Deck 31: Income and Wealth Inequality

Question 1

The top 1 percent share of income in the United States was only _____ percent in 1978 as compared to _____ in 2007.

A)7)55; 22.49
B)5)2; 36
C)3)45; 10.76
D)1)09; 13.44

Answer 1

A

Question 2

Capital gains are those gains

A)earned from avoiding tax payments by understating earnings from capital assets.
B)earned from purchasing an asset for less than what it is actually worth.
C)earned from selling an asset prior to its maturity date.
D)earned from selling an asset for a price more than what was paid for it.

Answer 2

D

Question 3

During the 2000s, it was observed that:

A)systemic inequality was the largest in three decades.
B)the measure of inequality was highly variable.
C)income inequality was at an all-time low.
D)the average income share of the top 1% of income earners was below 7%.

Answer 3

B

Question 4

During 1971-1998, the new _____ and greatly expanded EITC created a motivation for the low-earning households to file returns when they were not legally required to do so.

A)Child Tax Credit
B)Working Tax Credit
C)Earned Income Credit
D)Retirement Savings Credit

Question 5

Payments of capital gains taxes _____.

A)are voluntary and easily avoided
B)cannot be deferred
C)depend on whether the gains are short-term or long-term
D)are not forgiven at death

Question 6

James is a resident of the U.S. and has accrued capital gains on an asset. If James' heirs hold the asset at the time of his death, which of the following is true?

A)His heirs can sell the asset and its gains tax free.
B)His heirs will have to pay tax on the accrual of the capital gain.
C)The purchase price of the asset will be the difference between the value of the asset and the amount of tax payable.
D)The purchase price of the asset will equal the value of the asset on the day James died.

Question 7

Adjusting the conventional measure of income inequality for the increase in income tax returns resulted in:

A)a 1.4% decrease in the top 1 percent's systemic income share during 1968 to 2007.
B)a 2% increase in the bottom 99 percent's systemic income share during 1968 to 2007.
C)a 1.4% increase in the top 1 percent's systemic income share during 1968 to 2007.
D)a 2% decrease in the bottom 99 percent's systemic income share during 1968 to 2007.

Question 8

Which of the following led to an increase in the proportion of population filing for income tax returns from 1971 to 1998?

A)An increase in the population below poverty line.
B)A decrease in the proportion of people filing for returns as "single head of household."
C)An increase in the number of senior citizens working at part-time jobs as compared to previous generations.
D)An increase in the number of people who were unmarried or divorced but had children.

Question 9

Which of the following statements is true of capital gains in the U.S.?

A)Capital gains are forgiven at death.
B)Capital gains are taxed on accrual.
C)Capital gains are taxed only for low-income groups.
D)Capital gains are taxed only if they are long-term.

Question 10

Which period saw the biggest increase in systemic income inequality measured conventionally?

A)1980s and 1990s
B)2000s
C)1960s and 1970s
D)1950s

Question 11

James is a resident of the U.S. and has accrued capital gains on an asset. If James sells the asset, _____.

A)he will realize the gain and owe capital gains tax
B)the buyer of the asset will owe capital gains tax
C)his capital gain will be tax free
D)its purchase price will include the amount of capital gains tax payable

Question 12

Which of the following was true regarding conventionally measured income inequality in the U.S. during 1968 to 2007?

A)The income share of the top 1% of income earners tripled over this period.
B)The income share of the top 25% of income earners remained below 60% during 1968-2007.
C)There was a steady decline in the income share of the top 5% of income earners during this period.
D)The conventional measure of income inequality showed that it was significantly low during this period compared to any other time period.

Question 13

Which of the following is true of the taxation of capital gains in the United States?

A)Short-term capital gains are not taxed.
B)The tax cannot be deferred.
C)It is taxed on accrual.
D)It is taxed on realization.

Question 14

When tax filings increase faster than increases in population, and when nearly all the extra filings are from individuals in the lower 99 percent income group

A)the number of people in the bottom 99 percent group decreases more than it would otherwise.
B)the number of people in the bottom half group decreases more than it would otherwise.
C)the number of people in the top 1 percent group decreases more than it would otherwise.
D)the number of people in the top 1 percent group increases more than it would otherwise.

Question 15

Which of the following is a source of data on the press measure of income inequality in the United States?

A)The Federal Reserve
B)The Internal Revenue Service
C)Survey of Labor and Income
D)Survey of Consumer Finances

Question 16

Systemic income inequality peaked at the time of the tech boom in the _____ and peaked again just _____.

A)1990s; prior to the financial crisis
B)1970s. after the financial crisis
C)1960s; after the financial crisis
D)1970s; prior to the financial crisis

Question 17

Which of the following is true of refundable tax credits?

A)It led to a decrease in the number of income tax returns filed during the 2000s.
B)It resulted in a decrease in tax filings while population increased during the 1980s.
C)It included Child Tax Credit but not Earned Income Tax Credit.
D)It increased the number of low-earning households filing tax returns.

Question 18

Which of the following was a problem with using the conventional press measure of income inequality during 1971-1998?

A)There was a rapid decrease in the income tax filings during the period between 1971 and 1998.
B)There was a rapid increase in the income tax filings during the period between 1971 and 1998.
C)There was a rapid increase in the working class population during the period between 1971 and 1998.
D)There was a rapid decrease in the working class population during the period between 1971 and 1998.

Question 19

Alex, a resident of the United States, has accrued capital gains and she dies prior to the realization of her gains. Which of the following is true of Alex's capital gains?

A)Her capital gains are tax free.
B)Her heirs cannot sell her asset immediately.
C)Her heirs cannot hold her assets.
D)Her capital gains are transferred to government revenue.

Question 20

James is a resident of the U.S. and has accrued capital gains on an asset. If James dies prior to the realization of capital gains, ____.

A)his heirs will have to pay the tax on gains
B)his heirs can sell the asset and the gains will be tax-free
C)his heirs will not be able to sell the asset
D)his heirs will have to pay a death tax along with the capital gains tax

Question 21

During which year was the top 1 percent households' share of wealth higher than the top 90-99 percent share in the United States?

A)1989
B)1992
C)1995
D)1998

Question 22

If the capital gains tax rate in 2007 had remained the same as in mid-1970s

A)far fewer gains would have been realized.
B)more gains would have reported to the IRS.
C)the top 1 percent share of income would have been more than 30%.
D)the top 1 percent share of income would have been less than 7%.

Question 23

Which of the following statements is true?

A)The capital gains tax rate reached its all-time low during 2003-2012 in the U.S.
B)The capital gains tax rate reached its all-time low during the 1970s in the U.S.
C)The capital gains tax rate was nearly 40 percent during 2003-2012 in the U.S.
D)The incomes of the top 1 percent were likely overstated in early 2000s in the U.S.

Question 24

Which of the following is a feature of data collection on wealth concentrations in the United States?

A)Oversampling of the high-income households
B)Oversampling of the low-income households
C)Under sampling of the high-income households
D)Under sampling of the low-income households

Question 25

As a result of _____, the incomes of the top 1% of income earners during the 1970s were understated.

A)the increase in consumption levels
B)the expansion of the non-refundable ETIC
C)the special tax treatment of capital gains
D)the rapid decrease in the proportion of Americans filing tax returns

Question 26

In the United States, the data on wealth concentrations is collected by the

A)University of Chicago for the Federal Reserve.
B)University of Michigan for the Federal Reserve.
C)United States Treasury Department.
D)Department of Economic Affairs.

Question 27

The _____ households faired very well during the period after 1995 in their wealth shares.

A)top 1 percent
B)top 90-99 percent
C)upper-middle class
D)bottom half

Question 28

A decrease in the capital gains tax rate:

A)would be reflected in a decrease in the observed measure of the share of income of the top 1%.
B)would be reflected in an increase in the observed measure of the share of income of the bottom 99%.
C)would be reflected in a decrease in the observed measure of the share of income of the bottom 99%.
D)would be reflected in an increase in the observed measure of the share of income of the top 1%.

Question 29

Which of the following resulted from the collapse of the housing bubble in the United States during 2007?

A)The mean wealth was 6.5 times higher than the median households' wealth in 2010.
B)The mean wealth was 6.5 times lower than the median households' wealth in 2010.
C)The average households' wealth declined by 40 percent in 2010.
D)The total households' wealth declined by 15 percent in 2010.

Question 30

When the housing bubble collapsed, _____.

A)the median household's wealth fell by 40%
B)the mean household's wealth fell by 40%
C)the median household's wealth increased by 15%
D)the mean household's wealth increased by 15%

Question 31

Which of the following is true of the increase in the wealth of households during 2001 to 2007?

A)The average household benefitted more from these gains than the rich.
B)The increase in median wealth was much greater than the increase in mean wealth.
C)The gains were a result of the housing bubble.
D)The gains were the result of increases in stock prices.

Question 32

If the tax-returns and capital gains effect were accounted for in the measurement of income inequality, _____.

A)the top 1% share of income would have tripled from 1978 to 2007
B)the top 1% share of income would have remained at 8% in 1978 and 2007
C)the top 1% share of income would have less than doubled in value from 1978 to 2007
D)the top 1% share of income would have decreased by 1.4% from 1978 to 2007

Question 33

Which of the following statements is true of the trends in wealth inequality?

A)The share of the bottom 90 percent, which was 67% in 1989, grew to 75.3% by 2013.
B)The wealth shares of the bottom 90 percent and top 10 percent have increased by 30% from 1989 to 2013.
C)The share of the top 10 percent, which was 67% in 1989, grew to 75.3% by 2013.
D)The wealth shares of the bottom 90 percent and top 10 percent have decreased by 30% from 1989 to 2013.

Question 34

Which of the following statements is true of wealth share of the bottom half and the upper-middle class households in the United States?

A)The wealth shares of bottom half households have declined, whereas the wealth shares of the upper-middle class households have increased since 1989.
B)The wealth shares of both household types have seen a systematic rise since 1989.
C)The wealth shares of both household types have seen a systematic decline since 1989.
D)The wealth shares of bottom half households have increased, whereas the wealth shares of the upper-middle class households have declined since 1989.

Question 35

Which of the following is the source of data on wealth concentrations in the United States?

A)Survey of Labor and Income
B)Survey of Current Business
C)Survey of Household Income and Wealth
D)Survey of Consumer Finances

Question 36

Which of the following is true of wealth concentration in the U.S during 1989 to 2007?

A)Wealth rose 60% for the the median household, but the mean rose 86%.
B)Wealth decreased 20% for the median household, but the mean decreased by 15%.
C)Wealth decreased 20% for the median household, but the mean increased by 15%.
D)Wealth rose 86% for the the median household, but the mean rose 60%.

Question 37

Which of the following is true of the capital gain tax rate in the U.S from 1968 to 2007?

A)It reached a peak of 40% in the 1970s.
B)It was at an all-time low level of 15% during the 1980s.
C)It averaged around 30% from 2003-2007.
D)It remained constant at 10% in the 1990s.

Question 38

During 1989 to 2015, the wealth share of the top 1 percent:

A)grew from 30% to 36% with the rise in the stock market during the 1990s.
B)grew from 67% to 74.5% despite the financial crisis in 2007.
C)remained relatively stable around 45%.
D)dropped from 2.5% to 1.1% due to the bursting of the housing bubble.

Question 39

If there is a 20 percentage point drop in the maximum capital gains tax rate, _____percentage points of the increase in the share of the 1 percent can be attributed to the drop in the capital gains tax rate.

A)4
B)8
C)20
D)36

Question 40

Which of the following is true of the capital gains tax rates?

A)Lower rates of tax discourage realization.
B)Lower rates of tax encourage tax avoidance.
C)Higher rates of tax encourage realization.
D)Higher rates of tax encourage tax avoidance.

Question 41

Which of the following is true of capital markets during the 1980s?

A)The capital markets were more profitable as compared to the 1990s.
B)The mortgages available to buy a house were mostly from abroad.
C)The majority of financial capital was locally generated.
D)The capital gains tax was at an all-time low of 10%.

Question 42

From the following, identify a reason for increased income inequalities in the U.S.

A)Increase in the profitability of capital markets
B)Increase in the inheritance tax rates
C)Increase in labor-intensive manufacturing jobs
D)Increase in the tax rates on carried interests

Question 43

The U.S. claim to be "the land of opportunity" is not backed by recent data because a study by Miles Corak shows that:

A)it has very high capital gains tax rates.
B)it does not have a high value of intergenerational income elasticity.
C)there is a weak relationship between parental and child income in the U.S.
D)it has a very high level of income mobility.

Question 44

Which of the following is a benefit of income inequality?

A)It motivates people to be at the high end of income distribution.
B)It promotes economic growth in the less developed economies.
C)It reduces the intensity of business fluctuations in an economy.
D)It reduces the taxes to be paid by the ones in the low end of income distribution.

Question 45

Which of the following aspects of global change benefitted people at the higher end of the income scale in the U.S?

A)The increase in U.S. imports from the rest of the world
B)The movement of global capital
C)The increase in the level of foreign investment in the U.S.
D)The fall in global oil prices

Question 46

Which of the following is a significant change in public policy in the U.S. since the 1980s?

A)Decline in tax rates on capital gains
B)Increase in tax rates on carried interests
C)Significant increase in inheritance tax rates
D)Significant decrease in property tax rates

Question 47

Which of the following is a reason for the decrease in household income and wealth inequalities in the U.S during 1960-1980?

A)Increase in manufacturing jobs
B)Increase in robotic production
C)Increase in the participation of women in the labor force
D)Increase in the household saving rate by low-income households

Question 48

Which of the following contributed to the increase in household and wealth inequalities in the U.S?

A)A decline of union-represented manufacturing employees
B)A decrease in jobs performed by intellectually challenging labor
C)An increase in service sector jobs
D)An increase in the participation of women in the labor force

Question 49

Which of the following is a reason why the income of the wealthy people in the U.S. has continued to increase?

A)Fall in American saving rates
B)Decrease in profits earned in capital markets
C)Increase in inheritance tax rates
D)Increase in capital gains tax rates

Question 50

As a result of public policy changes in the U.S. since the 1980s, _____.

A)more people are becoming rich due to inherited wealth
B)more people are becoming rich due to earned wealth
C)the wealth of those at the lower end of the income distribution has increased
D)the savings rate for people at the lower end of the income distribution has increased

Question 51

Which of the following is a reason behind increase in household income and wealth inequalities in the U.S?

A)Increase in manufacturing jobs
B)Increase in robotic production
C)Decrease in international competition in the manufacturing sector
D)Increase in the production of consumer durables during the 1990s

Question 52

Which of the following is true of the relationship between income inequality and public policy in the U.S. since the 1980s?

A)Public policy has been more favorable to those at the high end of the income distribution resulting in an increase in income inequalities.
B)Public policy has been more favorable to those at the low end of the income distribution resulting in an increase in income inequalities.
C)Public policy has been less favorable to those at the high end of the income distribution resulting in a decrease in income inequalities.
D)Public policy has been less favorable to those at the low end of the income distribution resulting in a decrease in income inequalities.

Question 53

Which of the following is a cost of high income inequality?

A)Capital flight
B)Sticky wages
C)Social disorder
D)Hyperinflation

Question 54

Prior to the 1960s, _____.

A)the majority of American savers were from the higher end of the income scale
B)the majority of financial capital was generated from abroad
C)the capital gains tax was at an all-time high of 50%
D)American savers were spread across all categories of the income scale

Question 55

Which of the following is true of investment-based income?

A)Tax rates on carried investment are higher now as compared to 1980s.
B)Capital gains tax rates are higher now as compared to the 1980s.
C)Capital gains are now completely tax-free as compared to the 1980s.
D)Tax rates on carried investment are lower now as compared to 1980s.

Question 56

In the study conducted by Miles Corak, which of the following countries had the weakest relationship between parental and child income?

A)United States
B)United Kingdom
C)France
D)Denmark

Question 57

Which of the following acted as a counterweight to increasing income inequality during 1960-1980?

A)A decrease in inheritance tax rates.
B)A decline of union-represented manufacturing employees.
C)An increase in the number of two-earner households.
D)An increase in the tax rates on carried interests.

Question 58

In the study conducted by Miles Corak, which of the following countries had the strongest relationship between parental and child income?

A)United States
B)United Kingdom
C)France
D)Denmark

Question 59

The negative impacts of high income inequality on the society will be less significant if

A)those at the high end of the income distribution are not motivated to hold their positions.
B)the poor believe that their poverty is a result of choices they made
C)those at the bottom of the income distribution believe that the system is rigged in favor of the rich
D)there is a high level of political influence in the working of the income distribution system

Question 60

The costs of income inequalities in an economy can be reduced to an extent if there is _____.

A)capital flight
B)income mobility
C)regressive taxation
D)labor rigidity

Question 61

According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the upper middle and highest income class gain more income, the middle class will ___

A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, but that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.

Question 62

According to the Pew Charitable Trust methodology for identifying the middle class, for the period from 1971 to 2015, the middle class has

A)increased from 71% to 80% of the population.
B)increased from 50% to 80% of the population.
C)decreased from 80% to 71% of the population.
D)decreased from 80% to 50% of the population.

Question 63

According to the Pew Charitable Trust methodology for identifying the middle class, for the period from 1971 to 2015, the lowest income class has

A)increased from 16% to 20% of the population.
B)increased from 6% to 30% of the population.
C)decreased from 20% to 16% of the population.
D)decreased from 30% to 6% of the population.

Question 64

According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the upper middle and highest income class lose income, the middle class will ___

A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, but that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.

Question 65

According to the Pew Charitable Trust methodology for identifying the middle class, the bottom end of the middle class is ____ of median family income and the top end is ____.

A)50%; 150%
B)67%; 200%
C)40%; 60%
D)100%; 200%

Question 66

A graphical portrayal of the income distribution

A)is like a bell curve.
B)is a horizontal line (there is an equal number of people at every income level).
C)is an inverse bell curve with a large number of people at the low end and a large number of people at the high end.
D)is highly concentrated at low and moderate incomes with fewer and fewer people in each income category as incomes increase.

Question 67

According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the lowest and the lower middle income class gain more income, the middle class will ___

A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, and that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.

Question 68

According to the Pew Charitable Trust methodology for identifying the middle class, for the period from 1971 to 2015, the highest income class has

A)increased from 16% to 20% of the population.
B)increased from 4% to 9% of the population.
C)decreased from 9% to 4% of the population.
D)decreased from 30% to 6% of the population.

Question 69

According to the Pew Charitable Trust methodology for identifying the middle class, if people near the boundary between the lowest and the lower middle income class lose income, the middle class will ___

A)shrink, but that is unambiguously a good thing.
B)shrink, and that is unambiguously a bad thing.
C)increase, and that is unambiguously a good thing.
D)increase, and that is unambiguously a bad thing.

Question 70

According to the Pew Charitable Trust methodology for identifying the middle class, in 2014 the bottom end of the middle class is ____ and the top end is ____.

A)$42,000; $126,000
B)$50,000; $75,000
C)$30,000; $250,000
D)$75,000; $300,000