Deck 15: Poverty and Income Distribution

Question 1

Which of these is NOT a measure of income?

A) a week's worth of earnings from your part-time job
B) last year's household earnings
C) your assets as of July 1, 2014
D) a month's worth of earnings

Answer 1

C

Question 2

Which statement CANNOT be true?

A) Joe is wealthy, even though he earns no income.
B) Jane earns a very high salary but has negative net wealth.
C) Wealth measures the flow of income.
D) High-income earners can be in debt.

Answer 2

C

Question 3

To say that income is a flow measure means that it

A) measures the receipt of funds at a given point in time.
B) measures the receipt of funds over a period of time.
C) is determined by a household's assets minus its net liabilities.
D) is determined by a household's assets plus its net liabilities.

Answer 3

B

Question 4

_____ is a flow measure reflecting the funds received by individuals or households over a period of time.

A) An asset
B) Wealth
C) Income
D) Assets, wealth, and income are all flow measures.

Question 5

_____ is a stock measure of an individual's or household's assets and net liabilities at a given point in time.

A) An asset
B) Wealth
C) Income
D) Assets, wealth, and income are all stock measures.

Question 6

If a recently retired professional baseball player had accumulated assets of $15 million but is currently teaching part-time at a local high school for $15,000 a year, then he has

A) low income and high wealth.
B) low income and low wealth.
C) high income and high wealth.
D) high income and low wealth.

Question 7

Which demographic group can be expected to earn the highest incomes on average?

A) young adults entering the workforce for the first time
B) new immigrants with low skill levels
C) workers over age 60
D) workers between the ages of 45 and 55

Question 8

Which occurrence would increase average household income?

A) aging of the population
B) increased immigration
C) increased experience of workers
D) increase in the unemployment rate

Question 9

The life cycle effects of income indicate that peak income usually occurs

A) between the ages of 55 and 65.
B) between the ages of 35 and 45.
C) after age 60.
D) between the ages of 45 and 55.

Question 10

In general, as Americans approach 60 years old, household income _____ and savings ____.

A) falls; fall
B) falls; rise
C) rises; fall
D) rises; rise

Question 11

As members of a household approach retirement years, income tends to _____ and savings tends to _____.

A) rise; rise
B) decline; rise
C) rise; decline
D) decline; decline

Question 12

The distribution of income for resources or factors of production is referred to as the

A) income effect.
B) substitution effect.
C) functional distribution of income.
D) personal distribution of income.

Question 13

Since 1929, corporate profits' share of national income has

A) increased about 100%.
B) increased about 30%.
C) remained about the same.
D) decreased about 30%.

Question 14

Labor's share of national income

A) is lower today than it was in 1929.
B) has decreased slightly every decade since 1970.
C) has increased slightly every decade since 1970.
D) was roughly 50% in 2009.

Question 15

Labor's share of national income _____ from 1929 until 1970 and has _____ since 1970.

A) increased; decreased
B) decreased; increased
C) increased; increased
D) decreased; decreased

Question 16

In recent years, the share of national income attributed to rent has _____, and corporate profits have _____.

A) fallen; fallen
B) fallen; risen
C) risen; fallen
D) risen; risen

Question 17

The biggest fluctuations in national income shares have been associated with

A) wages.
B) rent.
C) corporate profits.
D) net interest.

Question 18

The functional distribution of income

A) measures the value of household assets at a given time.
B) splits income according to income quintiles.
C) splits income among factors of production.
D) measures income according to job description.

Question 19

Most income in the United States comes from

A) wages.
B) proprietor's income.
C) net interest.
D) corporate profits.

Question 20

All of these are classified as functional distributions of income, EXCEPT

A) proprietor's income.
B) transfer payments.
C) rent.
D) corporate profit.

Question 21

The distribution of income to individuals or household groups is referred to as the

A) income effect.
B) substitution effect.
C) functional distribution of income.
D) personal distribution of income.

Question 22

When the Census Bureau presents the personal distribution of income, it splits the households into

A) quartiles, or fourths.
B) thirds.
C) tenths.
D) quintiles, or fifths.

Question 23

Ignoring taxes and transfers, the U.S. personal distribution of income has _____ over the past four decades.

A) become more equitable
B) stayed the same
C) become more inequitable
D) seen greater shares of income received by the lowest three quintiles

Question 24

The personal distribution of income measures how much income

A) goes to specific segments of the population.
B) is collected by various government agencies.
C) is earned by different types of businesses.
D) is earned from different sources.

Question 25

In the latest U.S. Census data, the percentage of aggregate income earned by the lowest 20% of households is closest to

A) 5%.
B) 35%.
C) 50%.
D) 80%.

Question 26

Since 1970, which income quintiles have seen their share of U.S. national income fall?

A) the lowest quintile
B) the lowest and second-lowest quintile
C) the second- and third-lowest quintiles
D) the lowest four quintiles

Question 27

Which of these would be included in official estimates of household distribution of income?

A) food stamps
B) housing subsidies
C) Medicare
D) pretax income

Question 28

Since 1970, which quintile(s) has(have) increased in share of aggregate household income?

A) the lowest quintile
B) the top two quintiles
C) the middle three quintiles
D) the highest quintile

Question 29

In the latest U.S. Census data, the percentage of aggregate income earned by the top 20% of households is closest to

A) 100%.
B) 50%.
C) 33%.
D) 20%.

Question 30

About what percentage of national income does the wealthiest 1% of Americans earn?

A) 1%
B) 20%
C) 40%
D) 99%

Question 31

(Figure: Distribution of Income) _____ represents an equal distribution of income.

A) 0ac
B) 0bc
C) 0dc
D) An equal distribution of income is not shown on this graph.

Question 32

(Figure: Distribution of Income) Of the three line segments shown, _____ represents an unequal (but not the worst case) distribution of income.

A) 0ac
B) 0bc
C) 0dc
D) An unequal distribution of income is not shown on this graph.

Question 33

(Figure: Distribution of Income) Of the three line segments shown, which represents the MOST unequal distribution of income?

A) 0ac
B) 0bc
C) 0dc
D) The worst possible distribution of income is not shown on this graph.

Question 34

The _____ rank(s) households of various income levels on the horizontal axis, relating this to their accumulated share of total income on the vertical axis.

A) Phillips curve
B) Lorenz curve
C) Gini coefficient
D) Phillips curve, the Lorenz curve, and the Gini coefficient

Question 35

The Lorenz curve typically breaks income distribution into

A) quartiles.
B) quintiles.
C) deciles.
D) percentiles.

Question 36

The Lorenz curve is based on

A) before-tax money income plus fringe benefits.
B) after-tax money income only.
C) before-tax money income only.
D) after-tax money income plus government support payments.

Question 37

The Lorenz curve uses the

A) functional distribution of income.
B) personal distribution of income.
C) distribution of the gross domestic product.
D) household production function.

Question 38

The importance of the Lorenz curve is that it

A) tells policymakers what the optimum income distribution should be.
B) summarizes the degree of income inequality in a society.
C) indicates whether the poorest in society have enough income to live on.
D) supports the idea that the income distribution should be market-based.

Question 39

(Figure: Interpreting Lorenz Curves) Based on the graph, which curve represents the MOST equitable distribution of income?

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

Question 40

If the income distribution becomes more equitable, the Lorenz curve moves _____ the line of equal distribution of income and the Gini coefficient _____.

A) closer to; rises
B) closer to; declines
C) farther away from; rises
D) farther away from; declines

Question 41

The Lorenz curve for wealth in the United States

A) lies to the right of the Lorenz curve for income.
B) exhibits a more equal distribution than that for income.
C) lies to the left of the Lorenz curve for income.
D) has a Gini coefficient of 1.

Question 42

A graph representing income distribution in an economy is called a(n) _____ curve.

A) indifference
B) Lorenz
C) kinked demand
D) bowed out

Question 43

The Lorenz curve uses all of these sources of income to determine the distribution of income EXCEPT

A) wages.
B) salaries.
C) taxes.
D) capital gains.

Question 44

_____ measure(s) an economy's income inequality.

A) The Phillips curve
B) Functional values
C) The Gini coefficient
D) The Phillips curve, the Lorenz curve, and the Gini coefficient

Question 45

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-The table shows the Gini coefficients for one country over four years. Which year shows the MOST unequal income distribution?

A) year 1
B) year 2
C) year 3
D) year 4

Question 46

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-Which Gini coefficient represents the highest level of income equality?

A) 0.21
B) 0.34
C) 0.77
D) 0.98

Question 47

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-Which Gini coefficient represents the highest level of income inequality?

A) 0.11
B) 0.32
C) 0.50
D) 1.20

Question 48

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-As the income distribution becomes more equal, the Gini coefficient

A) increases.
B) decreases.
C) gets closer to 1.
D) becomes negative.

Question 49

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-A Gini coefficient of zero means that there is

A) a high degree of income inequality.
B) 20% of the population in each quintile.
C) perfect income equality.
D) a nonmonetary economy.

Question 50

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-The _____ the Gini coefficient, the more _____ the income distribution.

A) higher; unequal
B) higher; equal
C) lower; unequal
D) straighter; unequal

Question 51

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-If each quintile of households has 20% of all income, the Gini coefficient is

A) 0.
B) 1.
C) 0.2.
D) 0.5.

Question 52

$\begin{array}{|c|c|}\hline \text { Year } & \text { Gini Coefficient } \\\hline 1 & 0.38 \\\hline 2 & 0.36 \\\hline 3 & 0.43 \\\hline 4 & 0.42 \\\hline\end{array}$

-If all income is earned by one household, the Gini coefficient is

A) 0.
B) 1.
C) 0.5.
D) infinitely large.

Question 53

The income distribution in the United States is generally _____ equally distributed than in European countries and is _____ equally distributed than in many South American countries.

A) more; more
B) more; less
C) less; more
D) less; less

Question 54

The Gini coefficient is

A) lower in the United States than in most European countries.
B) 0.2, indicating that income is evenly distributed among the five quintiles.
C) above 3.0 in the United States.
D) higher in the United States than in most Southeast Asian countries.

Question 55

Official income distribution estimates for the United States since 1970 show that the Gini coefficient has

A) increased.
B) decreased.
C) stayed the same.
D) fluctuated between 0.25 and 0.35.

Question 56

In the United States, since the 1970s, the Gini coefficient has

A) increased.
B) decreased.
C) held constant within a small range.
D) fluctuated up and then down.

Question 57

In the United States, since the 1970s, which of these is NOT a reason the Gini coefficient has increased?

A) increased immigration
B) more single-parent households
C) globalization
D) expansion of the earned income tax credit

Question 58

Which measure does NOT represent an income redistribution policy aimed at making income distribution more equal?

A) regressive income tax
B) welfare programs
C) housing subsidies
D) Social Security

Question 59

If the effect of the progressive income tax were to be included, the

A) Lorenz curve would shift to the right.
B) Lorenz curve would become more bow shaped.
C) Gini coefficient would get smaller.
D) Gini coefficient would get larger.

Question 60

When the income distribution for the United States is adjusted for taxes and transfers, the

A) Lorenz curve shows greater income inequality.
B) Lorenz curve becomes the line of equal income distribution.
C) Gini coefficient declines.
D) Lorenz curve stays the same.

Question 61

Which of these is a tax on income?

A) the Social Security payroll tax
B) a motor vehicle registration fee
C) a property tax
D) the earned income tax credit

Question 62

In the United States, after adjusting for taxes and transfers, the income distribution as represented by a Lorenz curve

A) becomes less equal and skewed more to the right.
B) is exactly the same as the money-income Lorenz curve.
C) becomes more equal and less skewed to the right.
D) is equivalent to a Lorenz curve that represents an equal distribution of income.

Question 63

The question of whether a particular income distribution is fair is a(n) _____ question.

A) positive
B) unanswerable
C) unimportant
D) normative

Question 64

Income redistribution policies include all of these EXCEPT

A) proportional taxes.
B) Medicare.
C) welfare programs.
D) progressive taxes.

Question 65

In the United States

A) wealth distribution and income distribution are approximately equal.
B) income distribution is less equal than wealth distribution.
C) wealth distribution is less equal than income distribution.
D) income distribution plus tax incentives are equal to wealth distribution.

Question 66

Which of these is the MOST significant determinant of income disparity in the United States?

A) inheritance
B) discrimination
C) immigration status
D) individual investment in human capital

Question 67

Income inequality is greatest in which of the following countries?

A) Canada
B) India
C) Sweden
D) the United States

Question 68

The political left argues that

A) income differences are the natural result of a market system.
B) different individuals possess different personal talents, education, and ambition.
C) income disparity increases incentives to work and produce.
D) wealth is a product of community effort as much as individual effort.

Question 69

The political right

A) argues that wealth is a product of community effort as much as individual effort.
B) favors greater progressivity in the income tax system.
C) argues that income increases incentives to work and produce.
D) favors policies that reduce income disparity.

Question 70

Which of these would NOT be called an income redistribution policy?

A) progressive income tax
B) Medicare
C) housing subsidies
D) on-the-job training

Question 71

Which statement is NOT an argument of those on the political right?

A) Differences in income are the natural result of a market system.
B) The incentives of the marketplace are needed to encourage people to work and produce.
C) Public policy should ultimately be guided by human needs.
D) Opportunities in markets make winners of some people and losers of others.

Question 72

Those who favor government intervention to reduce income inequality often see personal wealth as

A) immoral.
B) unnecessary for personal happiness.
C) created by a joint effort between the individual and community.
D) the property of the government.

Question 73

Which statement is NOT an argument of those on the political left?

A) Personal wealth is the product of community effort and individual effort.
B) Public policy should ultimately be guided by human needs.
C) The distribution of income is not a problem.
D) Greater government taxation can lead to less income inequality.

Question 74

The highest quintile of Americans earns what percentage of the national income?

A) 15% to 20%
B) 25% to 30%
C) 40% to 45%
D) 50% to 55%

Question 75

All of these are considered redistribution methods, EXCEPT

A) Section 8 housing subsidies.
B) progressive taxes.
C) Medicare.
D) Blue Cross Blue Shield.

Question 76

If a nation with an aging population admits more low-skilled immigrants

A) wealth disparity decreases.
B) income disparity increases.
C) job creation is reduced.
D) income mobility is reduced.

Question 77

Which of these is NOT a cause of income inequality?

A) differences in human capital
B) an increase in the number of manufacturing jobs
C) economic discrimination
D) number of earners per household

Question 78

A star athlete is paid more than a janitor MOSTLY because of

A) differences in years of schooling.
B) supply and demand.
C) differences in intelligence.
D) factors outside the market.

Question 79

The service economy

A) is an increasingly smaller part of the total economy.
B) uses primarily lower-wage employees.
C) requires higher-skilled and more-educated employees than the manufacturing sector.
D) is more important in other countries than in the United States.

Question 80

Discrimination can cause a vicious circle because

A) employees learn to discriminate from their bosses.
B) once an illegal activity is done, it is easier to keep committing it.
C) firms then become dependent on underpaid workers.
D) the lack of high wages reduces the incentives to invest in human capital.