Deck 23: Income Inequality, Poverty, and Discrimination

Question 1

The U.S. poverty rate for the elderly (65 and over)is higher than for the general population.

Answer 1

False

Question 2

The U.S. poverty rate was, in 2017, a little over 12 percent..

Answer 2

False

Question 3

An employer (biased against African Americans)whose discrimination coefficient is $5 will hire only whites if the actual African-American-white wage gap is $7.

Answer 3

False

Question 4

The crowding model of occupational segregation predicts that domestic output will increase if occupational segregation is ended.

Question 5

The Lorenz curve is a graph that relates income to household spending.

Question 6

About a quarter of all U.S. households had personal incomes of $100,000 or more in 2017.

Question 7

In the United States since 1980, the poor have gotten poorer and the rich have gotten richer in both relative and absolute terms.

Question 8

Currently over 90 percent of all workers in the United States are covered by Social Security.

Question 9

The top 20 percent of U.S. income earners receive nearly 80 percent of total U.S. income.

Question 10

TANF stands for Temporary Assistance for Needy Families.

Question 11

Statistical discrimination is also known as occupational discrimination.

Question 12

In the U.S., the top 20 percent of households received a little more than 50 percent of total pretax income in 2017.

Question 13

Unemployment compensation is financed by taxes levied on employers.

Question 14

The closer the Lorenz curve is to the diagonal, the greater is the degree of income inequality.

Question 15

A curve showing the quintile distribution of a nation's income is called the Gini curve.

Question 16

Since the implementation of TANF in 1996, the U.S. welfare rolls have fallen by roughly one-half and participation remains low in 2017.

Question 17

The standard data on income distribution do not include the value of noncash transfers as income.

Question 18

Labor market discrimination increases the size of the nation's GDP by promoting specialization on the basis of race.

Question 19

A reduction in the collective discrimination coefficients of employers will increase the wage rate of those discriminated against but reduce their employment.

Question 20

After the implementation of TANF, the U.S. welfare rolls fell by roughly one-half between 1996 and 2007.

Question 21

The Supplemental Nutrition Assistance Program (formerly the food-stamp program)mostly pays out cash-vouchers to eligible households.

Question 22

The basic reason why the debate between income equality versus inequality is ongoing is because there is a trade-off between income equality and economic efficiency.

Question 23

Eligibility for social insurance programs is largely on the basis of need and "means tests."

Question 24

All social insurance programs are welfare or public charity programs.

Question 25

U.S. income statistics indicate that approximately one-eighth of the nation lived in poverty in 2017.

Question 26

The Social Security program is financed with funds from general tax revenues of the federal government.

Question 27

The Temporary Assistance for Needy Families (TANF)program that replaced the old Aid for Families with Dependent Children welfare program succeeded in reducing the number of welfare recipients and increasing the employment rate among single mothers until the 2007-2008 recession hit.

Question 28

Differences in skills or ability are one major reason for income differences in the United States.

Question 29

In the taste-for-discrimination model, a prejudiced employer who prefers white workers and who has a discrimination coefficient of $3/hour would still hire African-Americans if the market wage rate were $22/hour for white workers and $20/hour for African Americans.

Question 30

Labor market discrimination occurs when equivalent labor resources are paid or treated differently even though their productive contributions are equal.

Question 31

During the past 35 years or so, the degree of income inequality in the United States has decreased considerably.

Question 32

The unequal distribution of wealth among households in the United States is one of the causes of income inequality.

Question 33

The Temporary Assistance for Needy Families (TANF)program expanded welfare benefits and has no limit on the number of years for receiving welfare benefits.

Question 34

If income inequality is increasing, it means that the income levels of the poor are falling while the income levels of the rich are rising.

Question 35

The incidence of poverty is very high among the elderly (65 years or older).

Question 36

The Gini coefficient or ratio is a summary measure of income inequality derived from the Lorenz curve.

Question 37

The distribution of household income in the United States becomes more unequal after taxes and transfer payments are taken into account.

Question 38

When welfare payments like housing credits are completely cut off when the recipient's income goes above a certain threshold, then this could discourage the recipient from finding more work or a better-paying job.

Question 39

One basic argument for redistributing income to achieve more equality rests on the idea of maximizing the society's total utility when there is diminishing marginal utility from income.

Question 40

A Universal Basic Income program would guarantee that every household receives the same income.

Question 41

Which of the following Gini ratios indicates the highest degree of income inequality?

A)0.67
B)0.56
C)0.33
D)0.15

Question 42

In 2017, a household with an annual income of $80,000 would find itself in the

Question 43

Suppose the market wage rate for whites is $18 an hour and the monetary value a prejudiced employer attaches to the disutility of hiring African Americans is $3. This employer will be indifferent between hiring African Americans and whites only when the African-American wage rate is

A)advocate redistributing income from Joseph to Rita.
B)advocate redistributing income from Rita to Joseph.
C)be content with this distribution of income between Rita and Joseph.
D)argue that any redistribution of income between them would increase total utility.

Question 44

Suppose Rita obtains 16 units of utility from the last dollar of income received by her, and Joseph obtains 12 units of utility from the last dollar of his income. Assume both Joseph and Rita have the same capacity to derive utility from income. Those who favor an equal distribution of income would

A)third 20 percent of households.
B)second 20 percent of households.
C)highest 20 percent of households.
D)fourth 20 percent of households.

Question 45

In the quintile distribution of income, the term "quintile" represents

A)$61,372.
B)$42,820.
C)$56,610.
D)$68,426.

Question 46

Which of the following Gini ratios indicates the highest degree of income inequality?

A)can say that the income of population B is more equally distributed than that of population A.
B)can say that the income of population B is less equally distributed than that of population A.
C)cannot make a meaningful comparison of the income distributions of populations A and B.
D)can say that the richest quintile of population A receives 40 percent of total income.

Question 47

In 2017, the average income for households in the United States was about

A)$3.
B)$12.
C)$15.
D)$21.

Question 48

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $4,000, $3,200, $2,400, $1,800, and $1,200, respectively. The members of population B, consisting of Fred, George, Holly, Irma, and Joan, receive incomes of $4,000, $3,000, $1,250, $950, and $800, respectively. We

A)87.5
B)60
C)25
D)76.5

Question 49

In 2017, a household with an annual income of $50,000 would find itself in the

A)second quintile of the household income distribution.
B)third quintile of the household income distribution.
C)fourth quintile of the household income distribution.
D)fifth (highest)quintile of the household income distribution.

Question 50

In the taste-for-discrimination model, an increase in the prejudice of employers will decrease the demand for African-American workers, lower the African-American wage rate, and lower the ratio of African-American to white wages.

Question 51

Refer to the table. The decline in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the

A)second 20 percent of households.
B)third 20 percent of households.
C)fourth 20 percent of households.
D)highest 20 percent of households.

Question 52

An employer whose discrimination coefficient is $7 will

A)more than $2.
B)at most 0.2.
C)less than $2.
D)1 or less.

Question 53

Refer to the table. The decline in percentage of income received from before taxes and transfers to after taxes and transfers is greatest for the

A)randomly hire African-American and white workers if the actual African-American-white wage differential is more than $4.
B)randomly hire African-American and white workers if the actual African-American-white wage differential is less than $4.
C)hire only African Americans if the actual African-American-white wage differential is less than $4.
D)hire only African Americans if the actual African-American-white wage differential is more than $4.

Question 54

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $4,000, $3,000, $2,000, and $1,000, respectively. What percentage of total income is received by the fourth quintile?

A)27 percent of total income.
B)35 percent of total income.
C)43 percent of total income.
D)23 percent of total income.

Question 55

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the highest 60 percent of the income receivers in population A?

A)26.7
B)20
C)33.3
D)16.7

Question 56

Assume that all workers are equally productive, but the wage rate for men is $25, compared to $23 for women. An employer who employs only male workers must have a discrimination coefficient of

A)0.71
B)0.55
C)0.45
D)0.31

Question 57

Suppose an employer is biased against African Americans. If his discrimination coefficient is $4, the employer will

A)refuse to hire nonpreferred-race workers at any wage rate.
B)hire only preferred-race workers if the actual nonpreferred-preferred wage differential is $8 an hour.
C)hire only nonpreferred-race workers if the actual nonpreferred-preferred wage differential is $8 an hour.
D)hire only preferred-race workers if the nonpreferred-preferred wage differential is $7.

Question 58

Statistical discrimination occurs when employers base hiring decisions on individual workers' previous employment records and statistics.

Question 59

In 2017, the fourth quintile of households in the U.S. income distribution received about

A)highest quintile of the household income distribution.
B)second quintile of the household income distribution.
C)third quintile of the household income distribution.
D)fourth quintile of the household income distribution.

Question 60

The crowding model of occupational segregation shows how white males earn higher incomes at the expense of women and minorities who are restricted to a limited number of occupations.

Question 61

The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the

A)can say that the income of population B is less equally distributed than that of population A.
B)can say that the income of population B is more equally distributed than that of population A.
C)cannot make a meaningful comparison of the income distributions of populations A and B.
D)can say that the poorest quintile of population B receives 12 percent of total income.

Question 62

The Lorenz curve

A)seventeen
B)ten
C)eight
D)twenty

Question 63

Refer to the diagram, where curves (a)through (e)are Lorenz curves for five different countries. Income is equally distributed in

A)0 and 10,000.
B)1 and 10.
C)−1 and +1.
D)0 and 1.

Question 64

The Gini ratio of income inequality ranges between

A)measures the relative extent of poverty in a nation.
B)compares the income of persons, households, or households at the 90th percentile of the income distribution to the income at the 10th percentile.
C)is a numerical measure of the overall dispersion of income in a nation.
D)is found by dividing the entire area below and to the right of the diagonal in the Lorenz diagram by the area between the diagonal and Lorenz curve.

Question 65

Refer to the diagram, where curves (a)through (e)are for five different countries. The Gini ratio is lowest in country

A)none of the countries shown.
B)country b.
C)countries a and e.
D)country a.

Question 66

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. The members of population B, consisting of Fred, George, Holly, Irma, and Joan, receive incomes of $4,000, $3,000, $1,250, $950, and $800, respectively. We

A)25
B)60
C)50
D)20

Question 67

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the lowest 60 percent of the income receivers in population A?

A)50
B)5
C)25
D)20

Question 68

Which of the following Gini ratios indicates the highest degree of income inequality?

A)smaller is the Gini ratio and the greater is the degree of income inequality.
B)larger is the Gini ratio and the greater is the degree of income inequality.
C)smaller is the Gini ratio and the lesser is the degree of income inequality.
D)larger is the Gini ratio and the lesser is the degree of income inequality.

Question 69

Refer to the diagram, where curves (a)through (e)are for five different countries. Of the countries listed below, income is most unequally distributed in country

A)a.
B)b.
C)c.
D)e.

Question 70

The lowest quintile of households in the income distribution (as of 2017)receives about

A)highest quintile of the household income distribution.
B)second quintile of the household income distribution.
C)lowest quintile of the household income distribution.
D)fourth quintile of the household income distribution.

Question 71

The Lorenz curve portrays

A)plots graphically the poverty rate over time.
B)is located closer to the diagonal today than it was in 1980.
C)plots graphically the distribution of income.
D)is located farther from the diagonal when income is defined to include the value of noncash transfers.

Question 72

The Gini ratio

A)the functional distribution of income.
B)the ratio of labor to capitalist income.
C)the personal distribution of income.
D)income equality.

Question 73

Census data indicate that, as of 2017, the top fifth of all households receive about ________ times as much income as the bottom fifth.

A)43 percent of total income.
B)30 percent of total income.
C)62 percent of total income.
D)52 percent of total income.

Question 74

The highest quintile of households in the income distribution (as of 2017)

A)2.4 percent of the total income.
B)3.1 percent of the total income.
C)8.2 percent of the total income.
D)10 percent of the total income.

Question 75

In 2017, the highest quintile of households in the U.S. income distribution received about

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

Question 76

In 2017, a household with an annual income of $80,000 would find itself in the

A)5 percent of the income receivers.
B)10 percent of the income receivers.
C)20 percent of the income receivers.
D)25 percent of the income receivers.

Question 77

Refer to the diagram, where curves (a)through (e)are for five different countries. The Gini ratio is

A)a.
B)b.
C)c.
D)d.

Question 78

Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the highest quintile?

A)zero in country (e)and 1 in country (a).
B)greater in country (b)than in country (c).
C)zero in country (a)and 1 in country (e).
D)less than 0.5 in country (d).

Question 79

Which of the income distributions in the accompanying table is closest to describing the United States (as of 2017)?

A)receives about 3 percent of the total income.
B)comprises 10 percent of all households.
C)receives about 52 percent of the total income.
D)receives about 43 percent of the total income.

Question 80

In 2017, a household with an annual income of $23,000 would find itself in the

A)second quintile of the household income distribution.
B)third quintile of the household income distribution.
C)fourth quintile of the household income distribution.
D)fifth (highest)quintile of the household income distribution.