Deck 18: Who Gets What the Distribution of Income

Question 1

Attempts to reduce income inequality may lead to greater income inequality.

Answer 1

True

Question 2

On its horizontal axis, a Lorenz curve measures:

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

Answer 2

cumulative percentage of families.

Question 3

Economic theory tells us that inequality in income is unfair if differences in opportunity leads to inequality of income.

Answer 3

False

Question 4

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

Question 5

U.S. poverty figures do not include in-kind transfers or underreporting of income.

Question 6

If a nation's Lorenz curve lies on the 45-degree line of income equality:

A)proportionately more of the nation's income is received by the lowest 20 percent of families than by the highest 20 percent.
B)income is unequally distributed.
C)proportionately more of the nation's income is received by the highest 20 percent of families than by the lowest 20 percent.
D)the income received by each 20 percent of families is 20 percent of the total income.

Question 7

The recession that began with a housing market crash in 2007 had the effect of reducing income inequality.

Question 8

Share distribution of income is the relative division of total income among:

A)capitalists, workers, and landowners.
B)income groupings.
C)socioeconomic groupings.
D)nationality groupings.

Question 9

On the Lorenz curve, a perfectly equal distribution of income would be represented by:

A)a line with a slope of 1.
B)a horizontal line.
C)a vertical line.
D)an upward-shaped curve.

Question 10

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

Question 11

Income is more unequally distributed than wealth in the United States.

Question 12

An example of share distribution of income is how much:

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.

Question 13

Income inequality increased in the United States from 1929 to 1970 and decreased thereafter.

Question 14

Most economists believe that it is impossible for government programs that benefit the rich to also benefit the poor.

Question 15

All of the following are examples of socioeconomic distribution of income except how much:

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.

Question 16

Positive economics is concerned with justifying a particular distribution of income.

Question 17

Poverty is defined by the U.S. government as having an income equal to or less than three times an average family's minimum food expenditure as calculated by the U.S. Department of Agriculture.

Question 18

A Lorenz curve is a geometric representation of the:

A)level of income earned by a given family in a given country at a given time.
B)share distribution of income among families in a given country at a given time.
C)behavior of income over time.
D)behavior of income across countries.

Question 19

If there were no income inequality in a nation, its Lorenz curve would be:

A)convex.
B)concave.
C)an upward-sloping straight line with slope of 1.
D)a horizontal line.

Question 20

The Lorenz curve would be a diagonal line if income were distributed equally.

Question 21

Real income will fall whenever:

A)prices and wages increase at the same rate.
B)wages increase faster than prices.
C)prices increase faster than wages.
D)wages increase and prices stay the same.

Question 22

Refer to the graph shown. The richest 10 percent of the families earn:

A)37 percent of the income.
B)48 percent of the income.
C)52 percent of the income.
D)63 percent of the income.

Question 23

Which of the following statements contradicts the evidence shown in the graph shown?

A)Income is more equally distributed in Sweden than it is in Brazil.
B)Income is more equally distributed in Taiwan than it is in the United States.
C)Income is more equally distributed in Sweden than it is in Taiwan.
D)Income is more equally distributed in the United States than it is in Brazil.

Question 24

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

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 25

The Lorenz curve:

A)is an absolute measure of income inequality.
B)is a relative measure of income inequality.
C)takes into account changes in the standard of living.
D)has elements of absolute and relative measures.

Question 26

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

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 27

Refer to the graph shown. The poorest 50 percent of the families earn:

A)6 percent of the income.
B)19 percent of the income.
C)36 percent of the income.
D)64 percent of the income.

Question 28

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

A)6.6 percent of the income.
B)17.3 percent of the income.
C)10.7 percent of the income.
D)20 percent of the income.

Question 29

Which of the following statements is true?

A)Income distribution became less equal from 1929 to 1970.
B)Income distribution became less equal from 1970 to today.
C)The income of the bottom fifth of families rose 10 percent from 1970 to today.
D)The income of the bottom fifth of families fell 10 percent from 1929 to today.

Question 30

Refer to the graph shown. The 25 percent of the families with the highest income earn:

A)6 percent of the income.
B)19 percent of the income.
C)36 percent of the income.
D)64 percent of the income.

Question 31

Refer to the graph shown. The poorest 25 percent of the families earn:

A)6 percent of the income.
B)19 percent of the income.
C)36 percent of the income.
D)64 percent of the income.

Question 32

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

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

Question 33

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

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 34

Refer to the graph shown. The fourth quintile (a quintile is a fifth)of the families earn:

A)52 percent of the income.
B)28 percent of the income.
C)24 percent of the income.
D)20 percent of the income.

Question 35

A Lorenz curve that becomes less bowed out implies:

A)a change in income distribution toward more inequality.
B)no change in income distribution.
C)a change in income distribution toward more equality.
D)an increase in poverty.

Question 36

Refer to the graph shown. The middle quintile (the middle fifth)of families earn:

A)10.7 percent of the income.
B)15.3 percent of the income.
C)22.1 percent of the income.
D)32.6 percent of the income.

Question 37

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

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 38

The U.S. official poverty threshold is:

A)three times the U.S. Department of Agriculture's minimum food budget.
B)three times the U.S. Department of Housing's minimum housing allowance.
C)the level of income earned by a person receiving minimum wage.
D)the level of welfare benefits received by an eligible family.

Question 39

Refer to the graph shown. The country with the most unequal distribution of income is:

A)Sweden.
B)Taiwan.
C)the United States.
D)Brazil.

Question 40

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

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

Question 41

According to official statistics in the United States, a family is considered to live in poverty if its money income:

A)is below three times an average family's minimum food budget.
B)is below the income earned by 90 percent of all Americans.
C)is below the income earned by 80 percent of all Americans.
D)and all government transfers are below three times an average family's minimum food budget.

Question 42

Wealth is defined as the:

A)total amount of income earned in a one-year period.
B)value of all assets minus the money that is owed.
C)value of assets that can be converted to cash on short notice.
D)value of monetary assets.

Question 43

Over 17 million American households had a net worth over $1 million. This means:

A)their assets minus liabilities were greater than $1 million.
B)their total income minus expenses was greater than $1 million.
C)more than $1 million flowed through the accounts of over 17 million households.
D)the Lorenz curve would show $1 million for over 17 million households.

Question 44

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

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 45

The price of food relative to other goods has:

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 46

In the United States, the income distribution is shaped like a:

A)pyramid.
B)diamond.
C)square.
D)pentagon.

Question 47

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

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 48

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

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 49

Since the minimum food budget used to determine the poverty line is not adjusted for changes in the standard of living, it is, in principle:

A)an absolute measure of poverty.
B)a relative measure of poverty.
C)an inaccurate measure of poverty.
D)an optimal measure of poverty.

Question 50

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

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

Question 51

Which of the following Gini coefficients represents the income distribution closest to being equal?

A)0.02
B)0.10
C)0.50
D)0.98

Question 52

The official poverty income threshold in the United States is:

A)adjusted for changes in the basket of food purchased by the average family.
B)not adjusted for the effects of inflation.
C)adjusted for inflation.
D)adjusted for increases in standard of living.

Question 53

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. Which of the following people is most likely to be in the bottom 40 percent?

A)Ann is 29 years old, earns $120,000 a year, has no financial assets, but still has student loans of $4,000.
B)Betty is 29 years old, earns $40,000 a year, has $80,000 in a savings account, and has credit card debt of $4,000.
C)Carol is 69 years old, is disabled, and is living on Social Security and dividends from her $500,000 of mutual funds. She has no debt.
D)Debra is 45 years old, and the only money she gets is $40,000 of rental payments from an apartment building she owns that is worth $250,000. She owes the bank $50,000.

Question 54

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?

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 55

A Gini coefficient of 1 denotes:

A)zero income.
B)infinite income.
C)perfect inequality of income distribution.
D)perfect equality of income distribution.

Question 56

The Gini coefficient for Algeria is about 0.4. How would this number be shown on a Lorenz curve?

A)It cannot be shown; the Lorenz curve and the Gini coefficient are alternative ways of measuring inequality.
B)The area between the Lorenz curve and the line of absolute equality is 40 percent of the total area under the line of equality.
C)The area between the Lorenz curve and the x-axis is 40 percent of the total area below the line of equality.
D)The length of the Lorenz curve is 40 percent longer than the line of equality.

Question 57

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

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

Question 58

For the purpose of determining whether a family is officially considered to be living in poverty, poverty figures do not include:

A)after-tax income of the poor.
B)food stamps.
C)earned income.
D)profits of a small business owner.

Question 59

The minimum food budget used to determine the poverty line was determined in the:

A)1960s but has been recalculated every decade to account for rising standards of living.
B)1960s and is not recalculated to account for rising standards of living.
C)1930s but has been recalculated every decade to account for rising standards of living.
D)1930s and is not recalculated to account for rising standards of living.

Question 60

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?

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 61

When a tax is progressive, the average tax rate:

A)decreases with income.
B)is constant with income.
C)increases with income.
D)first increases with income, then decreases with income.

Question 62

The three problems with determining whether an equal income distribution is fair include all of the following except:

A)people don't start from equivalent positions.
B)people's needs differ.
C)income differences and wealth differences are not the same.
D)people's efforts differ.

Question 63

To remedy unfairness in the distribution of income, many Americans look to all of the following except:

A)affirmative action laws.
B)comparable worth laws.
C)social welfare programs.
D)regressive taxes.

Question 64

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

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

Question 65

The underclass in the United States has expanded over the last several decades as a fraction of the overall population partly because:

A)there are more people in the United States.
B)there has been a substantial movement of Black people into the middle class.
C)there has been a substantial amount of well-educated immigrants from Southeast Asia.
D)there has been a substantial amount of illegal immigration.

Question 66

For U.S. workers in tradable sectors such as manufacturing, the effect of globalization has been:

A)to push wages up relative to those in nontradable sectors such as government or service workers.
B)to cause greater upward mobility for those workers while reducing downward mobility.
C)to push wages down or leave them unemployed.
D)to reduce unemployment in this group while leaving wage rates about the same.

Question 67

If redistribution is a public bad, rather than a public good, redistributing income to the poor makes others feel that society is:

A)unjust and therefore decreases their utility.
B)unjust and therefore increases their utility.
C)more just and therefore decreases their utility.
D)more just and therefore increases their utility.

Question 68

Friedrich Nietzsche's views on income distribution and fairness can best be described by the statement:

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)An efficiently operating marketplace will generate an equal distribution of income without government intervention.

Question 69

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

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 70

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

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 71

Which of the following is not one of the side effects economists have found in programs to redistribute income?

A)The incentive effects of a tax may result in a switch from labor to leisure.
B)The effects of taxes may include attempts to avoid or evade taxes, leading to a decrease in measured income.
C)The incentive effects of distributing money may cause people to make themselves look needier than they really are.
D)The incentive effects of distributing money may cause people to avoid government assistance programs.

Question 72

John Rawls's views on income distribution and fairness can best be described by the statement:

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 73

In most developed countries, the class system:

A)is the same as in underdeveloped countries.
B)has been completely eliminated.
C)is a pyramid with the largest group being the lower class.
D)is diamond-shaped with the largest group being the middle class.

Question 74

Some economists believe that:

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 75

An increase in the tax rate can cause total tax collections to fall if:

A)higher taxes cause individuals to substitute leisure for labor.
B)higher taxes cause individuals to substitute labor for leisure.
C)the tax is regressive.
D)the tax is progressive.

Question 76

In the United States:

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 77

In the United States, the class system is a:

A)triangle, and in most developing countries the class system is a triangle.
B)pentagon, and in most developing countries the class system is a diamond.
C)pentagon, and in most developing countries the class system is a triangle.
D)triangle, and in most developing countries the class system is a diamond.

Question 78

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

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 79

The democratic system of one person/one 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 80

A higher tax rate could result in lower tax revenues if:

A)attempts to avoid or evade taxes increase.
B)individuals switch from leisure to labor.
C)fewer people qualify for government assistance.
D)the tax has no incentive effects.