Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate
A)is more likely to understate the true level of poverty.
B)is more likely to overstate the true level of poverty.
C)will increase by $2,000 divided by the poverty level.
D)Both b and c are correct.

Question

Quizplus · Accepted Answer

If the average value of in-kind transfers increases by $2,000 from 2013 to 2014, it means that individuals and households are receiving more non-cash aid, such as food stamps or housing assistance. This increase in non-cash aid would not be reflected in the official poverty measure, which only takes into account cash income. Therefore, the poverty rate is more likely to overstate the true level of poverty, as the official measure would not reflect this increase in in-kind transfers. Choice C is incorrect because the increase in in-kind transfers does not necessarily correspond to an increase in the poverty level, as the official poverty measure is based on cash income and does not take into account non-cash aid.

Suppose the Average Value of In-Kind Transfers Increases by $2,000