Question 1

A Lorenz curve that becomes less bowed out implies:

Accepted Answer

A)   a change in income distribution toward more inequality.
B)   no change in income distribution.
C)   a change in income distribution toward more equality.
D)   an increase in poverty.E) C) and D)
F) A) and C)

Question 2

Over 17 million American households had a net worth over $1 million. This means:

Accepted Answer

A)   their assets minus liabilities were greater than $1 million.
B)   their total income minus expenses was greater than $1 million.
C)   more than $1 million flowed through the accounts of over 17 million households.
D)   the Lorenz curve would show $1 million for over 17 million households.E) A) and C)
F) C) and D) A

Question 3

Which of the following Lorenz curves is closest to the diagonal line?

Accepted Answer

A)   The before-tax, before-transfer income distribution
B)   The after-tax income distribution
C)   The after-transfer income distribution
D)   The before-tax distribution of incomeE) None of the above
F) C) and D)

Question 4

Which program has been very successful in keeping the elderly out of poverty?

Accepted Answer

A)   Temporary Assistance for Needy Families
B)   The Department of Housing and Urban Development's housing programs
C)   Supplemental Security Income
D)   The Social Security systemE) B) and C)
F) A) and D)

Question 5

If a nation's Lorenz curve lies on the 45-degree line of income equality:

Accepted Answer

A)   proportionately more of the nation's income is received by the lowest 20 percent of families than by the highest 20 percent.
B)   income is unequally distributed.
C)   proportionately more of the nation's income is received by the highest 20 percent of families than by the lowest 20 percent.
D)   the income received by each 20 percent of families is 20 percent of the total income.E) B) and C)
F) A) and D) D

Question 6

In the United States, the income distribution is shaped like a:

Accepted Answer

A)   pyramid.
B)   diamond.
C)   square.
D)   pentagon.E) A) and B)
F) A) and D)

Question 7

U.S. poverty figures do not include in-kind transfers or underreporting of income.

Accepted Answer

A) True 
 B)False

Question 8

John Rawls's views on income distribution and fairness can best be described by the statement:

Accepted Answer

A)   The lesser individuals' duty should be to work for the well-being of the brightest individuals.
B)   A high level of income inequality is necessary to sustain the arts, beauty, education, and civilization.
C)   Society's goal should be to maximize the welfare of the least well-off, but some inequality is necessary to meet this goal.
D)   Property rights should be equally distributed, and the market should determine the distribution of income.E) A) and C)
F) C) and D)

Question 9

A Lorenz curve is a geometric representation of the:

Accepted Answer

A)   level of income earned by a given family in a given country at a given time.
B)   share distribution of income among families in a given country at a given time.
C)   behavior of income over time.
D)   behavior of income across countries.E) A) and D)
F) A) and C)

Question 10

An increase in the tax rate can cause total tax collections to fall if:

Accepted Answer

A)   higher taxes cause individuals to substitute leisure for labor.
B)   higher taxes cause individuals to substitute labor for leisure.
C)   the tax is regressive.
D)   the tax is progressive.E) A) and B)
F) A) and C)

Question 11

Federal tax and expenditure programs:

Accepted Answer

A)   are somewhat effective means of redistributing income in the United States.
B)   are not effective means of redistributing income in the United States.
C)   have worsened the inequality of income in the United States.
D)   have dramatically equalized income in the United States.E) A) and B)
F) None of the above

Question 12

The U.S. official poverty threshold is:

Accepted Answer

A)   three times the U.S. Department of Agriculture's minimum food budget.
B)   three times the U.S. Department of Housing's minimum housing allowance.
C)   the level of income earned by a person receiving minimum wage.
D)   the level of welfare benefits received by an eligible family.E) C) and D)
F) None of the above

Question 13

On the Lorenz curve, a perfectly equal distribution of income would be represented by:

Accepted Answer

A)   a line with a slope of 1.
B)   a horizontal line.
C)   a vertical line.
D)   an upward-shaped curve.E) None of the above
F) A) and B)

Question 14

The trend back toward greater inequality in the 1970s and 1980s was caused by:

Accepted Answer

A)   a movement toward progressive taxation.
B)   a fall in the real income of the poor.
C)   an increase in government funding for social programs.
D)   a rise in the real income of the poor.E) A) and B)
F) A) and C)

Question 15

Refer to the graph shown.  The poorest 50 percent of the families earn:

Accepted Answer

A)   6 percent of the income.
B)   19 percent of the income.
C)   36 percent of the income.
D)   64 percent of the income.E) B) and C)
F) None of the above

Question 16

The official poverty income threshold in the United States is:

Accepted Answer

A)   adjusted for changes in the basket of food purchased by the average family.
B)   not adjusted for the effects of inflation.
C)   adjusted for inflation.
D)   adjusted for increases in standard of living.E) A) and D)
F) All of the above C

Question 17

The Lorenz curve:

Accepted Answer

A)   is an absolute measure of income inequality.
B)   is a relative measure of income inequality.
C)   takes into account changes in the standard of living.
D)   has elements of absolute and relative measures.E) C) and D)
F) B) and C)

Question 18

The Gini coefficient for Algeria is about 0.4. How would this number be shown on a Lorenz curve?

Accepted Answer

A)   It cannot be shown; the Lorenz curve and the Gini coefficient are alternative ways of measuring inequality.
B)   The area between the Lorenz curve and the line of absolute equality is 40 percent of the total area under the line of equality.
C)   The area between the Lorenz curve and the x-axis is 40 percent of the total area below the line of equality.
D)   The length of the Lorenz curve is 40 percent longer than the line of equality.E) A) and B)
F) None of the above

Question 19

Some economists believe that:

Accepted Answer

A)   giving benefits to the poor will reduce aggregate demand, improving business so that wealthy stockholders are better off.
B)   giving benefits to the rich will expand aggregate output and thus help the poor.
C)   taxing the poor will cause them to increase their work efforts.
D)   taxing the rich will cause them to increase their work efforts.E) A) and B)
F) A) and C)

Question 20

For the purpose of determining whether a family is officially considered to be living in poverty, poverty figures do not include:

Accepted Answer

A)   after-tax income of the poor.
B)   food stamps.
C)   earned income.
D)   profits of a small business owner.E) B) and C)
F) A) and B)

Exam 18: Who Gets What the Distribution of Income

A Lorenz curve that becomes less bowed out implies:

Correct AnswerverifiedShow Answer

Over 17 million American households had a net worth over $1 million. This means:

Correct AnswerverifiedA

Which of the following Lorenz curves is closest to the diagonal line?

Correct AnswerverifiedShow Answer

Which program has been very successful in keeping the elderly out of poverty?

Correct AnswerverifiedShow Answer

If a nation's Lorenz curve lies on the 45-degree line of income equality:

Correct AnswerverifiedD

In the United States, the income distribution is shaped like a:

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U.S. poverty figures do not include in-kind transfers or underreporting of income.

Correct AnswerverifiedShow Answer

John Rawls's views on income distribution and fairness can best be described by the statement:

Correct AnswerverifiedShow Answer

A Lorenz curve is a geometric representation of the:

Correct AnswerverifiedShow Answer

An increase in the tax rate can cause total tax collections to fall if:

Correct AnswerverifiedShow Answer

Federal tax and expenditure programs:

Correct AnswerverifiedShow Answer

The U.S. official poverty threshold is:

Correct AnswerverifiedShow Answer

On the Lorenz curve, a perfectly equal distribution of income would be represented by:

Correct AnswerverifiedShow Answer

The trend back toward greater inequality in the 1970s and 1980s was caused by:

Correct AnswerverifiedShow Answer

Refer to the graph shown. The poorest 50 percent of the families earn:

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The official poverty income threshold in the United States is:

Correct AnswerverifiedC

The Lorenz curve:

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The Gini coefficient for Algeria is about 0.4. How would this number be shown on a Lorenz curve?

Correct AnswerverifiedShow Answer

Some economists believe that:

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For the purpose of determining whether a family is officially considered to be living in poverty, poverty figures do not include:

Correct AnswerverifiedShow Answer

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C

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