Question 1

Supporters of supply-side economics would be most likely to argue __________ government intervention to reduce inequality by focusing on its effects on __________.

Accepted Answer

Supply-side economics typically argues against government intervention aimed at reducing inequality, with the belief that such intervention can hinder economic growth.

Question 2

A quintile,sometimes used to measure wealth inequality,represents one-fourth of households.

Accepted Answer

A quintile represents one-fifth, or 20 percent, of households.

Question 3

Progressive income tax structures tend to make incomes less equal.

Accepted Answer

Progressive income taxes take a larger fraction of a high-income individual's earnings, thereby rendering the after-tax income more equal.

Question 4

An economy where there is a wide gap between the compensation of the top people in certain fields and the merely competent people is called a(n)

Accepted Answer

In many fields (sports, academics, entertainment, consulting, law) there is a widening gap in compensation between the top people and the merely competent ones.

Question 5

In a "superstar economy," companies try to find only the very best talent.What effect has this had on labor markets?

Accepted Answer

As firms get larger and have larger markets, the talents of key employees have a broad impact. This means that firms are willing to bid very high salaries to put the best people in those positions.

Question 6

Which of the following is among the arguments for using government intervention to reduce income inequality?

Accepted Answer

Large income differences can cause social unrest and degrade the support, and the stability of a market economy.

Question 7

An increase in the returns to a college education has increased inequality of income.

Accepted Answer

The introduction of technology in the workplace places a premium on the ability to understand and use sophisticated equipment, and seems to have favored skilled and educated workers.

Question 8

The 80/20 ratio is found by dividing the

Accepted Answer

The 80/20 ratio can be calculated by dividing the income at the 80th percentile by the income at the 20th percentile.

Question 9

Which of the following is among the arguments against using government intervention to reduce income inequality?

Accepted Answer

This argument suggests that high income earners are motivated to work hard and innovate because they have the potential to earn large rewards. Implementing government interventions to reduce income inequality may discourage this motivation and decrease innovation and creativity.

Question 10

The percentage of U.S.citizens living in poverty is actually higher today than it was for most of the 1970s.

Accepted Answer

According to data from the U.S. Census Bureau, the poverty rate in the United States was 10.5% in 1973 and 11.8% in 2018. Therefore, the percentage of U.S. citizens living in poverty is actually higher today than it was for most of the 1970s.

Question 11

The 80/20 ratio of income has been rising over the last three decades.

Accepted Answer

According to various studies and reports, the income inequality in many countries, including the United States, has been increasing over the last three decades, leading to a higher 80/20 ratio of income.

Question 12

The combined impact of the labor pool effect of globalization for low-skilled workers and the market expansion effect of globalization for high-skilled workers is

Accepted Answer

The labor pool effect of globalization leads to a decrease in wages and employment opportunities for low-skilled workers, while the market expansion effect leads to an increase in demand and wages for high-skilled workers. This combination leads to rising income inequality, with those in the high-skilled sector benefitting and those in the low-skilled sector suffering.

Question 13

Which of the following statements about the poverty line is true?

Accepted Answer

Adjusting the poverty line for inflation is necessary to ensure that the real definition of poverty remains stable.

Question 14

In the last two decades,women have completely closed the gender earnings gap.

Accepted Answer

While progress has been made, the gender earnings gap still exists and women generally earn less than men for the same work. Although the gap has narrowed in recent years, it has not been completely closed.

Question 15

Increasing foreign trade has reduced income inequality because the market expansion effect increases the work opportunities and wages of low-skilled workers.

Accepted Answer

Increasing foreign trade has helped those with high skill levels but has not helped low-skilled workers as much, since foreign trade has increased the supply of low-skilled labor.

Question 16

Which of the following statements about the minimum wage is true?

Accepted Answer

The growth rate of the minimum wage has not kept up with inflation over the last 30 years, meaning that it has fallen in real terms.

Question 17

Adjusting for inflation,the real minimum wage has fallen over the last 30 years.

Accepted Answer

The minimum wage has not kept up with inflation, which means that it is falling in real terms.

Question 18

The percentage of U.S.citizens living below the poverty line is higher today than it was for most of the 1970s.

Accepted Answer

The rising proportion of low-income households is a characteristic of modern income distribution.

Question 19

Which of the following is NOT a reason for increasing income inequality?

Accepted Answer

The minimum wage has increased in dollar terms, but not in real terms.

Question 20

Dividing the number of households making over $80,000 by the number of households making less than $20,000 will produce the 80/20 ratio.

Accepted Answer

The 80/20 ratio is the amount of income at the 80^th percentile divided by the amount of income at the 20^th percentile.

Quiz 17: The Distribution of Income

Supporters of supply-side economics would be most likely to argue government intervention to reduce inequality by focusing on its effects on .