Chapter20 IncomeInequalityandPoverty

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ThreefourthsoftotalincomeintheU.S.economycomesfrom a. rentalincome. b. laborearnings. c. returnstocapital. d. corporateprofit. ANSWER:b. laborearnings. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Onewaytodescribethedistributionofincomeintheeconomyisto a. calculatethebellcurvethatexistsinanyeconomy. b. usetheInternationalIncomeDistributionStandardsthatwereestablishedin1992. c. dividethepopulationintotwocategoriestherichandthepoor. d. calculatethepercentageoffamiliesthatfallintoeachofsevenincomecategories. ANSWER:d. calculatethepercentageoffamiliesthatfallintoeachofsevenincomecategories. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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U.S.incomedatafrom1998showthatthebottomonefifthofallfamiliesreceived a. 4percentofallincome. b. 10percentofallincome. c. 22percentofallincome. d. 36percentofallincome. ANSWER:a. 4percentofallincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Overthepastseveraldecades,thewomensmovementmayberesponsiblefor a. lessinequalityinfamilyincomes. b. highincomemenmarryinglowincomewomen. c. richhouseholdsbecomingpoorer. d. moreinequalityinfamilyincomes. ANSWER:d. moreinequalityinfamilyincomes. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

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WhentheincomedistributionoftheU.S.iscomparedtothatofothercountries,itshowsthatthe U.S.hasa a. distributionthatisoneofthemostequalincomedistributions. b. distributionthatisoneofthemostunequalincomedistributions. c. distributionthatissomewhereinthemiddleofthepack. d. higherpercentageofpoorfamilies,andahigherpercentageofrichfamiliesthanmostcountries. ANSWER:c. distributionthatissomewhereinthemiddleofthepack. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y NOTE:THEFOLLOWINGQUESTIONISREPEATEDFROMTHEONLINEQUIZZES.YOUR STUDENTSMAYHAVEALREADYTHISQUESTIONANDITSANSWER.
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Thepovertylineisequaltothe a. averageincomeofthebottomonefifthofallincomerecipients. b. averageincomeofthebottomonetenthofallincomerecipients. c. costofanadequatedietforafamilymultipliedbysix. d. costofanadequatedietforafamilymultipliedbythree. ANSWER:d. costofanadequatedietforafamilymultipliedbythree. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Theannualadjustmenttothepovertylinereflects a. familysize. b. pricechanges. c. changesinwhatfoodsareincludedinanadequatediet. d. thenumberofpeoplecurrentlyonpublicassistance. ANSWER:b. pricechanges. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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ThenumberoffamilieslivinginpovertyintheU.S.tendstobeoverstatedbyabout a. 2percent. b. 5percent. c. 10percent. d. 15percent. ANSWER:c. 10percent. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Inkindtransfers a. canonlybeprovidedbytheFederalgovernment. b. aregoodsandservicesgiventothepoorratherthancash. c. increasethenumberoffamiliesbelowthepovertylinesincenomoneyisgiven. d. aretakenintoaccountwhendeterminingthedegreeofincomeinequalityintheeconomy. ANSWER:b. aregoodsandservicesgiventothepoorratherthancash. TYPE:MKEY1:DSECTION:1OBJECTIVE:4RANDOM:Y

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Transitoryincomerefersto a. theregularpatternofincomevariationoverapersonslife. b. apersonsnormalincome. c. theregularpatternofincomevariationthatpeaksaroundage50. d. temporaryincreasesanddecreasesinincome. ANSWER:d. temporaryincreasesanddecreasesinincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Incomeandsavingratesarehighestforpeoplewhoare a. retired. b. middleaged. c. youngandsingle. d. marriedwithyoungchildren. ANSWER:b. middleaged. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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Thelifecycletheorywouldsuggestthatbecausepeoplecanborrowandsavetosmoothoutchanges inincome,theirstandardoflivingdependsmoreon a. lifetimeincomeratherthanannualincome. b. annualincomeratherthanlifetimeincome. c. annualfamilyincomeratherthanannualpersonalincome. d. averagemonthlyincomeratherthanannualincome. ANSWER:a. lifetimeincomeratherthanannualincome. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

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ThenewformulabeingconsideredbytheU.S.CensusBureautocomputetheincomethresholdfor thepovertylinewould a. notchangethepovertyline,buttheformulawouldbeeasiertocompute. b. decreasethepovertylineanddecreasethenumberoffamiliesbelowthepovertyline. c. increasethepovertylineandincreasethenumberoffamiliesbelowthepovertyline. d. increasethepovertyline,butthenumberoffamiliesconsideredpoorwouldnotchangesince thecostoflivingiscontinuouslyrising. ANSWER:c. increasethepovertylineandincreasethenumberoffamiliesbelowthepovertyline. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y
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Afamilysabilitytobuygoodsandservicesdependslargelyonitsnormaloraverageincomewhich isits a. transitoryincome. b. inkindtransfers. c. permanentincome. d. lifetimeincome. ANSWER:c. permanentincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:2RANDOM:Y

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Studieshaveshownthatifafatherearns20percentabovehisgenerationsaverageincome,hisson willmostlikelyearn a. relativelythesameincomeashisfather. b. lessthanhisfathersincethesonhaslessincentivetoworkwithawealthyfather. c. 22percentbelowhisgenerationsaverageincome. d. 8percentabovehisgenerationsaverageincome. ANSWER:d. 8percentabovehisgenerationsaverageincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y NOTE:THEFOLLOWINGQUESTIONISREPEATEDFROMTHEONLINEQUIZZES.YOUR STUDENTSMAYHAVEALREADYTHISQUESTIONANDITSANSWER.
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Evidenceindicatesthat a. mostofthepoorarepoorforshortperiodsoftime. b. educationisunrelatedtopoverty. c. mostofthepoorareelderly. d. workingdoesnotreduceoneschanceofbeingpoor. ANSWER:a. mostofthepoorarepoorforshortperiodsoftime. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y NOTE:THEFOLLOWINGQUESTIONISREPEATEDFROMTHEONLINEQUIZZES.YOUR STUDENTSMAYHAVEALREADYTHISQUESTIONANDITSANSWER.
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Thepoliticalphilosophyaccordingtowhichthegovernmentshouldpunishcrimesandenforce voluntaryagreementsbutnotredistributeincomeis a. liberalism. b. utilitarianism. c. communism. d. libertarianism. ANSWER:d. libertarianism. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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Becauseofdiminishingmarginalutility, a. therichreceivemoresatisfactionthanthepoorfromthelastdollartheyspendsincetherich havemoretospend. b. moreofsomethingisalwayspreferredtolessofsomething,especiallymoney. c. thepoorarelessefficientatspendingmoneythantherich. d. thepoorreceivemoresatisfactionthantherichfromthelastdollartheyspend. ANSWER:d. thepoorreceivemoresatisfactionthantherichfromthelastdollartheyspend. TYPE:MKEY1:DSECTION:2OBJECTIVE:3RANDOM:Y

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Becauseofdistortedincentives,whenthegovernmenttriestomaximizetotalutilityintheeconomy byredistributingincome,thepolicywill a. alwaysachieveafullegalitariansocietyinamarketeconomy. b. alwaysfallshortofafullegalitariansociety. c. canonlybeachievedwithaprogressiveincometaxsystem. d. achieveafullegalitariansocietyonlyifsufficientfundsaretransferredfromtherichtothe poor. ANSWER:b. alwaysfallshortofafullegalitariansociety. TYPE:MKEY1:CSECTION:2OBJECTIVE:4RANDOM:Y
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Rawlsmaximincriterionsuggeststhatincometransferredfromtherichtothepoorshouldaimto a. promoteanegalitariandistributionofincome. b. maximizethewellbeingoftheworstoffpersoninsociety. c. maximizethewellbeingofeachpersoninsociety. d. reducethedisincentivestoworkandsavethatredistributionpolicycreates. ANSWER:b. maximizethewellbeingoftheworstoffpersoninsociety. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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Libertarianswouldcondonegovernmentinvolvementinaneconomytoensure a. adistributionofincomeasequalaspossible. b. equalopportunity,butnotanequaldistributionofincome. c. thewellbeingoftheleastfortunateinsociety. d. anobjectivelydeterminedjustsociety. ANSWER:b. equalopportunity,butnotanequaldistributionofincome. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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Governmentwelfareprogramsareoftencriticizedbecause a. studieshaveshownthattheseprogramsencouragesingleparenthouseholds. b. thegovernmentspendsmoreeachyearonwelfareprogramsthanitdoesonnationaldefense. c. mostpeopleonthewelfarerolestodayareactuallyineligibletoreceivethebenefits. d. theycreateincentivesforpeopletobecomeneedy. ANSWER:d. theycreateincentivesforpeopletobecomeneedy. TYPE:MKEY1:DSECTION:3OBJECTIVE:4RANDOM:Y

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Opponentsofthe1996lawthatlimitsthetimeafamilycanreceivewelfarebenefitsbelievethat a. childrenwillbecomeinnocentvictimsofthislaw. b. anymoneysavedbyloweringwelfareroleswillbedivertedtodefensespending. c. welfareisthebestsystemthegovernmenthastodistributeincometothereallypoor. d. littleevidenceexiststhatstayingonwelfareforlongperiodsoftimeisdetrimentaltoafamily. ANSWER:a. childrenwillbecomeinnocentvictimsofthislaw. TYPE:MKEY1:CSECTION:3OBJECTIVE:4RANDOM:Y

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Assumethatthegovernmentproposesanegativeincometaxthatcalculatestaxesowedbythe formula,TAXESOWED=(1/2 INCOME)15,000.Forafamilyearning$20,000ofincome,how wouldthisnegativeincometaxaffectthem? a. Theywillreceiveanincomesubsidyof$10,000. b. Theywillreceiveanincomesubsidyof$5,000. c. Theywillpayataxof$5,000. d. Theywillnotberequiredtopayanytax. ANSWER:b. Theywillreceiveanincomesubsidyof$5,000. TYPE:MKEY1:ESECTION:3OBJECTIVE:4INSTRUCTION:2RANDOM:N
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Almosteveryoneagreesthatthemoreequallypolicymakersattempttodividethepiethe a. morelikelythemiddleclasswillbetostarve. b. largerthepiebecomes. c. smallerthepiebecomes. d. fattertherichbecome. ANSWER:c. smallerthepiebecomes. TYPE:MKEY1:CSECTION:3OBJECTIVE:4RANDOM:Y

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ANSWER:b.laborearnings. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:d. calculatethepercentageoffamiliesthatfallintoeachofsevenincome categories. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:a.4percentofallincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:d. moreinequalityinfamilyincomes. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:c. distributionthatissomewhereinthemiddleofthepack. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:d. costofanadequatedietforafamilymultipliedbythree. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:b.pricechanges. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:c. 10percent. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

ANSWER:b.aregoodsandservicesgiventothepoorratherthancash. TYPE:MKEY1:DSECTION:1OBJECTIVE:4RANDOM:Y

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ANSWER:d. temporaryincreasesanddecreasesinincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:b.middleaged. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:a.lifetimeincomeratherthanannualincome. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:c. increasethepovertylineandincreasethenumberoffamiliesbelowthepoverty line. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:c. permanentincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:2RANDOM:Y

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ANSWER:d. 8percentabovehisgeneration'saverageincome. TYPE:MKEY1:DSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:a.mostofthepoorarepoorforshortperiodsoftime. TYPE:MKEY1:CSECTION:1OBJECTIVE:1RANDOM:Y

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ANSWER:d. libertarianism. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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ANSWER:d. thepoorreceivemoresatisfactionthantherichfromthelastdollarthey eachspend. TYPE:MKEY1:DSECTION:2OBJECTIVE:3RANDOM:Y

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ANSWER:b.alwaysfallshortofafullegalitariansociety. TYPE:MKEY1:CSECTION:2OBJECTIVE:4RANDOM:Y

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ANSWER:b.maximizethewellbeingoftheworstoffpersoninsociety. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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ANSWER:b.equalopportunity,butnotanequaldistributionofincome. TYPE:MKEY1:CSECTION:2OBJECTIVE:3RANDOM:Y

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ANSWER:d. theycreateincentivesforpeopletobecomeneedy. TYPE:MKEY1:DSECTION:3OBJECTIVE:4RANDOM:Y

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ANSWER:a.childrenwillbecomeinnocentvictimsofthislaw. TYPE:MKEY1:CSECTION:3OBJECTIVE:4RANDOM:Y

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ANSWER:b.Theywillreceiveanincomesubsidyof$5,000. TYPE:MKEY1:ESECTION:3OBJECTIVE:4INSTRUCTION:2RANDOM:N

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ANSWER:c. smallerthepiebecomes. TYPE:MKEY1:CSECTION:3OBJECTIVE:4RANDOM:Y