Question 1

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

Accepted Answer

The U.S.definition of poverty is that a family is in poverty if it has an income equal to or less than three times an average family's minimum food expenditures.It is both an absolute and a relative measure of poverty.It is in part an absolute measure because the minimum food budget used in the definition was determined in the 1960s and food today is a much smaller portion of people's budgets.It is in part a relative measure because the specific dollar amounts are adjusted by the overall rate of inflation,which is greater tan the change in the prices of food.

Question 2

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

Accepted Answer

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

Question 3

One way to look at inequality is to look at the size distribution of income.What are two other approaches to measuring inequality? When measuring income distribution according to class,how does the class distribution in most developed countries compare to most developing countries? Recently,changes in the US class distribution of income by class have taken on what shape and why is this so?

Accepted Answer

Besides looking at the size distribution of income,inequality can be measured according to socioeconomic characteristics (such as race or gender)or according to class (lower,middle,upper).
In most developing countries,the distribution of income according to class may be characterized as a pyramid with a very large lower class at the base,a much smaller middle class in the center,and a very small upper class on top.In contrast to this,in most developed countries,the distribution could be characterized by a diamond.This diamond would have a small lower class at the base,a large middle class in the center,and a small upper class on top.Recently the US class distribution of income has taken on a pentagonal shape because of an increase in the size of the upper middle class and a decrease in the size of the lower middle class.

Question 4

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 5

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

Accepted Answer

Wealth is a stock concept: it is the val

Question 6

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

Accepted Answer

The share distribution of income is the

Question 7

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 8

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. 
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.

Question 9

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. 
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.

Question 10

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?

Accepted Answer

The justification may be more important

Question 11

One study of the distribution of wealth indicates that the bottom 40 percent of households hold 1 percent or less of total marketable wealth in the United States and the top 1 percent owns close to 40 percent of it. An economist might observe that these data do not include the value of human capital: the value of labor and skills embodied in a person. If we were to include human capital, which of the following people's net worth would change the most?

Accepted Answer

A) Debra, who recently received a $25,000 bonus from her job that she has spent on an around-the-world trip 
B) Carol, who has just bought an apartment for $500,000 using savings and bank loans 
C) Betty, who has just retired but expects to live well because her retirement account is worth $1,000,000 
D) Alice, who has just completed her education as a medical doctor and now has student loans of $100,000 
A) Debra, who recently received a $25,000 bonus from her job that she has spent on an around-the-world trip 
B) Carol, who has just bought an apartment for $500,000 using savings and bank loans 
C) Betty, who has just retired but expects to live well because her retirement account is worth $1,000,000 
D) Alice, who has just completed her education as a medical doctor and now has student loans of $100,000

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

An important element that is excluded from U.S. poverty figures is:

Accepted Answer

A) income tax. 
B) earned income. 
C) in-kind transfers such as food stamps and housing assistance. 
D) interest income. 
A) income tax. 
B) earned income. 
C) in-kind transfers such as food stamps and housing assistance. 
D) interest income.

Question 15

When most people talk about believing in equality of income, they mean they believe in equality of:

Accepted Answer

A) effort for comparably endowed individuals. 
B) opportunity for comparably endowed individuals. 
C) after-tax income for comparably endowed individuals. 
D) before-tax income for comparably endowed individuals. 
A) effort for comparably endowed individuals. 
B) opportunity for comparably endowed individuals. 
C) after-tax income for comparably endowed individuals. 
D) before-tax income for comparably endowed individuals.

Question 16

Society as a whole likely benefits from a decrease in poverty because:

Accepted Answer

A) social programs to help the poor are a small portion of the U.S. government budget. 
B) increased assistance to those in poverty raises their incentives to work. 
C) if there are fewer families in poverty, there will be less demand for childcare. 
D) if there are fewer people in poverty, the incentive to commit crimes falls. 
A) social programs to help the poor are a small portion of the U.S. government budget. 
B) increased assistance to those in poverty raises their incentives to work. 
C) if there are fewer families in poverty, there will be less demand for childcare. 
D) if there are fewer people in poverty, the incentive to commit crimes falls.

Question 17

On its horizontal axis, a Lorenz curve measures:

Accepted Answer

A) cumulative percentage of family income. 
B) amount of family income. 
C) cumulative percentage of families. 
D) demand of families. 
A) cumulative percentage of family income. 
B) amount of family income. 
C) cumulative percentage of families. 
D) demand of families.

Question 18

Other things equal, tax cuts favoring the rich and reductions in funding for government programs favoring the poor would be expected to:

Accepted Answer

A) increase income inequality, causing the Lorenz curve to bend toward the diagonal line. 
B) decrease income inequality, causing the Lorenz curve to bend toward the diagonal line. 
C) increase income inequality, causing the Lorenz curve to bend away from the diagonal line. 
D) decrease income inequality, causing the Lorenz curve to bend away from the diagonal line. 
A) increase income inequality, causing the Lorenz curve to bend toward the diagonal line. 
B) decrease income inequality, causing the Lorenz curve to bend toward the diagonal line. 
C) increase income inequality, causing the Lorenz curve to bend away from the diagonal line. 
D) decrease income inequality, causing the Lorenz curve to bend away from the diagonal line.

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

An example of share distribution of income is how much:

Accepted Answer

A) the top 10 percent of a population gets. 
B) Black people get relative to white people. 
C) two-parent households get relative to single-parent households. 
D) the young get relative to the old. 
A) the top 10 percent of a population gets. 
B) Black people get relative to white people. 
C) two-parent households get relative to single-parent households. 
D) the young get relative to the old.

Exam 18: Who Gets What the Distribution of Income

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

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

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

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

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

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

Some economists believe that:

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

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

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

An important element that is excluded from U.S. poverty figures is:

When most people talk about believing in equality of income, they mean they believe in equality of:

Society as a whole likely benefits from a decrease in poverty because:

On its horizontal axis, a Lorenz curve measures:

Other things equal, tax cuts favoring the rich and reductions in funding for government programs favoring the poor would be expected to:

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

An example of share distribution of income is how much:

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters