Question 1

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A Gini coefficient of 0 represents perfect equality in income distribution, where every individual or household has the same income. A Gini coefficient of 1 represents perfect inequality, where one person or household has all of the income and everyone else has none. Therefore, choice A with a Gini coefficient of 0 representing perfect equality and a Gini coefficient of 1 representing perfect inequality is the correct answer.

Question 2

Which of the following groups had the highest poverty rate in 2011 in the United States?

Accepted Answer

Female heads of families had the highest poverty rate in the United States in 2011, with approximately 31.6% living below the poverty line. While poverty rates for other groups like blacks and Hispanics were also high (27.6% and 25.3% respectively), the poverty rate for female heads of households was the highest. The poverty rate for Asians was the lowest at 12.3%.

Question 3

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.477.This means that

Accepted Answer

The Gini coefficient measures income inequality, with 0 representing perfect equality (everyone has the same income) and 1 representing perfect inequality (one person has all the income). The increase in the Gini coefficient from 0.403 in 1980 to 0.477 in 2011 indicates that income inequality increased over that time period. Options A, B, and C are not supported by the information given in the question.

Question 4

Figure 18-7  Figure 18-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-7.The second lowest 20 percent of households

Accepted Answer

The Lorenz curve shows the cumulative percentage of total income earned by each percentile of households. The second lowest 20 percent of households is shown to earn around 16 percent of the society's total income according to the curve.

Question 5

As a group,people with high incomes are likely to have

Accepted Answer

People with high incomes tend to have greater-than-average productivity, often meaning they have high-paying jobs or successful businesses. They may also have investments that generate capital, such as real estate or stocks and bonds. This can lead to a cycle of wealth accumulation and continued success in their endeavors. Inheritance and SAT scores may play a role in individual cases, but they are not generally characteristic of the group as a whole. Lower productivity or lack of productivity is also unlikely to result in high income. Stable marriage and children may or may not be true for individuals with high incomes, but it is not a defining characteristic of the group.

Question 6

If official poverty statistics for the United States included transfer payments individuals receive from the government,such as Social Security payments and other non-cash benefits such as food stamps,

Accepted Answer

The inclusion of transfer payments and non-cash benefits in official poverty statistics would increase the income of many low-income individuals and families, leading to a lower poverty rate.

Question 7

Measures of poverty (for example,the poverty line)and the distribution of income (for example,the Lorenz curve and the Gini coefficient)are misleading for which of the following two reasons?

Accepted Answer

The poverty line and income distribution measures can be misleading because they do not account for income mobility over time (i.e. people moving in and out of poverty) and they do not consider the effect of government programs aimed at reducing poverty.

Question 8

Which of the following statements best represents the opinion of many economists regarding the impact that changes in tax laws have had on recent changes in income inequality in the United States?

Accepted Answer

The answer of Which of the following statements best represents...

Question 9

What does a Lorenz curve illustrate?

Accepted Answer

A Lorenz curve is a graphical representation of the distribution of income or wealth within a country. It plots the cumulative share of the population on the horizontal axis and the cumulative share of income or wealth on the vertical axis. A perfectly equal distribution of income or wealth would result in a straight line, while a curved line represents an unequal distribution. Therefore, option B is the correct choice as it represents the distribution of income within a country at a given time period.

Question 10

All Gini coefficients must lie between 0 and 1.The lower the value

Accepted Answer

The Gini coefficient measures income inequality, with 0 representing perfect equality (everyone has the same income) and 1 representing perfect inequality (one person has all the income). Therefore, the lower the Gini coefficient, the closer the income distribution is to being equal.

Question 11

Figure 18-7  Figure 18-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-7.The second highest 20 percent of households

Accepted Answer

The answer of Figure 18-7  Figure 18-7 shows the...

Question 12

Which of the following is a transfer payment?

Accepted Answer

The answer of Which of the following is a transfer...

Question 13

Which of the following statements about the distribution of income in the United States is true?

Accepted Answer

The answer of Which of the following statements about the...

Question 14

The poverty rate is defined as the percentage of the

Accepted Answer

The poverty rate is defined as the percentage of the population that is poor according to the federal government's definition of poverty. Other options such as the labor force, tax exemptions, and welfare qualifications may be related to poverty, but they are not accurate definitions of the poverty rate.

Question 15

Absolute poverty measures vary from country to country.For example,in 2013,the poverty line in the United States for a family of four with two children was an annual income of $23,550 but economists often use a much lower threshold income of $1 per day when calculating the rate of poverty in poor countries.How is this absolute poverty measured?

Accepted Answer

Absolute poverty is measured by comparing the amount of goods and services that a household's income can purchase to an objective measure of the amount of income needed to sustain a certain predetermined standard of living. This is often done by calculating a poverty line, which is the minimum level of income required to meet basic needs such as food, shelter, and clothing. The poverty line varies from country to country depending on the cost of living and other factors.

Question 16

Which of the following tax systems would help reduce income inequality the most?

Accepted Answer

A progressive tax system would help reduce income inequality the most because it taxes higher-income individuals at a higher percentage of their income, while providing lower-income individuals with more tax breaks and exemptions. This helps to redistribute wealth from the top to the bottom, reducing the gap between the rich and poor.

Question 17

Studies by the U.S.Census Bureau have shown that

Accepted Answer

Studies by the U.S. Census Bureau have shown that there is significant income mobility in the U.S. over time. This means that individuals and families are not stuck in one income bracket forever and are able to move up or down over time. While some may remain in poverty for extended periods, many are able to improve their economic situation through factors such as education, job opportunities, and economic growth.

Question 18

Sheldon Cleaver commented on the difficulty people have in overcoming poverty in the United States: "Most people whose incomes fall below the poverty line have difficulty pulling themselves above the line in future years.In this sense,poverty becomes a vicious cycle.I believe the psychological damage households face when they are branded with the 'poverty' label in our society is a major factor in their remaining in poverty.Despair is a major reason why the percentage of people with incomes that lie below the poverty line never falls below 10 percent." Which of the following correctly evaluates Cleaver's statement?

Accepted Answer

The answer of Sheldon Cleaver commented on the difficulty people...

Question 19

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Accepted Answer

Rapid technological change and expanding international trade have led to increased competition and the outsourcing of lower-skilled jobs to countries with cheaper labor. This has contributed to a widening gap between high-skilled and low-skilled workers, as those with advanced education and specialized skills benefit from technological advancements and globalization while those in lower-skilled jobs face greater competition and lower wages.

Question 20

Which of the following summarizes the information provided by a Lorenz curve?

Accepted Answer

The Lorenz curve shows the cumulative proportion of income or wealth received by different segments of the population, ranked by their income or wealth level. The Gini coefficient is a summary measure of income inequality that is derived from the Lorenz curve.

Quiz 18: Public Choice,taxes,and the Distribution of Income

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.