payments.

Figure 1 -Refer to figure 1. The red line refers to

A Gini coefficient of .7 suggests a country has a very unequal distribution of income.

When households are divided into deciles, each group covers what percentage of the population?

Utilitarianism is based on the assumption of diminishing marginal product.

The political philosophies of utilitarianism and liberalism both suggest that income should be equalized across the population.

Libertarians are more concerned with equal opportunity than with equal outcome.

Figure 1 -Refer to figure 1. The middle quintile group earn

The UK Gini coefficient suggests that

Figure 2 -Refer to figure 2. The Gini coefficient is

Because of in-kind transfers to the poor and because people's incomes vary from year to year and across their lifetimes, standard measures of income distribution exaggerate the degree of inequality in standards of living.

Permanent income is

Figure 1 -Refer to figure 1. The blue 45 degree line refers to

John Rawls argues that economic justice would result if society chose a set of rules for the redistribution of income from behind a "veil of ignorance" and he argues that the set of rules would be the maximin criterion.

Because in-kind transfers are not accounted for in standard measures of income distribution, the standard measures of income distribution

Quiz 18: Income Inequality and Poverty

If permanent income were utilized to measure the income distribution instead of current annual income, the income distribution would appear to be wider.

Figure 1 ​ -Refer to figure 1. The top 20% of the population have what % of the income

The distribution of income in the UK became more equal between 1979 and 2000.

Figure 2 -Refer to figure 2. The Gini coefficient is calculated by

There is an easy and perfectly acceptable solution to the problem of poverty traps: recipients' benefit income should be reduced more gradually as they increase their earnings.

It is more efficient for the government to provide in-kind transfers instead of cash payments.

Figure 1 -Refer to figure 1. The red line refers to

A Gini coefficient of .7 suggests a country has a very unequal distribution of income.

When households are divided into deciles, each group covers what percentage of the population?

Utilitarianism is based on the assumption of diminishing marginal product.

The political philosophies of utilitarianism and liberalism both suggest that income should be equalized across the population.

Libertarians are more concerned with equal opportunity than with equal outcome.

Figure 1 ​ -Refer to figure 1. The middle quintile group earn

The UK Gini coefficient suggests that

Figure 2 -Refer to figure 2. The Gini coefficient is

Because of in-kind transfers to the poor and because people's incomes vary from year to year and across their lifetimes, standard measures of income distribution exaggerate the degree of inequality in standards of living.

Permanent income is

Figure 1 -Refer to figure 1. The blue 45 degree line refers to

John Rawls argues that economic justice would result if society chose a set of rules for the redistribution of income from behind a "veil of ignorance" and he argues that the set of rules would be the maximin criterion.

Because in-kind transfers are not accounted for in standard measures of income distribution, the standard measures of income distribution

Figure 1 -Refer to figure 1. The top 20% of the population have what % of the income

Figure 1 -Refer to figure 1. The middle quintile group earn