Deck 20: Income Inequality and Poverty

Question 1

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

A) 48.9 percent
B) 21.3 percent
C) 8.6 percent
D) 3.8 percent

Answer 1

D

Question 2

Based on data from 2011, the top fifth of all families received approximately what percent of all income in the United States?

A) 83 percent
B) 49 percent
C) 41 percent
D) 21 percent

Answer 2

B

Question 3

When the government enacts policies to redistribute income,

A) the objective is to enhance efficiency and a side effect is that the allocation of resources becomes more equal.
B) the objective is to enhance efficiency and a side effect is that the allocation of resources becomes less equal.
C) the objective is to enhance equality and a side effect is that the allocation of resources becomes more efficient.
D) the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient.

Answer 3

D

Question 4

The invisible hand of the marketplace acts to allocate resources

A) efficiently but does not necessarily ensure that resources are allocated fairly.
B) both fairly and efficiently.
C) fairly but does not necessarily ensure that resources are allocated efficiently.
D) neither fairly nor efficiently.

Question 5

Based on U.S. income data from 2011, the top fifth of all families received

A) about 3.8 percent more than the bottom fifth.
B) about 49 percent more than the bottom fifth.
C) approximately 5 times more income than the bottom fifth.
D) more than 12 times more income than the bottom fifth.

Question 6

Government programs that take money from high-income people and give it to low-income people typically

A) improve economic efficiency by reducing poverty.
B) reduce economic efficiency because they distort incentives.
C) have no effect on economic efficiency because they both reduce poverty and distort incentives.
D) sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Question 7

Which of the following is not a question that economists try to answer when measuring the distribution of income?

A) How many people live in poverty?
B) How often do people receive a raise at work?
C) How often do people move among income classes?
D) What problems arise in measuring the amount of inequality?

Question 8

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

A) a more efficient allocation of resources
B) a distortion of incentives
C) unchanged behavior
D) All of the above are correct.

Question 9

Comparing the United States household income distribution to other countries is

A) easy, because data is available for all countries in the world.
B) easy, because some countries collect data on expenditures instead of incomes.
C) problematic, because international agreements require countries to standardize their income accounting procedures.
D) problematic, because countries collect data in different ways.

Question 10

In the U.S. economy, labor earnings make up about

A) one-half of total income.
B) two-thirds of total income.
C) three-fourths of total income.
D) nine-tenths of total income.

Question 11

Which of the following is correct?

A) Governments can never improve market outcomes.
B) Governments can sometimes improve market outcomes.
C) Governments can always improve market outcomes.
D) Government can never make the income distribution more equal.

Question 12

In the United States, labor earnings are about what percent of total income?

A) 75 percent
B) 70 percent
C) 67 percent
D) 50 percent

Question 13

Governments enact policies to

A) make the distribution of income more efficient.
B) make the distribution of income more equal.
C) maximize the use of the welfare system.
D) minimize the use of in-kind transfers.

Question 14

Economists study poverty and income inequality to answer which of the following questions?

A) What are people's wages?
B) How does labor-force experience affect wages?
C) How much inequality is there in society?
D) How do people adjust their behavior due to taxation?

Question 15

A government's policy of redistributing income makes the income distribution

A) more equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient.
B) more equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient.
C) less equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient.
D) less equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient.

Question 16

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

A) Trade can make everyone better off.
B) The cost of something is what you give up to get it.
C) People face trade-offs.
D) Markets are usually a good way to organize economic activity.

Question 17

The income distribution in the United States shows that the income share of the top fifth of all families is

A) over 60 percent.
B) around 21 percent.
C) more than 12 times the income of the bottom fifth.
D) less than 10 times the income of the bottom fifth.

Question 18

When the government redistributes income to achieve greater equality, it

A) distorts incentives.
B) improves efficiency.
C) focuses on middle income brackets.
D) relies on foreign aid to help balance the budget.

Question 19

Which two of the Ten Principles of Economics are illustrated in this chapter?

A) A country's standard of living depends on its ability to produce goods & People face tradeoffs.
B) Prices rise when the government prints too much money & Governments can sometimes improve market outcomes.
C) Governments can sometimes improve market outcomes & People face tradeoffs.
D) People face tradeoffs & Prices rise when the government prints too much money .

Question 20

The marketplace allocates resources

A) fairly.
B) efficiently.
C) to those desiring them least.
D) both efficiently and equitably.

Question 21

Which of the following explains the rise in income inequality in the United States from 1970 to 2011?

A) An increase in minimum wages.
B) An increase in the demand for skilled labor.
C) An increase in the demand for unskilled labor.
D) Reduced international trade with low-wage countries.

Question 22

The 2011 U.S. distribution of income shows that the top 5 percent of families earn approximately how much income per year?

A) $170,000 and over
B) $205,000 and over
C) $250,000 and over
D) $325,000 and over

Question 23

If income were equally distributed among households,

A) each household's relative share of income would increase.
B) each household's relative share of income would decrease.
C) the top fifth of households would have 50 percent of the income.
D) 50 percent of the households would receive exactly 50 percent of the income.

Question 24

The lack of progress in reducing the poverty rate since the early 1970s is most closely related with which of the following factors?

A) increasing income inequality
B) a reduction in the poverty line
C) rapid economic growth
D) a reduction in international trade

Question 25

The 2011 U.S. distribution of income shows that the top 5 percent of families have approximately what share of income?

A) 4 percent
B) 9 percent
C) 21 percent
D) 49 percent

Question 26

When we examine historical data on income inequality in the U.S., we see that the distribution of income gradually became

A) more equal between 1935 and 2011.
B) more equal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
C) more unequal between 1935 and 1973, but that trend reversed itself between 1973 and 2011.
D) more unequal between 1935 and 2011.

Question 27

Table 20-1
The following table shows the distribution of income in Marysville.

Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

A) $30,000
B) $60,000
C) $90,000
D) There is insufficient information to answer this question.

Question 28

Since about 1970 in the U.S.,

A) decreases in the wages of unskilled workers, relative to skilled workers, have led to increased inequality in family incomes.
B) increases in the wages of unskilled workers, relative to skilled workers, have led to increased equality in family incomes.
C) inequality in family incomes has increased, despite increases in the wages of unskilled workers relative to skilled workers.
D) inequality in family incomes has decreased, despite increases in the wages of skilled workers relative to unskilled workers.

Question 29

Table 20-2
Percentage of Before-Tax Income Received by Families in Hapland

Refer to Table 20-2. According to the table, from 1950 to 2000, the Hapland income distribution became

A) less equal.
B) more equal.
C) more equal at the lowest level of income but less equal at highest level of income.
D) less equal at the lowest level of income but more equal at highest level of income.

Question 30

Table 20-1
The following table shows the distribution of income in Marysville.

Refer to Table 20-1. Seventy-five percent of all families have incomes above what level?

A) $30,000
B) $60,000
C) $90,000
D) There is insufficient information to answer this question.

Question 31

The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of income?

A) 20 percent
B) 35 percent
C) 50 percent
D) 80 percent

Question 32

Table 20-1
The following table shows the distribution of income in Marysville.

Refer to Table 20-1. If the poverty line was $31,852, what would be the poverty rate?

A) less than 25%
B) between 25% and 50%
C) between 50% and 75%
D) There is insufficient information to answer this question.

Question 33

In 2011, what percentage of U.S. families had income levels below $75,000?

A) 20 percent
B) 40 percent
C) 60 percent
D) 80 percent

Question 34

Table 20-3
The Distribution of Income in Edgerton

Refer to Table 20-3. According to the table, what percent of families in Edgerton have income levels below $76,000?

A) 20 percent.
B) 40 percent.
C) 60 percent.
D) 80 percent.

Question 35

In 2011, what percentage of U.S. families had income levels above $115,866?

A) 10 percent
B) 20 percent
C) 60 percent
D) 80 percent

Question 36

Table 20-1
The following table shows the distribution of income in Marysville.

Refer to Table 20-1. If the poverty line were $23,021, what would be the poverty rate?

A) less than 25%
B) between 25% and 50%
C) between 50% and 75%
D) There is insufficient information to answer this question.

Question 37

The 2011 U.S. distribution of income shows that the top 20 percent of all families have

A) more than twelve times the income of the bottom 20 percent.
B) more than six times the income of the bottom 20 percent.
C) more than 100 percent more income than the bottom 20 percent.
D) the same share of income as the bottom 20 percent.

Question 38

U.S. income data over the last 75 years suggests that the distribution of income

A) has gradually become more equal over the entire time period.
B) has gradually become less equal over the entire time period.
C) gradually became less equal until about 1970, then became more equal from 1970 to 2011.
D) gradually became more equal until about 1970, then became less equal from 1970 to 2011.

Question 39

Which of the following does not explain the rise in income inequality in the United States from 1970 to 2011?

A) Changes in technology.
B) An increase in minimum wages.
C) A reduction in the demand for unskilled labor.
D) Increased international trade with low-wage countries.

Question 40

Table 20-1
The following table shows the distribution of income in Marysville.

Refer to Table 20-1. Fifty percent of all families have incomes below what level?

A) $30,000
B) $60,000
C) $90,000
D) There is insufficient information to answer this question.

Question 41

Table 20-5
Distribution of Income in Umakastan

Refer to Table 20-5. Where would the government of Umakastan have to set the poverty line to have a poverty rate of about 28%?

A) $20,000
B) $34,690
C) $38,000
D) $56,000

Question 42

Table 20-3
The Distribution of Income in Edgerton

Refer to Table 20-3. If the poverty rate is 26%, where is the poverty line in Edgerton?

A) under $28,000
B) between $28,000 and $43,999
C) between $44,000 and $75,999
D) between $76,000 and $87,999

Question 43

Table 20-9
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-9. In 2010, the top fifth of the US population had

A) 50.2% more income than the remainder of the population.
B) a lower share of income than the top fifth in 1980.
C) about 15 times as much income as the bottom fifth.
D) about 6 times as much income as the middle fifth.

Question 44

Of the four countries below, the country that has the most income equality is

A) Ethiopia.
B) France.
C) Russia.
D) Thailand.

Question 45

Table 20-5
Distribution of Income in Umakastan

Refer to Table 20-5. Approximately what percentage of families in Umakastan have income levels below $74,000?

A) 27%
B) 28%
C) 52%
D) 79%

Question 46

Table 20-4
Source: U.S. Bureau of Census
Refer to Table 20-4. In 2011, the bottom 60% of families have

A) about 13% of total income in the U.S.
B) about 28% of total income in the U.S.
C) about 51% of total income in the U.S.
D) about 74% of total income in the U.S.

Question 47

Table 20-5
Distribution of Income in Umakastan

Refer to Table 20-5. If the poverty rate in Umakastan is 10%, what is the poverty line?

A) $18,750
B) $20,000
C) $34,690
D) $38,000

Question 48

Table 20-4
Source: U.S. Bureau of Census
Refer to Table 20-4. Comparing data from 2000 and 2011, which of the following statements is correct?

A) There has been no change in overall income inequality because the share of income held by the fourth fifth is nearly identical.
B) Overall income inequality has worsened slightly, as shown by the simultaneous increase in the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth.
C) Overall income inequality has improved because the share held by the second fifth has declined by 0.5%.
D) None of the above is correct.

Question 49

Table 20-3
The Distribution of Income in Edgerton

Refer to Table 20-3. According to the table, what percent of families in Edgerton have income levels below $44,000?

A) 80 percent
B) 60 percent
C) 50 percent
D) 40 percent

Question 50

Table 20-7

Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the data?

A) The most alarming statistic is the lowering of the top income level that defines the bottom fifth of the income distribution because this indicates that the income distribution is becoming more unequal.
B) The greatest cause for concern is the increase in the minimum income level that defines the top fifth of the income distribution because this indicates that the rich have become richer.
C) The income distribution has been relatively unchanged from 2001 to 2011.
D) Both a and b are correct.

Question 51

Table 20-9
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.
Source: US Census Bureau
Refer to Table 20-9. Which of the following statements best describes the trends in the table?

A) From 1980 to 2010, the distribution of income has become less equal.
B) From 1980 to 2010, the distribution of income has remained the same.
C) From 1980 to 2010, the distribution of income has become more equal.
D) None of the above is correct.

Question 52

Table 20-3
The Distribution of Income in Edgerton

Refer to Table 20-3. Where would the government in Edgerton set the poverty line to have a poverty rate of 40 percent?

A) $28,000
B) $44,000
C) $76,000
D) $88,000

Question 53

Of the four countries below, which has the highest degree of income inequality?

A) Germany
B) Turkey
C) South Africa
D) Mexico

Question 54

Table 20-8
Source: U.S. Bureau of Census
Refer to Table 20-8. In 2011, the bottom 40% of families has

A) about 13% of total income in the U.S.
B) about 28% of total income in the U.S.
C) about 51% of total income in the U.S.
D) about 72% of total income in the U.S.

Question 55

Table 20-8
Source: U.S. Bureau of Census
Refer to Table 20-8. Comparing data from 2000 and 2011, which of the following statements is correct?

A) The bottom 40% of the population had a greater share of the income in 2011 than it did in 2001.
B) The top 40% of the population had a greater share of the income in 2011 than it did in 2001.
C) The middle 60% of the population had a greater share of the income in 2011 than it did in 2001.
D) All of the above are correct.

Question 56

Table 20-4
Source: U.S. Bureau of Census
Refer to Table 20-4. In 2011, the top fifth of families have

A) almost 13 times as much income as the bottom fifth of families.
B) 28.2% more income than the bottom fifth of families.
C) 50.3% more income than the bottom fifth of families.
D) 45.1% more income than the bottom fifth of families.

Question 57

Table 20-3
The Distribution of Income in Edgerton

Refer to Table 20-3. According to the table, what percent of families in Edgerton have income levels at or above $76,000?

A) 80 percent
B) 60 percent
C) 50 percent
D) 40 percent

Question 58

When we compare the income distribution of the United States to those of other countries, we find that the U.S. has

A) an income distribution similar to Japan's.
B) an income distribution similar to South Africa's.
C) one of the most unequal income distributions.
D) a bit more inequality than the typical country.

Question 59

Table 20-6

Refer to Table 20-6. In both 2011 and 2012, approximately 25% of the population earned less than

A) $15,000.
B) $25,000.
C) $50,000.
D) $100,000.

Question 60

Table 20-6

Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position?

A) The percentage of people earning less than $25,000 decreased from 2011 to 2012.
B) The percentage of people earning more than $100,000 increased from 2011 to 2012.
C) The percentage of people earning between $50,000 and $100,000 stayed virtually constant from 2011 to 2012.
D) Both a and b are correct.

Question 61

Which of the following is not correct?

A) Many measures of inequality are based on income, which may not reflect a person's standard of living.
B) Because many of the poorest families receive in-kind transfers, more families have lower standards of living when compared to poverty rates based on income.
C) Because people can borrow and save to smooth out life cycle changes in income, equality measures based only on income may not reflect a person's standard of living.
D) A person's standard of living depends more on her permanent income than her transitory income, so inequality measures based on current income may be misleading.

Question 62

Which of the following statements is correct?

A) The United States has a more equal distribution of income than other developed countries such as Japan and Germany.
B) The statement "a rising tide lifts all boats" illustrates how economic growth reduces the number of people with income levels below the poverty line.
C) The economic life cycle explains why people base spending decisions on transitory income.
D) The United States has more income inequality than developing countries, including Mexico and Brazil.

Question 63

Table 20-10
*A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
Refer to Table 20-10. Which country has the most unequal income distribution?

A) Latvia
B) Italy
C) France
D) Sweden

Question 64

When John F. Kennedy said, "A rising tide lifts all boats," to what was he referring?

A) With government intervention, all citizens receive a greater allocation of resources.
B) With market forces working independently, everyone receives an equitable share of resources.
C) With economic growth, more families are pushed above the poverty line.
D) None of the above are correct.

Question 65

The poverty rate is a measure of the percentage of people whose incomes fall below

A) a relative level of income.
B) an absolute level of income.
C) the median income for a family of three.
D) the bottom 20 percent of the income distribution.

Question 66

In 2011, the poverty rate in the United States was

A) 5.9 percent.
B) 11.1 percent.
C) 15.0 percent.
D) 22.4 percent.

Question 67

Table 20-10
*A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
Refer to Table 20-10. Which country has the most equal income distribution?

A) Latvia
B) Italy
C) France
D) Sweden

Question 68

Comparing the US to other countries ranked by inequality,

A) the US has a less equal distribution of income than some countries, but a more equal distribution of income than others.
B) the US has one of the most equal distributions of income.
C) the US has one of the least equal distributions of income.
D) the US has a more equal distribution of income than other economically advanced countries such as Japan, Germany, and France.

Question 69

The United States has greater income

A) disparity than most other economically advanced countries, but a more equal income distribution than some developing countries.
B) disparity than both other economically advanced and all developing countries.
C) equality than most other economically advanced countries but greater income disparity than some developing countries.
D) equality than both other economically advanced and developing countries.

Question 70

Over the past 50 years, the U.S. poverty rate was at its lowest level in

A) 1973.
B) 1980.
C) 1990.
D) 2008.

Question 71

The poverty rate is based on a family's

A) income, in-kind transfers, and other government aid.
B) income and in-kind transfers.
C) in-kind transfers only.
D) income only.

Question 72

Table 20-10
*A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
Refer to Table 20-10. Which of the following statements is correct?

A) Latvia has the most unequal distribution of income.
B) France has a more equal distribution of income than Italy.
C) Sweden has the most equal distribution of income.
D) All of the above are correct.

Question 73

When comparing the percentage of income (or expenditure) of the lowest and highest 10 percent of the population,

A) South Africa has a more equal income distribution than the United States.
B) South Africa has a more equal income distribution than Japan.
C) Japan has a more equal income distribution than the United States.
D) Mexico has a more equal income distribution than Germany.

Question 74

Which of the following lists correctly ranks countries from most equal to least equal distribution of income?

A) Nigeria, India, Mexico, Germany
B) Brazil, United States, India, Japan
C) United States, Ethiopia, Japan, South Africa
D) Japan, India, United States, Brazil

Question 75

The United States has greater income disparity than

A) Japan.
B) Indib.
C) South Africa.
D) Both a and b are correct.

Question 76

The poverty rate is

A) a measure of income inequality across families.
B) the percentage of the population whose family income falls below a specified level.
C) an absolute level of income set by the federal government for each family size.
D) measured by the number of in-kind transfers that a family receives.

Question 77

The United States has less income inequality than

A) Ethiopia.
B) United Kingdom.
C) Vietnam.
D) Mexico.

Question 78

Since 1959 when the official data on the poverty rate began, the poverty rate was at its highest in

A) 1959.
B) 1968.
C) 1977.
D) 1986.

Question 79

A commonly-used gauge of poverty is the

A) income inequality rate.
B) average income rate.
C) poverty rate.
D) social inequality rate.

Question 80

The percentage of families with incomes below the poverty line

A) is defined as the 10 percent of U.S.households with the lowest incomes.
B) is known as the poverty rate.
C) is known as the unemployment rate.
D) rises as the general income level rises.