Question 1

In the United States:

Accepted Answer

A)  the upper class has become the largest class. 
B)  the lower class has become the largest class. 
C)  the middle class has become the largest class. 
D)  all three classes are the same size. 
A)  the upper class has become the largest class. 
B)  the lower class has become the largest class. 
C)  the middle class has become the largest class. 
D)  all three classes are the same size.

Question 2

Refer to the graph shown.   The Lorenz curve showing the most income equality is:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 3

Which of the following statements is a correct interpretation of some economists' views?

Accepted Answer

A)  When the incomes of the poor are increased, the poor purchase more goods and services, and this causes lower profits. 
B)  When the government gives income to the head of a household, other members of the household remain in need. 
C)  When the rich do well, the total pie is increased so much that the benefits that trickle down to the poor are greater than the proceeds they would get from redistribution. 
D)  When the rich do well, the total pie is decreased, so that the poor are worse off than they were before. 
A)  When the incomes of the poor are increased, the poor purchase more goods and services, and this causes lower profits. 
B)  When the government gives income to the head of a household, other members of the household remain in need. 
C)  When the rich do well, the total pie is increased so much that the benefits that trickle down to the poor are greater than the proceeds they would get from redistribution. 
D)  When the rich do well, the total pie is decreased, so that the poor are worse off than they were before.

Question 4

Refer to the graph shown.   The Lorenz curve showing the most income inequality is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 5

Because income differs so much by type of job, some economists argue that a new class distinction has emerged between:

Accepted Answer

A)  union and nonunion workers. 
B)  workers and capitalists. 
C)  professionals and nonprofessionals. 
D)  salaried workers and the self-employed. 
A)  union and nonunion workers. 
B)  workers and capitalists. 
C)  professionals and nonprofessionals. 
D)  salaried workers and the self-employed.

Question 6

Our ability to manage Social Security as a "pay-as-you-go" program (in which taxes collected from those currently working are used to make benefits payments to those currently retired) is impaired when the number of retirees per worker increases. The current concern about the stability of Social Security is based primarily on projections that there will many more retirees per worker when the baby boomers begin to retire. Then, if we want to maintain a pay-as-you-go system, we can:

Accepted Answer

A)  reduce benefits to compensate for the increase in the number of retirees per worker. 
B)  raise benefits to compensate for the increase in the number of retirees per worker. 
C)  maintain current benefit levels with no changes to how Social Security is financed. 
D)  reduce benefits to compensate for the decrease in the number of retirees per worker. 
A)  reduce benefits to compensate for the increase in the number of retirees per worker. 
B)  raise benefits to compensate for the increase in the number of retirees per worker. 
C)  maintain current benefit levels with no changes to how Social Security is financed. 
D)  reduce benefits to compensate for the decrease in the number of retirees per worker.

Question 7

Our ability to manage Social Security as a "pay-as-you-go" program (in which taxes collected from those currently working are used to make benefits payments to those currently retired) is impaired when the number of retirees per worker increases. The current concern about the stability of Social Security is based primarily on projections that there will many more retirees per worker as the baby boomers continue to retire. Then, if we want to maintain a pay-as-you-go system, we can:

Accepted Answer

A)  lower payroll taxes to ease the burden on those currently working. 
B)  raise payroll taxes to compensate for the increase in the number of retirees. 
C)  lower payroll taxes to compensate for the increase in the number of retirees. 
D)  raise payroll taxes to ease the burden on those currently working. 
A)  lower payroll taxes to ease the burden on those currently working. 
B)  raise payroll taxes to compensate for the increase in the number of retirees. 
C)  lower payroll taxes to compensate for the increase in the number of retirees. 
D)  raise payroll taxes to ease the burden on those currently working.

Question 8

A curve that shows the wealth distribution for the United States would be:

Accepted Answer

A)  equal to the Lorenz curve for income. 
B)  below the Lorenz curve for income. 
C)  above the Lorenz curve for income. 
D)  above the diagonal line. 
A)  equal to the Lorenz curve for income. 
B)  below the Lorenz curve for income. 
C)  above the Lorenz curve for income. 
D)  above the diagonal line.

Question 9

Today, the Gini coefficient of income inequality for the United States is about .5. In 1975, it had been about .4. What do these numbers tell us?

Accepted Answer

A)  Wealth is distributed less equally than income. 
B)  The number of rich people has fallen. 
C)  Income has become more unequally distributed. 
D)  The official definition of poverty has changed. 
A)  Wealth is distributed less equally than income. 
B)  The number of rich people has fallen. 
C)  Income has become more unequally distributed. 
D)  The official definition of poverty has changed.

Question 10

Bertrand de Juvenal'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. 
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.

Question 11

The democratic system of one person/one vote:

Accepted Answer

A)  necessarily leads to a political system that favors the poor because there are more poor voters than there are rich voters. 
B)  necessarily leads to a political system that favors the poor because the poor organize themselves into groups that can deliver votes to politicians. 
C)  does not necessarily lead to a political system that favors the poor, because many of the poor do not vote, believing that their individual votes cannot make a difference. 
D)  does not necessarily lead to a political system that favors the poor because many of the poor are illiterate and unable to vote. 
A)  necessarily leads to a political system that favors the poor because there are more poor voters than there are rich voters. 
B)  necessarily leads to a political system that favors the poor because the poor organize themselves into groups that can deliver votes to politicians. 
C)  does not necessarily lead to a political system that favors the poor, because many of the poor do not vote, believing that their individual votes cannot make a difference. 
D)  does not necessarily lead to a political system that favors the poor because many of the poor are illiterate and unable to vote.

Question 12

Refer to the graph shown.   The top 20 percent of the families earn:

Accepted Answer

A)  32.6 percent of the income. 
B)  45.3 percent of the income. 
C)  54.7 percent of the income. 
D)  67.4 percent of the income. 
A)  32.6 percent of the income. 
B)  45.3 percent of the income. 
C)  54.7 percent of the income. 
D)  67.4 percent of the income.

Question 13

Unemployment compensation is available to:

Accepted Answer

A)  anyone who is unemployed for an unlimited duration. 
B)  anyone who is unemployed but for a limited duration. 
C)  people who are out of work through no fault of their own and have worked in a covered occupation for a substantial number of weeks in the period just before they became unemployed. 
D)  people who are out of work through no fault of their own regardless of previous employment history. 
A)  anyone who is unemployed for an unlimited duration. 
B)  anyone who is unemployed but for a limited duration. 
C)  people who are out of work through no fault of their own and have worked in a covered occupation for a substantial number of weeks in the period just before they became unemployed. 
D)  people who are out of work through no fault of their own regardless of previous employment history.

Question 14

Public assistance programs:

Accepted Answer

A)  are not means-tested and are targeted to the public. 
B)  are means-tested social programs targeted to the poor and providing financial, nutritional, and housing assistance. 
C)  provide the same amount of support to families in poverty in every state of the United States. 
D)  are available only to single-parent families with at least three children. 
A)  are not means-tested and are targeted to the public. 
B)  are means-tested social programs targeted to the poor and providing financial, nutritional, and housing assistance. 
C)  provide the same amount of support to families in poverty in every state of the United States. 
D)  are available only to single-parent families with at least three children.

Question 15

Refer to the following graph.   The Gini coefficient is calculated as area:

Accepted Answer

A)  B divided by area A. 
B)  A divided by area A + B. 
C)  A divided by area B. 
D)  A + B divided by area B. 
A)  B divided by area A. 
B)  A divided by area A + B. 
C)  A divided by area B. 
D)  A + B divided by area B.

Question 16

Refer to the graph shown.   The poorest 30 percent of the families earn:

Accepted Answer

A)  2 percent of the income. 
B)  5 percent of the income. 
C)  9 percent of the income. 
D)  15 percent of the income. 
A)  2 percent of the income. 
B)  5 percent of the income. 
C)  9 percent of the income. 
D)  15 percent of the income.

Question 17

The price of food relative to other goods has:

Accepted Answer

A)  fallen, making it easier to live on less income. 
B)  fallen, making it harder to live on less income because other goods cost so much. 
C)  increased, making it harder to live on less income. 
D)  increased, making it easier to live on less income because other goods cost less. 
A)  fallen, making it easier to live on less income. 
B)  fallen, making it harder to live on less income because other goods cost so much. 
C)  increased, making it harder to live on less income. 
D)  increased, making it easier to live on less income because other goods cost less.

Question 18

If the Lorenz curve becomes more outwardly bowed, it is also true that the number of families living in poverty:

Accepted Answer

A)  must have risen. 
B)  must have fallen. 
C)  could have risen or fallen. 
D)  must have remained the same. 
A)  must have risen. 
B)  must have fallen. 
C)  could have risen or fallen. 
D)  must have remained the same.

Question 19

All real-world Lorenz curves are below the diagonal line because income is always distributed unequally in the real world.

Accepted Answer

A) True 
 B)False

Question 20

The United States has the least income inequality of all the nations in the world.

Accepted Answer

A) True 
 B)False

Exam 18: Who Gets What the Distribution of Income

In the United States:

Refer to the graph shown. The Lorenz curve showing the most income equality is:

Which of the following statements is a correct interpretation of some economists' views?

Refer to the graph shown. The Lorenz curve showing the most income inequality is

Because income differs so much by type of job, some economists argue that a new class distinction has emerged between:

A curve that shows the wealth distribution for the United States would be:

Today, the Gini coefficient of income inequality for the United States is about .5. In 1975, it had been about .4. What do these numbers tell us?

Bertrand de Juvenal's views on income distribution and fairness can best be described by the statement:

The democratic system of one person/one vote:

Refer to the graph shown. The top 20 percent of the families earn:

Unemployment compensation is available to:

Public assistance programs:

Refer to the following graph. The Gini coefficient is calculated as area:

Refer to the graph shown. The poorest 30 percent of the families earn:

The price of food relative to other goods has:

If the Lorenz curve becomes more outwardly bowed, it is also true that the number of families living in poverty:

All real-world Lorenz curves are below the diagonal line because income is always distributed unequally in the real world.

The United States has the least income inequality of all the nations in the world.

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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