Deck 18: The Economics of the Welfare State

Question 1

The percentage of the U.S.population living in poverty in 2009 was:

A)slightly less than 15%.
B)20% to 24%.
C)25% to 29%.
D)greater than 30%.

Answer 1

A

Question 2

The percentage of the population that falls below the poverty line is called the:

A)poor rate.
B)poverty rate.
C)homeless rate.
D)absolute number of people in poverty.

Answer 2

B

Question 3

Economists believe that looking at the distribution of income by quintiles at one point in time overstates the true inequality of income because:

A)it ignores the effect of taxes.
B)it ignores the effect of transfer payments.
C)families near the bottom of the distribution in any given year may be having an unusually bad year, while those at the top may be having an unusually good one.
D)families near the bottom of the distribution in any given year are often having an unusually good year, while those at the top are often having an unusually bad one.

Answer 3

C

Question 4

Which of the following is associated with poverty?

A)lack of adequate employment
B)lack of education
C)lack of proficiency in English
D)lack of adequate employment, lack of education, and lack of proficiency in English

Question 5

The single most important factor influencing children's later socioeconomic attainment is:

A)parental income.
B)education.
C)health care.
D)geographic mobility.

Question 6

Which of the following is not a major cause of poverty in the United States?

A)educational attainment
B)discrimination
C)lack of adequate health coverage
D)welfare

Question 7

Children raised in poverty have a greater likelihood of living in poverty as adults than do those raised in nonpoor families, because low income is highly correlated with higher:

A)high school dropout rates.
B)risk of mental problems and behavioral disorders.
C)rates of illness and hospitalization.
D)high school dropout rates, risk of mental problems and behavioral disorders, and with higher rates of illness and hospitalizatio

Question 8

Government payments to individuals for which no good or service is produced for the government in exchange are:

A)government spending.
B)government purchases.
C)government spending on goods and services.
D)transfer payments.

Question 9

An example of a social insurance program is:

A)expenditure on national defense.
B)Social Security payments to the disabled.
C)the food stamp program.
D)purchasing a new city police car.

Question 10

During the past 25 years the degree of income inequality in the United States has been rising.Which of the following is not a possible reason for this phenomenon?

A)technological progress that has increased the demand for high-skilled workers relative to the demand for low-skilled workers
B)increased imports of labor-intensive products
C)increased immigration
D)higher divorce rates

Question 11

Which of the following transactions is a transfer payment?

A)The government pays an employee by making a direct transfer to the employee's bank account.
B)An army officer, paid by the government, transfers part of the money he receives to the government to pay his taxes.
C)A senior citizen receives a Social Security payment.
D)All of these are transfer payments.

Question 12

Which of the following is not a leading cause of poverty in the United States?

A)lack of adequate employment
B)lack of education
C)the welfare system
D)discrimination

Question 13

In the United States, the mobility between income groups is:

A)relatively high.
B)relatively low.
C)high only for the top two groups.
D)very rare.

Question 14

Which of the following is the best example of social insurance?

A)liability insurance for automobiles
B)food stamps
C)housing subsidies
D)Social Security

Question 15

In 2009, which of the following demographic groups had the highest poverty rate?

A)African-Americans
B)Hispanics
C)Whites
D)female-headed families with no husband present

Question 16

The poverty line is adjusted each year to reflect:

A)changes in the cost of living.
B)changes in the size of the average family.
C)the long-term rise in the average standard of living.
D)changes in the cost of living and changes in the size of the average family.

Question 17

Studies of family income over time reveal that:

A)most people in the lowest quintile tend to stay there over their lifetime.
B)income mobility is rare for all quintiles of the income distribution.
C)many people who move down the income ladder are young.
D)many people who start out at the bottom of the income ladder when they are young move up the income ladder as they age and move down again when they retire.

Question 18

The poverty threshold for a household with one person in 2010 was:

A)about $11,300.
B)about $21,100.
C)about $25,600.
D)about $38,000.

Question 19

America's poverty rate is ________ than that of most _.

A)higher; developing nations
B)higher; other wealthy nations
C)just a little lower; other wealthy nations
D)no lower; developing nations

Question 20

Given that the definition of poverty has not been adjusted to reflect the long-term rise in incomes, you would expect in the percentage of the population living below the poverty line.

A)a decrease
B)an increase
C)no change
D)It is impossible to determine how the percentage of the population living in poverty might change.

Question 21

Over the past two decades, the share of income going to the richest Americans has ________ than the share going to the poorest Americans.

A)risen faster
B)risen more slowly
C)fallen faster
D)fallen more slowly

Question 22

A factor that has been associated with the increase in income inequality in the United States is:

A)the growth in technology.
B)the reduction in the percentage of the population over the age of 65.
C)the smaller gap between the wages of skilled and unskilled workers.
D)affirmative action programs.

Question 23

Which of the following was not mentioned in the book as a possible factor in increasing income inequality in the United States since 1968?

A)increases in immigration
B)growth in international trade
C)technological change
D)a reduction in the number of people attending college

Question 24

According to the book, the data show that in the United States in the first two decades following World War II:

A)income distribution in the United States became less equal.
B)income equality measures stayed the same.
C)income distribution became more equal.
D)there was no way to determine income distribution.

Question 25

Redistribution programs are means tested.To qualify for such a program, a person must demonstrate that:

A)his or her family is larger than the mean family size for the country as a whole.
B)his or her average (or mean) family income has fallen (or not gone up) during the past three years.
C)he or she is making serious efforts to get a job, even though he or she is currently unemployed.
D)his or her income (or means) is below a certain specified level.

Question 26

Which of the following programs represents in-kind transfers?

A)the Earned Income Tax Credit
B)Temporary Assistance for Needy Families
C)Social Security
D)Medicaid

Question 27

Among the following, which is a factor that has been associated with the increase in income inequality in the United States?

A)a decrease in households headed by single women
B)a reduction in the percentage of the population over the age of 65
C)a smaller gap between the wages of skilled and unskilled workers
D)the way that technological change has affected labor demand

Question 28

The identifies the income at which half of the households in the population earn more and half of the population earns less.

A)median household income
B)mean household income
C)poverty level
D)Gini coefficient

Question 29

The is widely used to measure income inequality.

A)Gini coefficient
B)median household income
C)poverty rate
D)ability-to-pay principle

Question 30

A popular explanation for the most important cause of the increase in income inequality in recent years is:

A)the elimination of many income redistribution programs.
B)rapid technological change.
C)the failing education system.
D)the failing education system and rapid technological change.

Question 31

According to the book, the data show that in the United States since World War II, the distribution of income has:

A)become more equal.
B)become less equal.
C)stayed about the same.
D)changed first toward greater equality and then, after 1968, toward greater inequality.

Question 32

Food stamps, Medicaid, and housing subsidies are all examples of:

A)a negative income tax.
B)unemployment benefits.
C)in-kind transfers.
D)the Temporary Assistance for Needy Families program.

Question 33

Which of the following American welfare programs is an in-kind benefit that is not means tested?

A)Medicaid
B)Medicare
C)food stamps
D)Social Security income

Question 34

A factor that has been associated with the increase in income inequality in the United States is the:

A)decrease in households headed by single women.
B)reduction in the percentage of the population over the age of 65.
C)increase in immigration.
D)slowdown in technological change.

Question 35

A ________ program is one for which the recipient qualifies on the basis of _.

A)social insurance; income
B)means-tested; age
C)means-tested; income
D)social insurance; need

Question 36

When a welfare program is provided to those whose income falls below some minimum, it is said to be:

A)means tested.
B)an in-kind benefit.
C)a monetary benefit.
D)a negative income tax.

Question 37

If a nation's Gini coefficient is rising over time, it is an indicator of:

A)an increase in the poverty rate.
B)a decrease in the poverty rate.
C)an increase in income inequality.
D)a decrease in income inequality.

Question 38

There are six households in a rural community.Each household earns $40,000 per year.Suppose that a new resident builds a mansion in the community and that the income in the new household is $4 million per year.After the new resident arrives, the median household income has ________ and the mean household income has _.

A)increased; increased
B)not changed; increased
C)increased; not changed
D)not changed; not changed

Question 39

There is considerable among the quintiles of the distribution of income, with many families moving from ________ and others moving from quintiles.

A)immobility; lower to higher; higher to
B)lower mobility; higher to lower; lower to
C)higher immobility; lower to lower; higher to
D)higher stability; lower to higher; higher to higher

Question 40

Food stamps are an example of:

A)a negative income tax.
B)an in-kind benefit.
C)a monetary benefit.
D)unemployment insurance.

Question 41

The provision of specific goods and services (rather than cash) to needy people is:

A)the income effect.
B)the wealth effect.
C)in-kind benefits.
D)Rawlsian assistance.

Question 42

In the United States, the government pays of all medical costs.

A)100%
B)between 70% and 80%
C)approximately 50%
D)less than 20%

Question 43

In 2009, health care expenditures in the United States were approximately per person.

A)$500
B)$1,000
C)$8,000
D)$12,000

Question 44

Critics of Temporary Assistance for Needy Families argue that it creates perverse incentives such as:

A)family breakup, since a family with both spouses present may not qualify for aid.
B)a reward for not seeking work.
C)the abandonment of children.
D)family breakup, a reward for not seeking work, and the abandonment of children.

Question 45

Which of the following American welfare programs is a means-tested in-kind benefit?

A)Social Security
B)Temporary Assistance to Needy Families
C)food stamps
D)unemployment insurance

Question 46

In most wealthy countries excluding the United States, the government pays of all medical costs.

A)100%
B)between 70% and 80%
C)between 30% and 40%
D)less than 20%

Question 47

Programs designed to provide benefits to people whose income falls below some minimum are called:

A)means-tested programs.
B)relative income programs.
C)absolute income programs.
D)nominal income programs.

Question 48

The negative income tax:

A)is the term used by economists to describe a badly designed tax system.
B)refers to a tax system in which low incomes are taxed at a higher rate than high incomes.
C)is a program in which low-income working families receive income supplements rather than having to pay positive taxes.
D)is the minimum tax that must be paid by a business even if it has a negative income (or a loss).

Question 49

An example of a means-tested program is:

A)expenditure on national defense.
B)Social Security payments to the disabled.
C)the food stamp program.
D)purchasing a new city police car.

Question 50

________ is (are) a means-tested monetary benefit in in a welfare program.

A)Food stamps
B)Medicaid
C)Temporary Assistance for Needy Families
D)Unemployment insurance

Question 51

Becky works for a large grocery store that provides a health insurance program to all workers.This is an example of:

A)Medicaid.
B)employment-based health insurance.
C)government health insurance.
D)a single-payer health care system.

Question 52

Suppose ABC Health is a private health insurance company that offers a one-size-fits-all policy to all customers.Each customer pays a premium equal to the average consumer's annual medical expenses.This is a system that has the potential to fail due to the:

A)adverse selection problem.
B)income inequality problem.
C)single-payer problem.
D)equity versus efficiency problem.

Question 53

The largest ________ program in the United States is _.

A)social insurance; Medicaid
B)social insurance; Social Security payments to retired persons
C)means-tested; farmers' aid
D)means-tested; Social Security payments to retired persons

Question 54

Which of the following American welfare programs is a monetary benefit that is not tested?

A)Earned Income Tax Credit
B)Social Security
C)food stamps
D)Medicare

Question 55

The age group in the United States with the highest poverty rate is years old.

A)under 18
B)18 to 24
C)25 to 44
D)45 to 64

Question 56

Private health insurance is funded by:

A)the government.
B)tax contributions to Medicare.
C)people who are extremely ill who pay very high premiums.
D)members of a large pool of individuals, each paying a fixed premium to a private company that agrees to pay most of the medical expenses of the members.

Question 57

Measured by the amount of money spent by the U.S.government, which of the following American welfare programs is the largest?

A)food stamps
B)unemployment insurance
C)Medicare
D)Social Security

Question 58

In the United States, individuals pay directly (out of pocket) of all medical costs.

A)100%
B)between 70% and 80%
C)50%
D)less than 15%

Question 59

Which of the following programs is not an antipoverty program?

A)the Earned Income Tax Credit
B)Temporary Assistance for Needy Families
C)Social Security
D)Medicaid

Question 60

Compared to a generation ago, public aid programs that are likely to benefit families have received:

A)no funding.
B)less funding.
C)more funding.
D)about the same level of funding.

Question 61

Approximately of Americans have no health insurance.

A)5% to 10%
B)15% to 20%
C)50% to 60%
D)70% to 80%

Question 62

When healthy people drop their health insurance, leaving only sicker people to buy insurance, this is called:

A)moral hazard
B)an efficient free market outcome.
C)adverse selection.
D)maximizing profits.

Question 63

Between 2000 and 2009, the number of people with employment-based insurance:

A)increased.
B)remained the same.
C)decreased.
D)fluctuated randomly.

Question 64

Which of the following countries has a health care system which directly employs health care workers and runs hospitals and clinics that are free to the public?

A)United States
B)Canada
C)France
D)Great Britain

Question 65

Medicaid is funded by:

A)private charities.
B)the federal government only.
C)state governments only.
D)federal and state governments.

Question 66

Which of the following countries gives all of its citizens a choice between private doctors and hospitals and care in a system run directly by the government?

A)United States
B)Canada
C)France
D)Great Britain

Question 67

Some nations, like Canada, have adopted a health care system in which the government pays the medical bills.This is known as a(n):

A)employment-based system.
B)private health insurance system.
C)means-tested system.
D)single-payer system.

Question 68

The U.S.government health insurance program for people 65 years old and older is:

A)Medicare.
B)Medicaid.
C)the Veterans Administration.
D)health savings accounts.

Question 69

The U.S.government health insurance program that is means tested is:

A)Medicare.
B)Medicaid.
C)the Veterans Administration.
D)health savings accounts.

Question 70

Most Americans receive their health insurance through:

A)Medicare.
B)Medicaid.
C)their employer.
D)direct purchase.

Question 71

Children in low-income families which can't afford insurance are covered by:

A)Medicare.
B)Medicaid.
C)SCHIP (State Children's Insurance Health Program)
D)the Veteran's Administration.

Question 72

People may be uninsured for all of the following reasons except that:

A)their employer does not provide health insurance.
B)they are too old to qualify for health insurance.
C)they are relatively healthy and choose to save their money rather than buy insurance.
D)they are unemployed and can't afford to purchase insurance.

Question 73

In 2009, the average cost of health insurance for a family of four was approximately ______ per year.

A)$500
B)$1,000
C)$5,000
D)$14,000

Question 74

Insurance companies attempt to minimize adverse selection by:

A)relying on the government to pay for health insurance.
B)screening and employment-based health insurance.
C)relying on the free market to allocate risk efficiently.
D)charging high premiums to young, healthy people.

Question 75

An advantage of employment-based insurance is that it:

A)reduces moral hazard.
B)helps reduce the problem of adverse selection.
C)increases government tax revenues.
D)guarantees care that is higher quality than that provided by government insurance such as Medicare.

Question 76

Health care in the United States is different from that of other wealthy countries in all of the following ways except that:

A)Americans rely more on private health insurance.
B)Americans spend more per person on health care.
C)The United States is the only country in which large numbers of people lack health insurance.
D)The United States is the only country that provides government health care.

Question 77

When adverse selection occurs, healthy people pay premiums that are their actual health care costs.

A)greater than
B)equal to
C)less than
D)positively correlated to

Question 78

Which of the following countries does not provide health care to all of its citizens?

A)United States
B)Canada
C)France
D)Great Britain

Question 79

An advantage of employment-based insurance is that it:

A)increases moral hazard.
B)increases the likelihood of adverse selection.
C)increases government tax revenues.
D)receives favorable tax treatment.

Question 80

Which of the following countries has a single-payer system funded through taxes in which the government is the principal payer of medical bills for all of its citizens?

A)United States
B)Canada
C)France
D)Great Britain