Question 1

Present the basic premise of the life cycle theory and discuss why it is used to dispel concerns about an unequal income distribution.

Accepted Answer

The life cycle theory claims that spending in any one year is dependent upon lifetime income rather than income in any particular year.The normal pattern of life causes income inequality since young people and old people will have low "income," but the distribution of spending patterns may actually be less extreme.Therefore,this theory would assert that inequality in the income distribution overstates inequality in the distribution of the well-being of individuals.

Question 2

Assume that the government proposes a negative income tax that calculates taxes owed by the following formula: Taxes owed = (1/3 × income) - $10,000.If a family doesn't earn any income,how does the negative income tax affect them

Accepted Answer

A) They will receive an income subsidy of $0. 
B) They will receive an income subsidy of $1000. 
C) They will receive an income subsidy of $3300. 
D) They will receive an income subsidy of $10,000. 
A) They will receive an income subsidy of $0. 
B) They will receive an income subsidy of $1000. 
C) They will receive an income subsidy of $3300. 
D) They will receive an income subsidy of $10,000. D

Question 3

What problem in measuring inequality does the fact that the young often borrow and then repay these loans when they are older relate to

Accepted Answer

A) in-kind transfers 
B) the economic life cycle 
C) transitory versus permanent income 
D) economic mobility 
A) in-kind transfers 
B) the economic life cycle 
C) transitory versus permanent income 
D) economic mobility B

Question 4

The government enacts policies to bring about which result

Accepted Answer

A) a more efficient distribution of income 
B) a fairer distribution of income 
C) a more efficient redistribution of income 
D) a fairer and more efficient redistribution of income 
A) a more efficient distribution of income 
B) a fairer distribution of income 
C) a more efficient redistribution of income 
D) a fairer and more efficient redistribution of income

Question 5

Figure 20-1
  
-Refer to Figure 20-1.If the government imposes a minimum wage below Wo,which effect is it likely to have

Accepted Answer

A) It will increase employment to a level above Q₀ . 
B) It will reduce employment to a level below Q₀ . 
C) The market equilibrium wage will reset to the level of minimum wage. 
D) The market equilibrium wage will be Wo. 
A) It will increase employment to a level above Q₀ . 
B) It will reduce employment to a level below Q₀ . 
C) The market equilibrium wage will reset to the level of minimum wage. 
D) The market equilibrium wage will be Wo.

Question 6

The maximin criterion would lead to a completely egalitarian society.

Accepted Answer

A) True 
 B)False

Question 7

What problematic aspect of measuring inequality relates to the statement "Measures of the distribution of income are based on money income"

Accepted Answer

A) in-kind transfers 
B) the economic life cycle 
C) transitory versus permanent income 
D) economic mobility 
A) in-kind transfers 
B) the economic life cycle 
C) transitory versus permanent income 
D) economic mobility

Question 8

What does economic mobility refer to

Accepted Answer

A) the government's attempt to move monetary assistance to areas most in need 
B) the ability of families to freely move to find good jobs 
C) the movement of people among income classes 
D) the movement of resources from one industry to another 
A) the government's attempt to move monetary assistance to areas most in need 
B) the ability of families to freely move to find good jobs 
C) the movement of people among income classes 
D) the movement of resources from one industry to another

Question 9

Which formula is most representative of a negative income tax proposal

Accepted Answer

A) Taxes owed = (1/4 of income) + $20,000 
B) Taxes owed = (1/4 of income) × 4 
C) Taxes owed = (1/3 of income) - $15,000 
D) Taxes owed = (1/2 of income) × 5/8 
A) Taxes owed = (1/4 of income) + $20,000 
B) Taxes owed = (1/4 of income) × 4 
C) Taxes owed = (1/3 of income) - $15,000 
D) Taxes owed = (1/2 of income) × 5/8

Question 10

Figure 20-1
  
-Refer to Figure 20-1.Supporters of minimum-wage legislation would suggest that an effective minimum wage would be set at which level,and with what effect

Accepted Answer

A) Minimum wage would be above Wo, and employment would rise above Q₀ . 
B) Minimum wage would be above Wo, and employment would fall below Q₀ . 
C) Minimum wage would be below Wo, and employment would rise above Q₀ . 
D) Minimum wage would be below Wo, and employment would fall below Q₀ . 
A) Minimum wage would be above Wo, and employment would rise above Q₀ . 
B) Minimum wage would be above Wo, and employment would fall below Q₀ . 
C) Minimum wage would be below Wo, and employment would rise above Q₀ . 
D) Minimum wage would be below Wo, and employment would fall below Q₀ .

Question 11

Which formula is most representative of a negative income tax proposal

Accepted Answer

A) Taxes owed = (1/4 of income) × 2 
B) Taxes owed = (1/3 of income) - $15,000 
C) Taxes owed = (1/2 of income) + $15,000 
D) Taxes owed = (1/3 of income) x 3/4 
A) Taxes owed = (1/4 of income) × 2 
B) Taxes owed = (1/3 of income) - $15,000 
C) Taxes owed = (1/2 of income) + $15,000 
D) Taxes owed = (1/3 of income) x 3/4

Question 12

Why is measuring poverty using an absolute income scale (like the poverty line) likely to be deceptive

Accepted Answer

A) Income measures don't include the value of in-kind transfers. 
B) Money is more highly valued by the poor than by the rich. 
C) The poor are not likely to participate in the labour market. 
D) Income is not correlated with job satisfaction. 
A) Income measures don't include the value of in-kind transfers. 
B) Money is more highly valued by the poor than by the rich. 
C) The poor are not likely to participate in the labour market. 
D) Income is not correlated with job satisfaction.

Question 13

Based on Canadian income data from 2011,approximately how many times as much income as the bottom fifth did the top fifth of all families receive

Accepted Answer

A) 25 
B) 40 
C) 50 
D) 65 
A) 25 
B) 40 
C) 50 
D) 65

Question 14

Based on data from 2011,approximately what percentage of all income in Canada did the second fifth of all families receive

Accepted Answer

A) 7 
B) 12 
C) 20 
D) 78 
A) 7 
B) 12 
C) 20 
D) 78

Question 15

According to utilitarians,what is the ultimate objective of private and public actions

Accepted Answer

A) to enhance the income of the rich 
B) to ensure an egalitarian distribution of income 
C) to maximize the sum of individual satisfaction toward their life 
D) to provide for the betterment of the poor 
A) to enhance the income of the rich 
B) to ensure an egalitarian distribution of income 
C) to maximize the sum of individual satisfaction toward their life 
D) to provide for the betterment of the poor

Question 16

Why do all welfare programs reduce the incentives to work, and what is the solution to this problem?

Accepted Answer

Under most of the welfare programs,welfa

Question 17

Permanent income theory suggests that a person's income is composed of predictable life cycle variation and which of the following

Accepted Answer

A) structural change in the economy 
B) random and transitory forces in the economy 
C) aggregate fluctuations from business cycles 
D) permanent changes that reflect the seasonal capacity of the economy 
A) structural change in the economy 
B) random and transitory forces in the economy 
C) aggregate fluctuations from business cycles 
D) permanent changes that reflect the seasonal capacity of the economy

Question 18

The concept of utility is fundamental to utilitarianism and describes which of the following

Accepted Answer

A) the optimal distribution of wealth in society 
B) the level of satisfaction derived from a person's circumstances 
C) the method by which society chooses to allocate resources 
D) the method whereby wealth is stored 
A) the optimal distribution of wealth in society 
B) the level of satisfaction derived from a person's circumstances 
C) the method by which society chooses to allocate resources 
D) the method whereby wealth is stored

Question 19

How are in-kind transfers best described

Accepted Answer

A) They are obtained only by those who are crafty and politically connected. 
B) They are the only form of transfer that is provided by the government. 
C) They are nonmonetary items given to the poor through government programs. 
D) They are obtained primarily through homeless shelters. 
A) They are obtained only by those who are crafty and politically connected. 
B) They are the only form of transfer that is provided by the government. 
C) They are nonmonetary items given to the poor through government programs. 
D) They are obtained primarily through homeless shelters.

Question 20

Explain what is meant by "in-kind transfer" programs.Briefly outline the pros and cons associated with an in-kind transfer program.

Accepted Answer

These programs transfer goods and servic

Exam 20: Income Inequality and Poverty

Present the basic premise of the life cycle theory and discuss why it is used to dispel concerns about an unequal income distribution.

Assume that the government proposes a negative income tax that calculates taxes owed by the following formula: Taxes owed = (1/3 × income) - $10,000.If a family doesn't earn any income,how does the negative income tax affect them

What problem in measuring inequality does the fact that the young often borrow and then repay these loans when they are older relate to

The government enacts policies to bring about which result

Figure 20-1 -Refer to Figure 20-1.If the government imposes a minimum wage below Wo,which effect is it likely to have

The maximin criterion would lead to a completely egalitarian society.

What problematic aspect of measuring inequality relates to the statement "Measures of the distribution of income are based on money income"

What does economic mobility refer to

Which formula is most representative of a negative income tax proposal

Figure 20-1 -Refer to Figure 20-1.Supporters of minimum-wage legislation would suggest that an effective minimum wage would be set at which level,and with what effect

Which formula is most representative of a negative income tax proposal

Why is measuring poverty using an absolute income scale (like the poverty line) likely to be deceptive

Based on Canadian income data from 2011,approximately how many times as much income as the bottom fifth did the top fifth of all families receive

Based on data from 2011,approximately what percentage of all income in Canada did the second fifth of all families receive

According to utilitarians,what is the ultimate objective of private and public actions

Why do all welfare programs reduce the incentives to work, and what is the solution to this problem?

Permanent income theory suggests that a person's income is composed of predictable life cycle variation and which of the following

The concept of utility is fundamental to utilitarianism and describes which of the following

How are in-kind transfers best described

Explain what is meant by "in-kind transfer" programs.Briefly outline the pros and cons associated with an in-kind transfer program.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

The Theory of Consumer Choice

Frontiers of Microeconomics

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