Question 1

Between 1968 and 2010, income inequality in the United States:
A) became greater.
B) became less unequal.
C) remained unchanged.
D) showed a dramatic increase in equality.

Accepted Answer

Income inequality in the US increased between 1968 and 2010 with the top earners seeing a larger increase in income compared to the rest of the population.

Question 2

According to the text, it is generally agreed that in the United States in the first two decades following World War II:
A) income distribution in the United States became less equal.
B) income equality measures stayed the same.
C) income distribution became more equal.
D) there was no way to determine income distribution.

Accepted Answer

During the first two decades following World War II, the United States experienced a period of economic growth and prosperity that was widely shared among its population. This era saw significant government investment in infrastructure, education, and social programs, along with strong labor unions and progressive tax policies, which contributed to a more equal distribution of income.

Question 3

-(Exhibit: Income Distribution) Curve _______ indicates that the lowest ________ percent of families would receive _______ of the income.
A) B; 40; 40
B) A; 60; 20
C) A; 40; 40
D) B; 80; 80

Accepted Answer

Curve A, according to the exhibit, represents the income distribution for the entire population. It is plotted against the cumulative percentage of families on the x-axis and the cumulative percentage of income on the y-axis. Thus, curve A indicates that the lowest 40% of families would receive 40% of the income. Curve B represents the income distribution for the bottom 60% of the population, and it shows that the lowest 20% of families would receive 40% of the income. Therefore, Curve C is not valid as it doesn't exist in the exhibit. Curve D indicates that the lowest 80% of families would receive 80% of the income, which is not possible since it is not a possible outcome of income distribution.

Question 4

Studies of family income over time reveal that:
A) most people in the lowest quintile tend to stay there over their lifetimes.
B) income mobility is rare for all quintiles of the income distribution.
C) many people who move down the income ladder tend to be young.
D) many people who start out at the bottom of the income ladder when they are young move up the income ladder as they age.

Accepted Answer

Studies have shown that many people who start out at the bottom of the income ladder when they are young move up the income ladder as they age. This is known as "income mobility." While it is true that many people in the lowest quintile tend to stay there over their lifetimes, and that income mobility is rare for all quintiles of the income distribution, option D is the best choice because it is the most accurate and complete statement. Additionally, research has shown that many people who move down the income ladder tend to be young, supporting the idea that income mobility is more likely as people age and gain work experience.

Question 5

Between 1968 and 2010, the income group in the United States showing the greatest income gains was the _______ 20 percent.
A) bottom
B) third
C) fourth
D) top

Accepted Answer

According to the statement, the income group showing the greatest income gains was the top 20 percent.

Question 6

-(Exhibit: Income Distribution) Curve B indicates that:
A) the lowest 60 percent of the families get 40 percent of the income.
B) the lowest 80 percent of the families get 40 percent of the income.
C) the lowest 80 percent of the families get 80 percent of the income.
D) income is quite equally distributed.

Accepted Answer

Curve B indicating that the lowest 80 percent of the families get 40 percent of the income suggests a significant level of income inequality, as a large majority of families are only receiving a small portion of the total income. This is a characteristic of an unequal distribution of income, where a smaller percentage of the population controls a larger share of the wealth.

Question 7

-(Exhibit: Income Distribution) Curve B shows that the fourth quintile of families gets approximately _______ percent of the income.
A) 20
B) 40
C) 60
D) 80

Accepted Answer

The answer of 
-(Exhibit: Income Distribution) Curve B shows that...

Question 8

The primary evidence of income inequality in the United States is provided by:
A) the IRS.
B) census data.
C) the Department of Agriculture.
D) research economists.

Accepted Answer

Census data is considered the primary evidence of income inequality in the United States as it provides comprehensive information on household income and demographics. The IRS data only provides information on taxable income, which may not accurately reflect individuals' total income. The Department of Agriculture provides information on food insecurity but not on income inequality. Research economists may use a variety of data sources, but they are not the primary source of evidence.

Question 9

Since 1968, a factor that is associated with the _______ in income _______ in the United States has been the _______ in the percentage of families headed by _______ .
A) decrease; inequality; increase; women.
B) increase; equality; increase; married couples
C) increase; inequality; increase; women
D) decrease; equality; increase; married couples

Accepted Answer

Since 1968, there has been an increase in income inequality in the United States, and this is associated with an increase in the percentage of families headed by women. This is due to factors such as the gender pay gap and the higher likelihood of women being single parents. Choice A is incorrect because it suggests a decrease in income inequality, which is not the case. Choice B is incorrect because it suggests an increase in equality, which is also not the case. Choice D is incorrect because it suggests a decrease in the percentage of families headed by married couples, which is not relevant to the question.

Question 10

-(Exhibit: Income Distribution) Curve B:
A) is called a Lorenz curve.
B) shows that the lowest 20% of the families gets 60% of the income.
C) shows that 60 percent of the families get 40 percent of the income.
D) shows an equal distribution of income.

Accepted Answer

Curve B is called a Lorenz curve, which is used to represent income distribution and inequality within an economy.

Question 11

When economists speak of the lowest 20 percent or the middle 20 percent of the families receiving a certain percentage of income, they are speaking of:
A) static groups.
B) families that move in and out of the various groups.
C) very immobile income classes.
D) a typical family of 4 with both parents present.

Accepted Answer

Economists often refer to income distribution in terms of quintiles or fifths, with the lowest 20% representing the bottom quintile and the middle 20% representing the third quintile. However, families do not remain in these income groups indefinitely; their incomes may change over time, meaning that the groups are not static. Therefore, economists are referring to families that move in and out of the various income groups when discussing these quintiles.

Question 12

Changes in the distribution of income in the United States over the past 40 years have brought to the forefront the issue of:
A) child labor.
B) early retirement income.
C) fairness.
D) credit card gouging.

Accepted Answer

The changes in income distribution have highlighted issues of fairness, specifically regarding the growing wealth gap and income inequality.

Question 13

The _______ a Lorenz curve lies to (from) the 45-degree line, the _______ the distribution of income.
A) further; more equal
B) closer; less equal
C) further; more unequal
D) closer; better as far as economists are concerned.

Accepted Answer

The further a Lorenz curve lies to the 45-degree line, the more unequal the distribution of income. This is because the 45-degree line represents perfect equality, where every person or household would have the same amount of income. The further the Lorenz curve is from this line, the more the distribution of income deviates from perfect equality, showing a greater concentration of income among fewer households.

Question 14

From 1968 to 2010, the share of income going to the rich has _______ and the share going to the poor has _______ .
A) risen; fallen
B) fallen; risen
C) stayed about the same; risen
D) risen; risen

Accepted Answer

From 1968 to 2010, the share of income going to the rich has increased, while the share going to the poor has decreased, reflecting growing income inequality.

Question 15

-(Exhibit: Income Distribution) Curve A represents:
A) a line of unequal income distribution.
B) a line of equal distribution of income.
C) a distribution of income where 20 percent of the families get 60 percent of the income, and 60 percent of the families get 20 percent of the income.
D) the ideal distribution of income, according to market economists.

Accepted Answer

Curve A represents a line of equal distribution of income, often referred to as the line of equality in the context of the Lorenz curve, where income is perfectly distributed among the population.

Question 16

America's poverty rate is _______ than that of most _______ .
A) higher; developing nations
B) higher; other industrialized nations
C) just a little lower; other industrialized nations
D) no lower; developing

Accepted Answer

The poverty rate in America is higher than that of most other industrialized nations, making option B the correct answer. Option A is incorrect as America's poverty rate is higher than developing nations too. Option C is incorrect as America's poverty rate is not just a little lower but higher than other industrialized nations. Option D is incorrect as it says that America's poverty rate is no lower than developing nations which is not true.

Question 17

If there is considerable _______ among the quintiles of the distribution of income in a country, then there would be many families moving from _______ and others moving from _______ quintiles .
A) immobility; lower to higher; higher to lower
B) mobility; higher to lower; lower to higher
C) immobility; lower to lower; higher to higher
D) stability; lower to higher; higher to higher

Accepted Answer

If there is considerable mobility among the quintiles of the distribution of income, it means that families are moving from one quintile to another. In this case, higher income families are moving to lower income quintiles, while lower income families are moving to higher income quintiles. Immobility (choice A and C) and stability (choice D) suggest that there is not much movement between the income quintiles.

Question 18

Between 1968 and 2010, the Lorenz curve of the United States became:
A) a straight line.
B) closer to the 45-degree line.
C) more bowed out.
D) more bowed in.

Accepted Answer

The Lorenz curve of the United States became more bowed out between 1968 and 2010, indicating an increase in income inequality.

Question 19

-(Exhibit: Income Distribution) Curve B shows that the lowest quintile of families gets approximately _______ percent of the income.
A) 2-4
B) 7-10
C) 12-14
D) 17-19

Accepted Answer

Curve B, representing the income distribution, typically shows a significant skew towards the higher income quintiles, with the lowest quintile receiving a very small portion of the total income, usually in the range of 2-4 percent.

Question 20

According to the text, it is generally agreed that in the United States since World War II, the distribution of income has:
A) become more equal.
B) become less equal.
C) stayed about the same.
D) changed first toward greater equality and then, after 1968, toward greater inequality.

Accepted Answer

The distribution of income in the United States has experienced a shift towards greater equality initially after World War II, but post-1968, there has been a trend towards increasing inequality. This reflects the economic and policy changes over these periods that affected income distribution.

Quiz 19: The Macroeconomic Perspective

Between 1968 and 2010, income inequality in the United States:

According to the text, it is generally agreed that in the United States in the first two decades following World War II:

-(Exhibit: Income Distribution) Curve _ indicates that the lowest percent of families would receive _ of the income.

Studies of family income over time reveal that:

Between 1968 and 2010, the income group in the United States showing the greatest income gains was the _______ 20 percent.

-(Exhibit: Income Distribution) Curve B indicates that:

-(Exhibit: Income Distribution) Curve B shows that the fourth quintile of families gets approximately _______ percent of the income.

The primary evidence of income inequality in the United States is provided by:

Since 1968, a factor that is associated with the ___ in income _ in the United States has been the _ in the percentage of families headed by ___ .

-(Exhibit: Income Distribution) Curve B:

When economists speak of the lowest 20 percent or the middle 20 percent of the families receiving a certain percentage of income, they are speaking of:

Changes in the distribution of income in the United States over the past 40 years have brought to the forefront the issue of:

The _ a Lorenz curve lies to (from) the 45-degree line, the _ the distribution of income.

From 1968 to 2010, the share of income going to the rich has _ and the share going to the poor has _ .

-(Exhibit: Income Distribution) Curve A represents:

America's poverty rate is _ than that of most _ .

If there is considerable ___ among the quintiles of the distribution of income in a country, then there would be many families moving from _ and others moving from _____ quintiles .

Between 1968 and 2010, the Lorenz curve of the United States became:

-(Exhibit: Income Distribution) Curve B shows that the lowest quintile of families gets approximately _______ percent of the income.

According to the text, it is generally agreed that in the United States since World War II, the distribution of income has: