Question 1

Reasons for the growing income inequality in the United States since 1975 include the following, except

Accepted Answer

While the other options contribute to the growing income inequality, an increase in the number of households headed by single or divorced women is not a major factor in this trend.

Question 2

Which of the following is a cause of growing income inequality in the United States since 1975?

Accepted Answer

The widening wage gap between skilled and unskilled workers is a major cause of growing income inequality in the United States since 1975. As technology advanced, there was a greater demand for skilled workers who have the ability to use and operate these technologies effectively. As a result, skilled workers began to earn higher wages than unskilled workers, driving up income inequality.

Question 3

The difference between income and wealth is that income

Accepted Answer

Income refers to the flow of earnings earned over a period of time, while wealth is the stock of assets one has accumulated over time. Income can fluctuate regularly, while wealth can remain relatively constant even with little to no income coming in.

Question 4

The equality-efficiency trade-off would be most closely associated with which one of the following statements?

Accepted Answer

The equality-efficiency trade-off refers to the idea that achieving greater equality in the distribution of resources may come at the cost of reduced economic efficiency. Choice C directly addresses this trade-off by asking how much shrinkage society is willing to tolerate in order to achieve greater equality. Choices A, B, and D do not specifically address this trade-off.

Question 5

The necessity to maintain incentives to work and incentives to produce output would be a point made by an individual making the case for

Accepted Answer

An individual making a case for income inequality would argue that maintaining incentives to work and incentives to produce output are necessary in order to encourage individuals to work hard and be productive, thus creating wealth that benefits society as a whole. They would argue that income inequality serves as a motivator for people to work harder and be more productive, and that without it, there would be little incentive to innovate, take risks, or work long hours.

Question 6

Which of the following would be a significant cause of income inequality in the United States?

Accepted Answer

Discrimination based on race, gender, or other factors can lead to disparities in educational and job opportunities, which in turn can lead to differences in income levels.

Question 7

"Redistributing income in order to have a more equal distribution in the United States would result in a higher level of total consumer satisfaction." This statement is based on the concept that

Accepted Answer

The statement suggests that redistributing income would lead to a more equal distribution, which would result in a higher level of total consumer satisfaction. This assumption is based on the concept of diminishing marginal utility, which suggests that the satisfaction gained from a dollar of income decreases as income increases. Therefore, redistributing income from the wealthy to the less wealthy would increase total consumer satisfaction because the extra dollars received by the less wealthy would provide them with more satisfaction than it would for the wealthy.

Question 8

Which of the following would be considered part of wealth?

Accepted Answer

The answer of Which of the following would be considered...

Question 9

A cause of the unequal distribution of income in the United States is

Accepted Answer

Differences in work preferences and risks can lead to variations in income levels. For example, someone who is willing to take risks and work longer hours may earn more than someone who prefers a stable routine and fewer work hours. These differences in preferences and risks can result in income inequality.

Question 10

Which of the following is a major reason for the growing income inequality in the United States since 1975?

Accepted Answer

The answer of Which of the following is a major...

Question 11

Which of the following is not one of the causes of the unequal distribution of income in the United States?

Accepted Answer

Income taxes and transfers actually work to reduce income inequality by taking from those with higher incomes and giving to those with lower incomes. The other options (ability differences, education and training, and job preferences and job risks) contribute to income inequality by creating disparities in earning potential and opportunities.

Question 12

Earnings received from wealth

Accepted Answer

Earnings received from wealth, such as income from investments, real estate, or inheritance, contribute to income inequality as they are typically only accessible to those who already possess a significant amount of wealth. This perpetuates the cycle of inequality as those who are already wealthy have greater opportunities for accumulating even more wealth.

Question 13

Which of the following would be an example of how pure luck contributes to income inequality?

Accepted Answer

Winning a lottery is purely based on luck and can result in a sudden increase in income, which can contribute to income inequality. The other options involve some level of merit or qualification, which can mitigate the impact of luck on income.

Question 14

Suppose Rita obtains 10 units of utility from the last dollar of income received by her, and Joseph obtains 6 units of utility from the last dollar of his income.Assume both Joseph and Rita have the same capacity to derive utility from income.Those who favor an equal distribution of income would

Accepted Answer

Since Rita obtains more utility from income, redistributing income from Joseph to Rita would result in a more equal distribution of utility between them. This aligns with the principle of an equal distribution of income, as both individuals have the same capacity to derive utility from income.

Question 15

Which of the following would be considered part of income?

Accepted Answer

Wages and salaries are considered income as they represent earnings from labor or services provided. The value of a house, corporate stock holdings, and money in a bank account are not considered income unless they generate income through rent, dividends, or interest.

Question 16

Which of the following would be evidence of an increase in income inequality over time in the United States?

Accepted Answer

An increase in the percentage of total household income received by the highest quintile would indicate an increase in income inequality, as this group is already the most affluent and any increase further widens the gap between the rich and poor. A and C are incorrect as they suggest an increase in income for lower quintiles, which would actually decrease income inequality. D is also incorrect as a decrease in income for the highest quintile would suggest a decrease in income inequality.

Question 17

Some economists prefer to look at the distribution of consumption rather than that of income.A Review of Economic Studies article in 2006 reported that consumption inequality in the U.S.is

Accepted Answer

Some economists argue that consumption inequality is a more accurate measure of well-being than income inequality because it reflects actual living standards. According to a 2006 article in the Review of Economic Studies, consumption inequality in the U.S. is less severe than income inequality. This suggests that while there may be disparities in income, these are not necessarily reflected in disparities in consumption levels.

Question 18

One of the major causes of income inequality is differences in

Accepted Answer

Education is often considered a key factor in determining income level. Individuals with higher levels of education and skills tend to have greater income opportunities and are more likely to secure higher paying jobs. This creates a gap between those who have access to quality education and those who do not, contributing to income inequality.

Question 19

Since 1975, the distribution of household income in the United States has

Accepted Answer

The distribution of household income in the United States has moved toward greater inequality since 1975. This is evidenced by a widening gap between the incomes of the top earners and the rest of the population.

Question 20

The wages and salaries that people earn differ partly because of differences in

Accepted Answer

The primary factor that determines differences in wages and salaries is ability. Individuals with higher levels of ability, whether it be through education, experience, or skill, generally command higher pay due to their competitive advantage in the labor market. Wealth, Social Security payments, and in-kind transfer payments may have some impact on overall income, but they are not the primary factors that determine wage discrepancies.

Quiz 23: Income Inequality, Poverty, and Discrimination