Exam 18: Who Gets What the Distribution of Income

Some critics complain that official U.S. poverty statistics overstate poverty because they do not consider the value of in-kind transfers. A large portion of the in-kind benefits for many poor families is made up of non-cash benefits such as food vouchers, housing subsidies and medical insurance. Should the value of these noncash benefits such as medical insurance be counted as an improvement in the economic well being of low-income families for purposes of calculating poverty statistics? Why or why not?

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Question 1

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The justification may be more important than the answer. In the case of medical insurance, it seems highly likely that low-income households would probably not be able to afford medical insurance and the services associated with it, if they were not provided free of charge, and would go without them. If that is the case, the value of the services doesn't really improve their living standards (in ways other than better health), since the transfer is really from the government to the service providers.
If in the absence of government assistance, the poor would continue to purchase the same quantity and quality of medical services, they would have to finance them by cutting back on other expenditures, and in that case, the value of the free in-kind health benefits would be raising the families' living standards and reducing poverty. However, it is highly unlikely that this would be the case.

How has income distribution changed in the U.S. since 1929? When did inequality decrease and when did it increase?

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Question 2

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Income inequality in the U.S. decreased from 1929 to 1970; after that, inequality has increased.

Describe three methods of affecting income distribution in the U.S.

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Question 3

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Three methods for affecting income distribution are taxation, expenditures, and the establishment and protection of property rights.

What is a Lorenz curve? What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time?

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Question 4

How does the Lorenz curve for the U.S. compare to the Lorenz curve for most developing and developed countries? What does this mean?

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Question 5

"To eliminate poverty, all we need to do is tax the millionaires and billionaires sufficiently, and spread the money around among the poor based on who needs it the most." Do you agree or disagree with this statement? Why?

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Question 6

What is the distributive effect of the Social Security tax? Explain.

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Question 7

Which of the three types of tax systems (progressive, proportional, regressive) redistributes income? Explain.

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Question 8

What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time? Explain.

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Question 9

The following diagram shows three Lorenz curves for the country of Ecoland. Based on this diagram, describe what happened to the distribution of income in Ecoland between 1956 and 20. What happened to the Gini Coefficient?

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Question 10

Describe the difference between share distribution of income and socioeconomic distribution of income.

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Question 11

What are the distributive consequences of the U.S. income taxes, the Social Security tax, sales taxes, and property taxes? (Are they progressive, proportional, or regressive?)

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Question 12

Some people in the U.S. argue that the poverty line is too high and some argue that it is too low. Explain both arguments by highlighting the difference between absolute and relative measures of poverty.

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Question 13

How does the distribution of income compare to the distribution of wealth in the U.S.? What does this imply about the respective Lorenz curves?

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Question 14

What are the distributive consequences of each of the following taxes: the U.S. income taxes, sales taxes, and property taxes? Are they progressive, regressive, or proportional?

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Question 15

What is the difference between wealth and income? Which is a flow concept? Which is a stock concept?

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Question 16

What are the social costs of poverty?

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Question 17

How is the poverty line calculated? Is it an absolute or a relative measure of poverty?

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Question 18

Describe five major U. S. expenditure programs that are used to redistribute income

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Question 19

Use the table below to answer the questions. (a) Draw a Lorenz curve for countries A, B, and C in the table below. (b) Which country has the least equal distribution of income? The most equal distribution? Percent of Income Quirtile A B C Lowest 8.5 10.2 2.3 fifth Second 10.1 15.2 6.1 fifth Third fifth 12.5 18.3 12.3 Fouth fifth 15.1 23.1 18.1 Highest 53.8 33.2 61.2 fifth $Use the table below to answer the questions. (a) Draw a Lorenz curve for countries A, B, and C in the table below. (b) Which country has the least equal distribution of income? The most equal distribution? \begin{array} { l l l l } & { \text { Percent of Income } } \\ \text { Quirtile } & \text { A } & \text { B } & \text { C } \\ \hline \text { Lowest } & 8.5 & 10.2 & 2.3 \\ \text { fifth } & & & \\ \text { Second } & 10.1 & 15.2 & 6.1 \\ \text { fifth } & & & \\ \text { Third fifth } & 12.5 & 18.3 & 12.3 \\ \text { Fouth fifth } & 15.1 & 23.1 & 18.1 \\ \text { Highest } & 53.8 & 33.2 & 61.2 \\ \text { fifth } & & & \end{array}$

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Question 20

Showing 1 - 20 of 34

Exam 18: Who Gets What the Distribution of Income

How has income distribution changed in the U.S. since 1929? When did inequality decrease and when did it increase?

Describe three methods of affecting income distribution in the U.S.

What is a Lorenz curve? What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time?

How does the Lorenz curve for the U.S. compare to the Lorenz curve for most developing and developed countries? What does this mean?

"To eliminate poverty, all we need to do is tax the millionaires and billionaires sufficiently, and spread the money around among the poor based on who needs it the most." Do you agree or disagree with this statement? Why?

What is the distributive effect of the Social Security tax? Explain.

Which of the three types of tax systems (progressive, proportional, regressive) redistributes income? Explain.

What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time? Explain.

The following diagram shows three Lorenz curves for the country of Ecoland. Based on this diagram, describe what happened to the distribution of income in Ecoland between 1956 and 20. What happened to the Gini Coefficient?

Describe the difference between share distribution of income and socioeconomic distribution of income.

What are the distributive consequences of the U.S. income taxes, the Social Security tax, sales taxes, and property taxes? (Are they progressive, proportional, or regressive?)

Some people in the U.S. argue that the poverty line is too high and some argue that it is too low. Explain both arguments by highlighting the difference between absolute and relative measures of poverty.

How does the distribution of income compare to the distribution of wealth in the U.S.? What does this imply about the respective Lorenz curves?

What are the distributive consequences of each of the following taxes: the U.S. income taxes, sales taxes, and property taxes? Are they progressive, regressive, or proportional?

What is the difference between wealth and income? Which is a flow concept? Which is a stock concept?

What are the social costs of poverty?

How is the poverty line calculated? Is it an absolute or a relative measure of poverty?

Describe five major U. S. expenditure programs that are used to redistribute income

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