Deck 23: Income Inequality, Poverty, and Discrimination

Question 1

In 2014, the average income for households in the United States was about

A)$68,426.
B)$42,820.
C)$56,610.
D)$69,821.

Answer 1

$68,426.

Question 2

The movement of individuals and households from one income quintile to another over time is called

A)income averaging.
B)wealth turnover.
C)income mobility.
D)the ratchet effect.

Answer 2

income mobility.

Question 3

The highest quintile of households in the income distribution (as of 2014)

A)receives about 51 percent of the total income.
B)comprises 10 percent of all households.
C)comprises 5 percent of all households.
D)receives about 43 percent of the total income.

Answer 3

receives about 51 percent of the total income.

Question 4

Income mobility

A)makes lifetime income inequality among income receivers in the United States less than income inequality in any single year.
B)is less in the United States than in most developing nations.
C)refers to the movement of wage earners from one job to another.
D)reduces the total percentage of households in the lowest quintile of the income distribution over time.

Question 5

Which of the following countries has the highest Gini ratio, as of 2014?

A)Ukraine
B)United States
C)Honduras
D)Mexico

Question 6

The Lorenz curve

A)plots graphically the poverty rate over time.
B)is located closer to the diagonal today than it was in 1975.
C)plots graphically the distribution of income.
D)is located farther from the diagonal when income is defined to include the value of noncash transfers.

Question 7

In 2014, a household with an annual income of $75,000 would find itself in the

A)second lowest quintile of the household income distribution.
B)third quintile of the household income distribution.
C)fourth quintile of the household income distribution.
D)fifth (highest) quintile of the household income distribution.

Question 8

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively.What percentage of total income is received by the lowest 60 percent of the income receivers in population A?

A)60
B)50
C)25
D)20

Question 9

The Lorenz curve portrays

A)the functional distribution of income.
B)the ratio of labor to capitalist income.
C)the personal distribution of income.
D)income equality.

Question 10

Which of the following Gini ratios indicates the highest degree of income inequality?

A)0.78
B)0.65
C)0.29
D)0.42

Question 11

In 2014, a household with an annual income of $23,000 would find itself in the

A)highest quintile of the household income distribution.
B)lowest quintile of the household income distribution.
C)second lowest quintile of the household income distribution.
D)second highest quintile of the household income distribution.

Question 12

Census data indicate that, as of 2014, the top fifth of all households receive about times as much income as the bottom fifth.

A)sixteen
B)twelve
C)eight
D)three

Question 13

The Gini ratio

A)measures the relative extent of poverty in a nation.
B)compares the income of persons, households, or households at the 90th percentile of the income distribution to the income at the 10th percentile.
C)is a numerical measure of the overall dispersion of income in a nation.
D)is found by dividing the entire area below and to the right of the diagonal in the Lorenz diagram by the area between the diagonal and Lorenz curve.

Question 14

Which of the following Gini ratios indicates the lowest degree of income inequality?

A)0.71
B)0.55
C)0.31
D)0.45

Question 15

The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the

A)smaller is the Gini ratio and the greater is the degree of income inequality.
B)larger is the Gini ratio and the greater is the degree of income inequality.
C)smaller is the Gini ratio and the lesser is the degree of income inequality.
D)larger is the Gini ratio and the lesser is the degree of income inequality.

Question 16

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively.What percentage of total income is received by the richest quintile?

A)50
B)5
C)25
D)20

Question 17

The lowest quintile of households in the income distribution (as of 2014) receives about

A)2.4 percent of the total income.
B)3.1 percent of the total income.
C)8.2 percent of the total income.
D)10 percent of the total income.Difficulty: 02 Medium

Question 18

In the quintile distribution of income, the term "quintile" represents

A)5 percent of the income receivers.
B)10 percent of the income receivers.
C)20 percent of the income receivers.
D)25 percent of the income receivers.

Question 19

In 2014, the highest quintile of households in the U.S.income distribution received about

A)43 percent of total income.
B)55 percent of total income.
C)62 percent of total income.
D)51 percent of total income.

Question 20

Income mobility

A)contributes to greater wealth inequality in the United States.
B)is less in the United States than in most developing nations.
C)is the movement of individuals and households from one income quintile to another over time.
D)makes lifetime income inequality among income receivers in the United States greater than income inequality in any single year.

Question 21

Wealth

A)is a flow concept.
B)refers to accumulated financial assets only.
C)refers to accumulated real assets only.
D)refers to accumulated financial and real assets.

Question 22

Housing subsidies for low-income households

A)represent a cash transfer.
B)are a part of the U.S.social insurance programs.
C)represent a noncash transfer.
D)conflict with the leaky-bucket analogy.

Question 23

Wealth in the United States is

A)distributed in a way that reduces the degree of income inequality.
B)more unequally distributed than is income.
C)less unequally distributed than is income.
D)distributed in a way that has no effect on income inequality.

Question 24

Some economists have criticized standard government figures on income inequality, arguing that these data

A)exclude households whose earnings arise in the public sector.
B)conceal the strong trend toward greater equality in household sizes.
C)conceal the growth of poverty due to a growing number of discouraged workers.
D)overstate the degree of income inequality by failing to include noncash transfers as income.

Question 25

The distribution of wealth in the United States is such that it

A)is randomly distributed among income classes.
B)has no perceptible impact on the distribution of income.
C)reduces income inequality.
D)contributes to income inequality.

Question 26

In the United States,

A)taxes decrease, but transfers increase, income inequality.
B)taxes increase, but transfers reduce, income inequality.
C)both taxes and transfers decrease income inequality.
D)both taxes and transfers increase income inequality.

Question 27

The exercise of market power by suppliers in resource markets tends to

A)reduce income inequality, ensuring that all workers receive fair wages.
B)have little impact on the distribution of income.
C)increase income inequality by raising incomes of those able to "rig the market."
D)increase income inequality but is offset by the exercise of market power in product markets.

Question 28

Which of the following would most likely increase income inequality?

A)improvements in public education
B)greater monopoly power among product sellers
C)greater equality in the distribution of wealth
D)fewer differences in working conditions across occupations

Question 29

Each of the following contributes to income inequality except

A)differences in ability and training.
B)differences in job tastes.
C)differences in wealth ownership.
D)government transfers.

Question 30

Which of the following would likely reduce income inequality?

A)a reduction in the number of high school dropouts
B)a reduction in Social Security benefits
C)greater inequality in the distribution of wealth
D)more stringent requirements to obtain occupational licenses

Question 31

Which of the following is a noncash transfer?

A)a payment to a divorced mother under TANF
B)SNAP (food stamps)
C)a Social Security payment to a retiree
D)unemployment compensation benefits

Question 32

Differences in the amounts and quality of education and training

A)combine with differences in mental, physical, and aesthetic talents to produce income inequality.
B)explain none of the income inequality in the United States.
C)explain nearly all the income inequality in the United States.
D)have lessened in the United States in the past decade, sharply reducing income inequality.

Question 33

Each of the following has contributed to growing income inequality in the United States since 1975 except

A)the decline in unionism.
B)greater demand for highly skilled workers.
C)stronger international competition from imports.
D)government transfers.

Question 34

Which is correct?

A)Wealth is less equally distributed than income and therefore increases income inequality.
B)Wealth is more equally distributed than income and therefore increases income inequality.
C)Wealth is less equally distributed than income and therefore decreases income inequality.
D)Wealth is more equally distributed than income and therefore decreases income inequality.

Question 35

People's incomes are relatively low when they are young, reach a peak in middle age, and then decline.This fact helps explain

A)the wide variations of Gini ratios among nations.
B)the equality-efficiency trade-off.
C)why the lifetime distribution of income is more equal than the distribution in any given year.
D)why the lifetime distribution of income is less equal than the distribution in any given year.

Question 36

Which of the following is correct?

A)Income is a stock concept, and wealth is a flow concept.
B)Both income and wealth are flow concepts.
C)Both income and wealth are stock concepts.
D)Income is a flow concept, and wealth is a stock concept.

Question 37

If discrimination based on gender and race was eliminated, we would expect the

A)personal distribution of income to become less equal.
B)personal distribution of income to become more equal.
C)personal distribution of income to be unaffected.
D)functional distribution of income to change in favor of profits and interest.

Question 38

Standard census data on the distribution of income

A)take all taxes and transfer payments into account.
B)are before taxes in that they do not account for personal income and payroll taxes.
C)include noncash transfers.
D)exclude cash transfers.

Question 39

One cause of income inequality in the United States is

A)the free public school system.
B)differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work.
C)antidiscrimination laws.
D)a system of taxes and government transfers that redistributes income away from the lowest earners.

Question 40

Income

A)is a stock concept.
B)consists of accumulated assets.
C)is a flow concept.
D)consists of wages only.

Question 41

Which of the following demographic groups does not bear a disproportionate burden of poverty?

A)households headed by women
B)persons 65 or over
C)Hispanics
D)children under 18

Question 42

Which of the following measurement issues makes interpretation of U.S.poverty rates difficult?

A)Poverty statistics measure income rather than consumption, and some families may be able to consume above the official poverty line.
B)The high cost of living in rural areas tends to result in the understatement of poverty.
C)Most people below the poverty line have substantial unreported income.
D)The poverty rate is adjusted for every urban and rural area, so people's poverty status changes whenever they move.

Question 43

The poverty rate in the United States was

A)12 percent in 2014.
B)higher in 2014 than in 1960.
C)about the same in 2014 as in 1993.
D)nearly 20 percent in 2014.

Question 44

Since 1980 the difference between the earnings of college graduates and high school graduates has

A)fallen, thereby increasing income inequality.
B)increased, thereby increasing income inequality.
C)remained constant.
D)increased, thereby decreasing income inequality.

Question 45

Which of the following groups would we expect to have the highest poverty rate?

A)Hispanic married households
B)elderly Asian households
C)white households headed by females
D)African-American households headed by females

Question 46

According to the standard government definitions, the percentage of the U.S.population now (2014) considered to be living in poverty is about

A)14.8 percent.
B)23.6 percent.
C)13.1 percent.
D)46.7 percent.

Question 47

Since 1975 the distribution of income has

A)remained virtually constant from year to year.
B)become more equal.
C)varied considerably from year to year but in general has been stable.
D)become less equal.

Question 48

Which of the following groups has the highest poverty rate?

A)age 65 or over
B)foreign-born (not citizens)
C)Hispanics
D)female-headed households

Question 49

Gomez argues that we need to increase the nation's output.Chang contends that our top priority should be a more equal distribution of income and output.It can be correctly stated that these two goals are

A)essentially unrelated.
B)complementary because the realization of one will promote fulfillment of the other.
C)at least partially competing because the redistribution of income might impair incentives to work and produce.
D)complementary because a more equal distribution of income always promotes economic growth.

Question 50

In 2014, the official poverty line for a household of four in the United States was

A)$24,230.
B)$32,473.
C)$12,071.
D)$26,803.

Question 51

The term "growing income inequality" implies that the

A)poor are getting poorer in both a relative and an absolute sense.
B)Lorenz curve is shifting toward the diagonal.
C)diagonal is shifting toward the Lorenz curve.
D)upper quintiles of income receivers are getting relatively more of the total income than before and the lower quintiles are getting relatively less.

Question 52

The U.S.poverty rate for

A)Hispanics is higher than that for African Americans.
B)children under 18 years of age is higher than for the overall population.
C)African Americans has increased since 1993.
D)foreign-born individuals who are not citizens is below the poverty rate for the general population.

Question 53

The equality-efficiency trade-off suggests that

A)welfare programs stimulate incentives to work.
B)inefficiencies result when incentives to produce are reduced.
C)noncash transfers are superior to cash transfers.
D)economic growth is the best means of reducing poverty.

Question 54

The poverty rate for African Americans is

A)greater than for any other racial or ethnic group.
B)below that for whites.
C)considerably lower than that for Hispanics.
D)below that for persons 65 years of age or older.

Question 55

The basic economic argument for greater income equality is that

A)an equal distribution of income is the logical outcome of any tax-transfer program.
B)because citizens enjoy political equality, they are also entitled to economic equality.
C)a more equal distribution of income will tend to maximize incentives to work, invest, and assume risk.
D)a more equal distribution of a given amount of income will increase the total utility of consumers.

Question 56

The equality-efficiency trade-off refers to

A)the conflict between risk averters and risk takers.
B)the willingness of Congress to abandon existing welfare programs in favor of a comprehensive plan to increase education and training for low-income persons.
C)possible conflicts between the goals of economic efficiency and greater income equality.
D)the difference between the goals of income equality and equality of economic opportunity.

Question 57

The basic argument for income inequality is that

A)the very rich establish consumption patterns that are desirable for the rest of society to emulate.
B)the rich buy luxury goods that soon become affordable to everyone else because of economies of scale.
C)income inequality is essential to maintain incentives to produce.
D)inequality undermines incentives and tends to reduce the size of the national income.

Question 58

Which of the following groups has the lowest poverty rate?

A)married-couple families
B)whites
C)foreign-born (not citizens)
D)Asians

Question 59

The entrance of large numbers of "baby boomers" into the labor force in the 1970s and 1980s

A)caused substantial reductions in permanent unemployment.
B)lessened income inequality.
C)increased income inequality.
D)had no impact on income inequality.

Question 60

Which of the following helps explain growing income inequality in the United States in recent years?

A)reduced immigration
B)increased demand for highly skilled workers
C)the falling labor force participation rate of women
D)increased power of unions

Question 61

A major difference between social insurance and public assistance is that the

A)former is regarded as an earned right while the latter is public charity.
B)latter is regarded as an earned right while the former is public charity.
C)latter is financed through earmarked payroll taxes and the former is financed by general tax revenues.
D)former are state and local programs while the latter are federal programs.

Question 62

Which of the following helps finance the medical expenses of individuals receiving TANF or SSI?

A)Medicare
B)Supplemental Security Income (SSI)
C)Medicaid
D)Social Security

Question 63

A major difference between social insurance and welfare is that social insurance

A)exclusively involves older Americans, whereas welfare is confined mainly to mothers with young children.
B)forces recipients to demonstrate need, while welfare does not.
C)is normally financed by earmarked payroll taxes, while welfare is financed out of general tax revenues.
D)provides cash transfers, while welfare does not.

Question 64

For which of the following income-maintenance programs is aggregate spending the greatest?

A)Medicare
B)Social Security
C)Unemployment compensation
D)TANF

Question 65

Which one of the following is not a cash transfer program?

A)TANF
B)Supplemental Security Income (SSI)
C)low-rent public housing
D)Social Security

Question 66

Which of the following measurement issues makes interpretation of U.S.poverty rates difficult?

A)Poverty statistics measure consumption rather than income, and some families may receive income that is above the official poverty line.
B)The high cost of living in urban areas tends to result in the understatement of poverty.
C)Most people below the poverty line have substantial unreported income.
D)The poverty rate is adjusted for every urban and rural area, so people's poverty status changes whenever they move.

Question 67

The TANF program is designed to

A)increase the minimum wage.
B)shift people from welfare to employment.
C)provide medical insurance to poverty-level workers.
D)provide income to the blind and disabled.

Question 68

An example of a social insurance program is , whereas an example of a public assistance program is .

A)Temporary Assistance for Needy Families; unemployment compensation
B)Supplemental Security Income; unemployment compensation
C)Social Security; Supplemental Nutrition Assistance Program
D)Medicaid; Medicare

Question 69

The primary purpose of Social Security is to

A)subsidize families in need.
B)offset the progressiveness of the personal income tax.
C)provide income for workers who are temporarily unemployed.
D)provide income for retired and disabled workers.

Question 70

Which of the following terms describes a system of subsidized health insurance available to the aged?

A)Medicare
B)Supplemental Security Income (SSI)
C)Medicaid
D)TANF

Question 71

Which of the following would move the Lorenz curve closer to the diagonal?

A)a 20 percent boost in Social Security retirement benefits
B)increasing payroll taxes
C)reducing the progressiveness of the federal personal income tax
D)eliminating the TANF program

Question 72

Social Security is financed

A)by state income tax revenues.
B)by payroll taxes on employees and employers.
C)by federal excise taxes.
D)out of general tax revenues.

Question 73

Medicaid

A)helps finance medical expenses for those participating in the TANF and Supplemental Security Income programs.
B)has been abandoned in favor of privately provided medical insurance.
C)is a program of medical insurance for the aged and retired.
D)is a compulsory national health insurance program that only covers preventative medical services.

Question 74

The TANF program

A)is a form of social insurance.
B)has been found to be unconstitutional by the Supreme Court.
C)limits total lifetime welfare benefits to 5 years and requires able-bodied adults to work after receiving benefits for 2 years.
D)perpetuates the so-called culture of poverty.

Question 75

Which of the following provides public assistance to those who are blind and otherwise disabled?

A)Medicare
B)Supplemental Security Income (SSI)
C)Medicaid
D)TANF

Question 76

Which of the following is a public assistance or welfare program as opposed to a social insurance program?

A)Supplemental Security Income (SSI)
B)unemployment compensation
C)Medicare
D)Social Security

Question 77

The earned-income tax credit

A)increases the personal income tax liability of low-income working families.
B)provides a cash payment to low-income working families if their tax credit exceeds their tax liability.
C)is designed to make labor force employment less attractive.
D)was eliminated as part of welfare reform in 1996.

Question 78

Which of the following is not a social insurance program?

A)TANF (Temporary Assistance for Needy Families)
B)Medicaid
C)Supplemental Security Income
D)unemployment compensation

Question 79

Which one of the following would increase income inequality as measured by official census data and the quintile distribution?

A)a doubling of Social Security retirement benefits
B)elimination of the SNAP program
C)elimination of the TANF program
D)reduced divorce rates

Question 80

The U.S.income-maintenance program consists of two kinds of programs.They are

A)the minimum wage law and Social Security.
B)antidiscrimination law and education and training programs.
C)social insurance and public assistance programs.
D)progressive income taxes and transfer payments.