Quiz 18: Income Distribution and Poverty

In a market economy, income depends mostly on A)productivity B)luck C)age D)sex E)discrimination

If income were distributed solely according to marginal productivity, A)every family would be above the poverty level B)it would be distributed evenly C)it would be distributed normally D)workers in capital-intensive industries would earn less than workers in labor-intensive industries E)some individuals would not receive any income

In a market economy, income is primarily determined by A)the productivity of household resources B)the level of transfer payments C)government monetary and fiscal policy D)the geographic distribution of resources E)the amount of financial assets owned by households

In the United States, most income comes from A)capital gains B)stocks and bonds C)providing labor resources D)illegal transactions E)government transfer payments

In the United States, most income comes from stocks and bonds

In a market economy, household income is determined primarily by A)the age of the head of household B)the gender of the head of household C)luck D)the productivity of labor resources E)government transfer payments

If the marginal productivity of labor was the sole determinant of household income in the U.S., then A)no households would be poor according to the official government definition of poverty B)no households would be poor according to a relative definition of poverty C)the distribution of income would be unequal D)every household would have sufficient income to meet biological needs E)there would be no need for government programs to redistribute income

The most recent data indicates households in the top fifth of the income distribution earn more than ten times as much income as those in the bottom fifth.

The most recent data indicates households in the top fifth of the income distribution earn as much income as the bottom four fifths combined.

Taxes and in-kind transfers make the distribution of income more unequal.

Census data on the income distribution among families in the United States in recent years show A)a rising share earned by the top fifth and a declining share earned by the bottom fifth B)a rising share earned by the bottom fifth and a declining share earned by the top fifth C)both the share earned by the top fifth and the share earned by the bottom fifth rising D)both the share earned by the top fifth and the share earned by the bottom fifth falling E)falling total income in the top fifth

In the United States, the dramatic increase in government social spending since the mid-1960s has A)made incomes less equally distributed B)made incomes equally distributed C)not greatly increased the money income share of the poorest fraction of the population D)greatly increased the money income share of the richest fraction of the population E)decreased the percentage of families in the lowest fifth

The Lorenz curve shows the A)functional distribution of income B)personal distribution of income C)relative percentage of income going to each of the resources D)demand for unskilled versus unskilled labor E)cumulative percentage of income received by cumulative percentages of households

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Which curve shows the most equal distribution of income? A)a B)b C)c D)d E)e

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Which curve shows the most unequal distribution of income? A)a B)b C)c D)d E)e

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Along the Lorenz curve labelled a, the poorest 60% of the population earns what proportion of the total income? A)20% B)40% C)60% D)80% E)100%

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Along the Lorenz curve labelled e, the poorest 60% of the population earns what proportion of the total income? A)100% B)exactly 60% C)more than 60% D)less than 60% E)cannot tell from the information provided

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Along the Lorenz curve labelled a, the wealthiest 40% of the population earns what proportion of the total income income? A)20% B)40% C)60% D)80% E)100%

Exhibit 18-1 Exhibit 18-1 shows five different Lorenz curves.Curve c chows the most equal distribution of income.

One of the main tools used by economists to measure the actual distribution of income is A)the Lorenz curve B)the Golden Rule C)the MR = MC rule D)the MRP = MRC rule E)the capital / labor ratio

Using the Lorenz curve, the degree of income inequality is measured by A)The line connecting all points for which a given percentage of families receives exactly the cumulative percentage of income B)the distance of the Lorenz curve from the line of perfect equality C)the flat diagonal line that applies to a perfectly elastic demand curve D)the number of times the Lorenz curve crosses the line of perfect equality E)is derived by dividing the number of people below the poverty line by the total population

On average, college graduates earn significantly more income than those with less education and the disparity tends to widen into middle age.

In less developed economies, the distribution of income is A)more concentrated (i.e., distributed less evenly)than in developed economies B)less concentrated than in developed economies C)such that the bottom 20 percent of households define the poverty threshold D)such that the top 20 percent of households define the poverty threshold E)completely even

The distribution of income in the United States is A)more concentrated than the distribution of income in other developed countries throughout the world B)significantly more even than the distribution of income in other developed countries throughout the world C)quite similar to the distribution of income in other developed countries throughout the world D)significantly less even than the distribution of income in most developing countries E)quite similar to the distribution of income in most developing countries

The distribution of income A)is about the same in most countries B)tends to be more equal in developing countries than in developed countries C)is more concentrated in the United States than in Canada or Japan D)is more even in developing countries than in the Russia E)is not related to a country's level of development

Compared to the United States, the income distribution in other major industrial nations tends to be A)more concentrated B)less concentrated C)similar D)impossible to calculate E)not comparable because tax structures differ among countries

The income distribution in less-developed nations tends to be A)more uneven than in developed economies B)less uneven than in developed economies C)similar to that in developed economies D)impossible to calculate E)not comparable because tax structures differ among countries

The problem with allocating income according to productivity is that some people have difficulty earning income.

A fair distribution of income for the U.S.economy is A)not an economic issue B)defined by the Department of Agriculture C)a positive economic question D)a normative economic question E)a state and local issue but not a national one

Families receive income from two primary sources: A)resource earnings and transfers B)transfers and subsidies C)wages and rents D)transfers and gifts E)interest and dividends

Compared to the distribution of money income, the distribution of income that takes into consideration the effects of taxes and in-kind benefits A)is less even B)is the same C)is more even D)is fairer E)is less fair

If official U.S.poverty statistics included in-kind transfer payments, A)the poverty rate would be close to zero B)the poverty rate would be lower C)the government deficit would be lower D)the inflation rate would be higher E)the top 10 percent of those in the income distribution would be wealthier

In every age group, average income in the United States increases with education.

Of the following, who would probably have the highest income? A)a couple, both of whom have high school educations and work at WalMart B)a husband who has a high school degree and a middle-management job and his wife, who is a full-time mother C)a couple, both of whom have high school educations; he is a high school teacher and she is a librarian D)a husband who has a college degree and is a high school teacher and his wife, who has an MBA and works as a insurance company executive E)a couple, both of whom have college degrees and are high school teachers

When family incomes are ranked from lowest to highest, the middle income is known as the A)median income B)mean income C)means-tested income D)official poverty level E)transfer income

Which of the following statements about income and education in the United States is correct? A)There is no relationship between income and education. B)At every age, average earnings are higher for those with more education. C)Average earnings are higher for those with more education, but only if they are over the age of 60. D)Average earnings are higher for those with more education, but only if they are under the age of 60. E)Income levels peak at a younger age for those with college educations than they do for those with only elementary educations.

The normal life-cycle pattern of income reflects differences in earnings based on A)race and education B)gender and education C)age and education D)race E)household size

In determining the poverty level, the Census Bureau counts cash transfers, but not in-kind transfers, thereby understating the actual amount of antipoverty transfers made.

In-kind transfer programs such as Medicaid have increased more rapidly than other welfare programs over the last decade.

The U.S.Department of Agriculture defines the official poverty level as A)the bottom 10 percent of the income distribution B)the poorest 2 million households C)income less than $15, 000 D)income equal to three times the estimated cost of a nutritionally adequate diet E)being unemployed for more than two months

The official poverty level in the United States A)has been the same since 1980 B)is the same as in other developed countries because it is based on a United Nations definition C)is defined by the United Nations D)is defined by the Department of Agriculture and based on food costs E)has been adjusted for inflation but not for changes in family size

In 2009, the official poverty level for a family of four was approximately A)$1, 000 B)$5, 193 C)$22, 000 D)$24, 000 E)$33, 062

Measurement of the official poverty level A)includes all transfers B)excludes all transfers C)includes cash transfers but not in-kind transfers D)includes in-kind transfers but not cash transfers E)is always measured in real rather than nominal terms

According to the Census Bureau, A)a greater percentage of families are below the poverty level now than in 1960 B)a smaller percentage of families are below the poverty level now than in 1960 C)the same percentage of families are below the poverty level now as in 1960 D)the percentage of families below the poverty level has fallen dramatically since 1970 E)30 percent of families are below the poverty level

The largest drop in the percentage of families below the poverty level occurred A)in the 1960s B)in the 1970s C)in the 1980s D)in the early 1990s E)during the recession of the early 1980s

A problem with official U.S.poverty data is that they A)omit the rural poor B)do not account for inflation C)omit in-kind transfers such as food stamps D)do not reflect changes in the cost of living E)omit dividends and interest

The official poverty definition in the U.S.is having an income that A)provides minimum biological needs B)is less than three times the cost of a nutritionally adequate yet frugal diet C)places the household in the bottom 20 percent of the income distribution D)is less than the average U.S.welfare allowance E)is approximately equal to the average household income of Canada

Eligibility for income assistance benefits requires a prior financial contribution from the individual covered; eligibility for social insurance programs does not.

Food stamps and Medicaid are in-kind transfer programs.

Since most welfare programs are administered by the federal government, there is uniformity in both eligibility and the dollar value of benefits in a state by state comparison.

Poverty is A)a relative concept B)an absolute concept C)more prevalent in North American countries than in other areas D)an insufficient income level to purchase all necessities E)the same in all countries

The major social insurance program in the United States is A)Social Security B)Temporary Assistance for Needy Families C)Medicare D)Medicaid E)food stamps

A major difference between social insurance and income assistance programs is that A)social insurance programs are run by the states and income assistance programs are run by the federal government B)funding for social insurance programs comes exclusively from the federal government, whereas income assistance programs are funded both at the state and federal levels C)benefits from social insurance programs are related to a worker's contributions to the programs, whereas benefits from income assistance programs are not D)social insurance programs are available only to households with children E)income assistance programs are available only to households without children

Transfer programs that do not tie benefits to contributions are called A)social insurance programs B)income assistance programs C)health aid programs D)bonus programs E)compensation programs

Social Security was established A)in the 1930s to provide retirement income to those with a work history B)in the 1930s to provide jobs for the unemployed C)in the 1930s to provide health insurance D)in the 1960s to provide retirement income to those with a work history E)in the 1960s to provide health insurance

In the United States A)only those who have made previous contributions to the program are entitled to receive the benefits of social insurance programs B)anyone with children is entitled to receive the benefits of social insurance programs C)anyone over 65 is eligible to receive the benefits of social insurance programs D)all taxpayers are eligible to receive the benefits of social insurance programs E)all poor families with children are eligible to receive the benefits of social insurance programs

Which of the following is a social insurance program? A)Medicaid B)food stamps C)unemployment compensation D)Temporary Assistance for Needy Families E)general assistance

Which of the following is a social insurance program? A)Medicaid B)Food stamps C)Social Security D)Temporary Assistance for Needy Families E)FDIC

The social insurance system generally redistributes income from A)rich to poor and from old to young B)rich to poor and from young to old C)poor to rich and from old to young D)poor to rich and from young to old E)consumers to producers

In order to qualify for unemployment insurance and worker's compensation, a person must have A)paid taxes the previous year B)an employment record C)a family of four D)food stamps E)a driver's license

Which of the following is an in-kind transfer payment? A)Medicaid B)Social Security C)workers' compensation D)unemployment insurance E)Temporary Assistance to Needy Families

The purpose of social insurance is to A)encourage charitable donations B)provide money to the poor C)provide in-kind aid to the poor D)redistribute income for the old to the young E)supplement the incomes of those who have worked but are now retired, temporarily unemployed, or disabled

Food stamps and Medicaid are examples of A)money transfers B)resource earnings C)in-kind transfers D)tax expenditures E)capital gains

Which of the following is not a form of social insurance? A)Social Security B)Temporary Assistance for Needy Families C)Medicare D)unemployment insurance E)workers' compensation

The largest U.S.welfare program is A)Aid to Families with Dependent Children B)Medicaid C)Social Security D)unemployment compensation E)food stamps

Measured in dollar terms, the two largest U.S.antipoverty programs are A)cash transfers and medical care B)cash transfers and food assistance C)food and housing assistance D)medical care and food assistance E)medical care and housing assistance

Income assistance programs A)require that the recipient work and contribute to the program B)are designed to replace lost income C)include unemployment compensation and Medicare D)are funded exclusively by the federal government E)include both cash and in-kind transfer programs

In order for Mary to qualify for benefits under a means-tested transfer payment program, A)she must have worked and contributed to the program B)she must be able to repay the cash transfer at a later date C)the head of her household must be able to hold a job D)she must be totally disabled E)her household's income and/or assets must fall below a certain level

The federal government's earned-income tax credit A)provides support only for elderly and disabled poor B)represents a type of in-kind transfer program C)provides food assistance to the working poor D)reduces taxes if the poor buy housing E)offers an income tax refund to the working poor greater than the taxes they paid

Temporary Assistance for Needy Families and Supplemental Security Income are A)cash transfers for income assistance B)cash transfers for social insurance C)in-kind transfers for income assistance D)in-kind transfers for social insurance E)intended to provide health care for the poor

The qualifying income level for Medicaid A)is $10, 000 B)is $14, 000 C)is set separately by each state D)is set yearly by the Bureau of the Census E)varies inversely with the number of children in the family

The Food Stamp program provides A)quality labels on food B)cash transfers to the poor C)cash transfers to the elderly D)vouchers that can be redeemed for food E)food deliveries to the elderly

The federal government has major assistance programs aimed at providing all of the following goods, except one.Which is the exception? A)housing B)energy C)school lunches D)clothing E)food

When an economy experiences strong economic growth, A)the number of families in the bottom 10 percent of the income distribution decreases B)the income of families in the bottom of the income distribution increases C)only the top of the income distribution is affected D)the accompanying inflation cancels out any change in income distribution E)the rich are no better off because taxes rise with income

The most effective government policy for reducing poverty is to A)reduce discrimination in the job market based on gender and race B)abandon all government programs and rely on private charity C)reduce programs that promote education and training of the poor D)dramatically increase Medicare payments to the elderly E)promote economic growth and job creation

Which of the following is not "means-tested"? A)Temporary Assistance for Needy Families (TANF) B)welfare programs C)the Food Stamp program D)Social Security payments to a retiree E)free and reduced price school lunches for the poor

Which of the following accounts for approximately three-fourths of all welfare spending? A)the school lunch program B)the earned income tax credit C)unemployment compensation and workers' compensation combined D)"in-kind" transfers E)cash transfers

Data show that the poorest U.S.demographic group is A)the elderly because Social Security payments have not kept pace with inflation B)the elderly because they have no steady income C)the elderly because poverty increases with age D)households headed by someone under 18 years of age E)households headed by someone between 40 and 50 years old

For which of the following groups has the poverty rate declined most in the United States? A)unmarried heads of households B)married heads of households C)less-educated African-Americans D)African-Americans with high school but not college educations E)people 65 and older

The poverty rate of the elderly in the United States has A)been constant since 1959 B)risen since 1959 because people are living longer C)fallen since 1959 because of the growth in Social Security and Medicare programs D)fallen since 1959 because of the growth in private retirement plans E)fallen since 1959, mainly because of inflation

Which of the following groups has experienced the greatest decrease in poverty rates since 1959? A)the elderly B)children C)people 18 to 64 years old D)women E)none of the above (i.e., all of these groups have had higher poverty rates)

One reason the U.S.government is sensitive to demands by the elderly is that the elderly have higher voter participation rates than members of other age groups.

The decline of the poverty rate for the elderly can be attributed to A)Temporary Assistance for Need Families (TANF) B)tax increases C)Medicaid D)the political power of the elderly E)increased resource earnings

Which of the following groups does not support the special interests of the elderly? A)the elderly themselves B)the relatives of the elderly C)the housing industry D)doctors and nursing home operators E)those under 65 who are concerned about their future benefits

In the U.S., the poverty rate is lowest among young families with a head of household under 25.

Transfer payments have reduced poverty among the elderly, but poverty among females has not fallen.

Children of female heads of households are five times more likely to live in poverty than other children.

The U.S.poverty rate is higher among households headed by black married couples than those headed by white females.

If the fraction of the population that is below the official poverty level has decreased, then A)the number of poor must have increased B)the number of poor must have decreased C)the population must have increased D)the number of poor may have increased or decreased E)the number of people above the official poverty level must have increased

In the last 30 years, the number of poor people in the United States in households headed by women has A)been constant B)increased slightly C)increased dramatically D)decreased slightly E)decreased by half

Of the following, which group has the fastest-growing population in the United States? A)female heads of households B)male heads of households C)white heads of households D)black heads of households E)single people

Over time, poverty in the United States, as measured by the number of poor, has increased the most A)among women because of discrimination B)among women because of an increasing divorce rate C)among households headed by women D)among the elderly because of cutbacks in the Social Security program E)for men because there are more of them

Which of the following contributed most to the large increases in poverty since 1960? A)increases in air pollution and other externalities B)federal government budget deficits C)the increase in the number of elderly individuals D)rising poverty rates among households headed by females E)the increase in the number of households headed by females

The distribution of income among African-American families is more even than it is for the population as a whole.

Since 1970, the number of African-American professionals (e.g., doctors, lawyers and the like)in the labor force has increased dramatically.

Which of the following would not account for the observed wage differential between African Americans and whites in the United States? A)differences in the quantity of on-the-job training B)differences in the quality of education C)discrimination by employers D)differences in job experience E)differences in access to public assistance programs

The distribution of income in a market economy is primarily determined by differences in A)effort and sacrifice and intelligence with the most important factor being intelligence since human capital is a resource B)the level of needs of the average or median income individual when selling her labor C)resource ownership and the value that resources buyers place on the resources that are sold in the marketplace D)the level of government intervention in the economy as it relates to job openings E)the amount of time that an individual spends working and the intensity of this effort

Firms that are required to participate in affirmative action programs do end up hiring more minority employees.

The Equal Employment Opportunity Commission A)was established by the Equal Rights Act of 1984 B)examines cases in which a worker is not paid the same as other workers performing the same work C)guarantees a worker's right to a job D)established a minimum wage for minorities E)has effectively eliminated racial discrimination in the workplace

The Equal Employment Opportunity Commission was established by A)the Social Security Act B)the Reagan administration C)the Civil Rights Act D)the Equal Rights Amendment E)the Wagner Act

The requirement that firms doing business with the federal government set numerical hiring, promotion, and training goals to reduce discrimination was A)included in the Civil Rights Act of 1964 B)signed by President Johnson C)first proposed in the Nixon administration D)first proposed in the Carter administration E)first proposed in the Equal Rights Amendment

Data on the U.S.income distribution suggest that A)black-white income differentials have decreased B)black-white income differentials have increased C)the distribution of income among blacks is more uneven than the overall distribution of income D)the distribution of income among blacks is less uneven than the overall distribution of income E)the distribution of income among blacks follows approximately the same pattern as the overall distribution of income

Poor welfare recipients face higher marginal tax rates than do the richest families.

Income assistance benefits are A)taxed at a high marginal rate, in the sense that benefits sharply decrease as earned income increases B)taxed at a 20 percent marginal rate C)taxed at a high marginal rate in order to provide work incentives D)unaffected by increases in earned income E)positively related to income from other sources

Welfare benefits A)may do of all of the following B)may discourage poor people from taking jobs C)may cause job skills to deteriorate D)take the form of cash or in-kind transfers E)allow increased consumption by many poor children

In reference to welfare recipients, the high effective marginal tax rate on earnings A)encourages self-sufficiency B)encourages more labor market activity C)discourages employment D)increases total family income if the marginal tax rate exceeds 100 percent E)tends to increase welfare benefits as more income is earned up to the "means-test" threshold

Welfare data show that in the United States A)most welfare recipients receive benefits only for a short time B)welfare encourages young women to have children C)children brought up on welfare tend to remain on welfare as adults D)having poor parents does not increase the chances of a child's being on welfare as an adult E)children of poor parents have a 50 percent chance of being middle-income adults

Which of the following is not an example of a "workfare" component in a welfare program? A)job skill training B)required job searches C)tougher child support laws D)required work in paid or unpaid jobs E)required participation in training programs

A preliminary conclusion about welfare reform is that A)work requirements do seem to yield substantial declines in welfare caseloads B)work requirements cause welfare caseloads to increase C)such reform can only be instituted when the economy is strong D)welfare can be reformed even when the economy is weak E)welfare rolls decline faster when the economy is weak because more people need income during those times

Most people on welfare A)are not U.S.citizens B)are poorly educated and have few job skills C)do not qualify for food stamps, child care, or Medicaid D)have jobs E)are below the age of 16

On average throughout the United States, A)almost all individuals leaving welfare had jobs B)day-care shortages arose as individuals left welfare for work C)only about half the individuals leaving welfare had jobs D)former welfare recipients who are now working find that they no longer qualify for food stamps, child care, or Medicaid E)welfare rolls remained stable during the late 1990s and early twenty-first century.

As welfare rolls declined during the late 1990s and early 2000s, A)states with aggressive work requirements found that their federal grants also declined B)states with aggressive work requirements were rewarded with larger federal grants C)few welfare recipients were able to find jobs D)there was a significant increase in welfare spending per recipient E)states cut back on their provision of services such as job placement and child care

One effect of the work requirements of welfare reform has been A)to make the demand curve for welfare upward sloping B)to lower the "price" of welfare to recipients C)to make the supply curve of welfare upward sloping D)to reduce the amount of hassle involved with going on welfare E)to raise the "price" of welfare to the recipients

Because women make up 54 percent of those ages 18 to 24 enrolled in college, graduate school, or professional school, men and women are now more likely to meet their future spouses A)at hayrides B)in some educational setting C)in entry-level jobs such as in food service D)at volunteer events E)during military service

Studies have found a growing similarity between women's wages before marriage and the future earnings of the men they marry.

Which of the following occurs last in the sequence? A)A power couple has children B)At the best colleges, the now grown children meet their future spouses C)A power couple marries D)With a head start in life, many of the children go to the best colleges E)The children benefit from the high income and genetic endowment passed along from their well-educated parents

Growth in power couples and in single mothers anchors the top and bottom ends of the income distribution, contributing to a narrowing income gap in the U.S.economy.

Which of the following countries has more even income distribution than the United States? A)Canada B)Brazil C)Chile D)Nigeria E)Philippines

The U.S.Census Bureau considers in-kind transfers (such as employer provided benefits)when measuring income.

Which of the following is not true about income quintiles? A)Only one in seven households in the bottom quintile has anybody working full time B)Only one in three households in the top quintile has anybody working at all C)A primary contributor to the smaller share of income going to the bottom quintile has been the growth of single-parent households D)Three out of four households in the top quintile have two or more working E)A primary contributor to the larger share of income going to the top quintile has been the growth of two-earner households

In 2010, federal, state, and local redistribution programs were most close to A)$20.0 trillion B)$200.0 billion C)$2.0 billion D)$200.0 trillion E)$2.0 trillion

Social Security and Medicare, programs that benefit the elderly primarily, make up the greatest share of federal redistribution programs since 1962.

Because more than half the federal welfare budget goes for health care, almost zero U.S.residents lacked health insurance in 2009.

Because more than half the federal welfare budget goes for health care, only 15% of U.S.residents lacked health insurance in 2009.

According to a recent five-year survey of U.S.business ownership, the number of black-owned businesses rose A)45 percent B)450 percent C)90 percent D)25 percent E)4.5 percent

Economists have no concern that children on welfare might be more likely to end up on welfare as adults.

It is difficult to say whether welfare "causes" daughters from welfare families to be more likely to participate in the welfare system themselves because A)the same factors that contribute to a mother's welfare status can also contribute to her daughter's welfare status B)no research has been done on this topic C)economists are unconcerned with questions about welfare status D)if two factors occur together, then one must cause the other E)it is possible that the daughter's welfare status "causes" the welfare programs

Which of the following has been a result of welfare reform? A)employment among mothers who head families substantially decreased B)about two thirds of mothers who head families found work only eight years after reform C)the incomes of mothers who head families went down on average D)welfare spending per recipient decreased significantly E)most states combined tough new eligibility rules with an expanded menu of welfare services

Welfare recipients as a percentage of the US population have declined after the welfare reforms in 1996?

There is much agreement among policy analysts and researchers that the 1996 welfare reform has failed.