Deck 7: The Wage Structure

Question 1

In general terms, which of the following statements regarding changes in income inequality in the United States is correct?

A)Inequality has increased over the last 30 years as witnessed by the Gini coefficient increasing from about 0.1 in 1970 to about 0.7 in 2000.
B)Inequality has increased over the last 30 years as witnessed by the Gini coefficient increasing from about 0.3 in 1970 to about 0.45 in 2000.
C)Inequality has decreased over the last 30 years as witnessed by the Gini coefficient decreasing from about 0.5 in 1970 to about 0.05 in 2000.
D)Inequality has decreased over the last 30 years as witnessed by the Gini coefficient decreasing from about 0.8 in 1970 to about 0.25 in 2000.
E)Inequality has stayed about the same over the last 30 years as witnessed by a Gini coefficient that has hovered around 0.6.

Answer 1

B

Question 2

Which of the following does not measure inequality?

A)The 90-10 wage gap.
B)The 50-10 wage gap.
C)The Gini coefficient.
D)The actual Lorenz curve.
E)The perfect-equality Lorenz curve.

Answer 2

E

Question 3

The Gini coefficient in a perfectly unequal society will have a Gini coefficient of _____ while a perfectly equal society will have a Gini coefficient equal to _____.

A)0; 1
B)1; 0
C)0; infinity
D)infinity; 0
E)-1; 1

Answer 3

B

Question 4

From 1965 to 2005, the 90-10 wage gap in the United States has

A)held constant at roughly 100.
B)held constant at roughly 200.
C)held constant at roughly 200 until 1980 and has steadily increased to about 400 since then.
D)held constant at roughly 200 until 1980 and has steadily decreased to under 100 since then.
E)increased steadily from 200 in 1960 to over 500 in 2000.

Question 5

In the United States, the wealthiest 10 percent of households earn approximately what share of total income?

A)5%
B)10%
C)30%
D)50%
E)80%

Question 6

What is meant by the skill-bias technological explanation of increasing inequality?

A)There has been increasing inequality over the last 40 years because unskilled workers use no technology.
B)There has been increasing inequality over the last 40 years among high-skilled workers.
C)Inequality has increased because technological advances have not kept pace with the demand for education.
D)Inequality has increased because technological advances over the last 40 years have complemented the productivity of skilled labor relative to unskilled labor.
E)Inequality has increased because technological advances over the last 40 years have complemented the productivity of unskilled labor relative to foreign labor.

Question 7

Regression toward the mean is captured by which of the following?

A)The tendency for inequality to be wider as a country experiences economic growth.
B)The tendency for countries to diverge in their inequality.
C)The tendency for income differences across families to get smaller over time as the various families move toward the mean income of the population.
D)The tendency for the 90-50 wage gap to approach the 50-10 wage gap as a country experiences economic growth.
E)The tendency for the tax code to erode inequality by targeting the mean tax rate to mean income.

Question 8

Suppose the distribution of innate ability is distributed symmetrically throughout a population but that the wage distribution is positively skewed.What most likely explains this?

A)A regressive tax code.
B)Decreased immigration.
C)Differences in human capital accumulation.
D)A decreasing Gini coefficient.
E)A non-competitive labor market.

Question 9

Which of the following statements regarding the increase in supply of high-skill labor in the United States since 1960 as measured by education level is not true?

A)The percent of workers without a high school degree has fallen dramatically since 1960.
B)The percent of workers with a high school degree has fallen dramatically since 1960.
C)The percent of workers with a college degree has increased dramatically since 1960.
D)The percent of workers with an advanced degree has increased dramatically since 1960.
E)The supply of highly-skilled women to the workforce has increased dramatically since 1960.

Question 10

Consider an economy with a particular distribution of income.Over the next 10 years, the income of all households increases by $20,000.How will the Gini coefficient change over those 10 years?

A)The Gini coefficient will increase.
B)The Gini coefficient will decrease.
C)The Gini coefficient will stay the same as all households received the same increase in income.
D)The Gini coefficient will become more negative.
E)It is impossible to determine how the Gini coefficient will change as it will depend on the original income distribution.

Question 11

Wage differentials across individual workers are determined in part by:

A)Effort.
B)Productivity.
C)Social capital.
D)Luck.
E)All of the above.

Question 12

Which of the following is not a possible explanation as to why wage inequality increased markedly over the last 40 years in the United States?

A)There was an increase in the supply of low-skill workers, particularly through immigration.
B)Federal legislation allowed employers to legally engage in more racial discrimination.
C)Competition from international economies has increased demand for highly productive workers.
D)Recent technological changes have been complementary to skilled labor (while substituting for unskilled labor).
E)Institutional changes in the United States such as a steady decline in union coverage and a falling real minimum wage have led to changes in the wage distribution.

Question 13

In the United States, the poorest 10 percent of households earn approximately what share of total income?

A)2%
B)5%
C)10%
D)20%
E)50%

Question 14

Large disparities in wages could possibly result from all but which one of the following?

A)Parental investment in a child's human capital.
B)Increases in the amount of middle class jobs.
C)Skill-biased technological change.
D)Globalization.
E)An increase in the demand for highly skilled labor.

Question 15

What does the Gini coefficient measure?

A)The rate of growth of income inequality over time.
B)The degree of inequality in an income distribution.
C)The correlation coefficient between income and education.
D)The covariance of income and education.
E)The degree of tax incidence paid by poor workers.

Question 16

Which of the following measures would best allow one to compare the relative wealth of poor households to the typical household in an economy?

A)The perfect-equality Lorenz curve.
B)The Gini coefficient.
C)The 90-10 wage gap.
D)The 50-10 wage gap.
E)The 90-50 wage gap.

Question 17

What does it mean for the U.S.economy to have a positively skewed wage distribution?

A)Most workers earn below the average wage.
B)A large proportion of workers earn very high wages.
C)The average wage equals the median wage.
D)The distribution of wages is symmetric around the mean.
E)The mean wage equals the median wage.

Question 18

Higher values of the Gini coefficient are associated with

A)greater education inequality.
B)greater income inequality.
C)less income inequality.
D)greater labor mobility.
E)less labor mobility.

Question 19

The positive correlation between ability and human capital investments "stretches out" wages in the population, generating what?

A)A positively skewed wage distribution.
B)A negatively skewed wage distribution.
C)An inconsistent wage distribution.
D)A uniform wage distribution.
E)A symmetric wage distribution.

Question 20

Expansions in globalization and the reduction of trade barriers world-wide during the 1980s and 1990s most likely had what effect on the demand for U.S.labor?

A)The demand for unskilled workers increased, while the demand for skilled workers decreased.
B)The demand for unskilled workers decreased, while the demand for skilled workers increased.
C)The demand for unskilled and skilled workers increased.
D)The demand for unskilled and skilled workers decreased.
E)The demand for unskilled workers increased, while the demand for skilled workers didn't change.

Question 21

Variation in wages across individuals is called

A)wage dispersion.
B)the mean wage.
C)the Gini coefficient.
D)the perfect-equality Lorenz curve.
E)the positively-skewed wage distribution.

Question 22

What is the 50-10 wage gap if the 10^th percentile wage is $25,000; the 50^th percentile wage is $62,000; and the 90^th percentile wage is $95,000?

A)0.52
B)0.75
C)1.48
D)2.25
E)2.78

Question 23

Social mobility refers to

A)the ability for a worker to move up in a firm's hierarchy.
B)the ability for a worker to increase his or her human capital.
C)the link between the skills and income of parents and children.
D)the relationship between human capital and wages.
E)the degree to which society dictates the wage distribution.

Question 24

In the United States over the last 30 years, wage differentials have

A)narrowed for all groups of workers.
B)increased for all groups of workers.
C)increased for skilled workers but have narrowed for unskilled workers.
D)decreased for skilled workers but have increased for unskilled workers.
E)increased for women but have narrowed for men.

Question 25

The superstar phenomenon explains why

A)some people are paid extraordinary sums of money for talents that many people have.
B)a few people are paid extraordinary sums of money for extreme talents that only a few people have.
C)most people are paid relatively modest sums of money for talents that just a few people have.
D)superstars have talents that far exceed even the next best person in the field.
E)there are fewer superstars with the passing of time.

Question 26

All but which one of the following statements about the Gini coefficient is true?

A)The Gini coefficient reflects the data shown in the Lorenz curve.
B)The Gini coefficient equals zero when there is perfect equality.
C)The Gini coefficient increases as income inequality increases.
D)The Gini coefficient must fall when the amount of income in an economy increases.
E)The Gini coefficient equals one when there is perfect inequality.

Question 27

How does the income distribution in the United States compare to other developed countries?

A)The income distribution is vastly more unequal in the United States compared to other developed countries.
B)The income distribution is vastly more equal in the United States compared to other developed countries.
C)The income distribution tends to be more unequal in the United States compared to other developed countries, but not by a huge amount.
D)The income distribution tends to be more equal in the United States compared to other developed countries, but not by a huge amount.
E)The income distribution must be the same in all developed countries, the United States included, because of increased globalization.

Question 28

An approximate Lorenz curve shows

A)the maximum and minimum wage gaps.
B)the relationship between income and tax revenue.
C)the share of income received by age group.
D)the relationship between income and earnings potential.
E)the cumulative share of income earned by quintiles of households.

Question 29

What is the approximate Gini coefficient associated with the following income distribution?

A)0.08
B)0.13
C)0.23
D)0.34
E)0.48

Question 30

The earnings distribution refers to the distribution of

A)wages or earnings in an economy.
B)earnings over an individual's life.
C)wages between races.
D)wages between genders.
E)wage offers throughout an economy.