Deck 18: Income Distribution and Poverty

Question 1

The households in the top tenth of income distribution earn ten percent of total income.

Answer 1

False

Question 2

The most recent data indicates households in the top fifth of the income distribution earn nearly ten times as much income as those in the bottom fifth.

Answer 2

False

Question 3

In less developed economies,the distribution of income is

A) more concentrated (i.e. ,distributed less evenly) than in developed economies
B) less concentrated than in developed economies
C) such that the bottom 20 percent of households define the poverty threshold
D) such that the top 20 percent of households define the poverty threshold
E) completely even

Answer 3

A

Question 4

Income distribution according to productivity is efficient because people with no resources could starve.

Question 5

In the United States,the dramatic increase in government social spending since the mid-1960s has

A) made incomes less equally distributed
B) made incomes equally distributed
C) not greatly increased the money income share of the poorest fraction of the population
D) greatly increased the money income share of the richest fraction of the population
E) decreased the percentage of families in the lowest fifth

Question 6

Since 1970,the households in U.S.experienced an increased inequality of income distribution.

Question 7

In a market economy,income depends mostly on

A) productivity
B) luck
C) age
D) sex
E) discrimination

Question 8

One of the main tools used by economists to measure the actual distribution of income is

A) the Lorenz curve
B) the Golden Rule
C) the MR = MC rule
D) the MRP = MRC rule
E) the capital / labor ratio

Question 9

Census data on the income distribution among families in the United States in recent years show

A) a rising share earned by the top fifth and a declining share earned by the bottom fifth
B) a rising share earned by the bottom fifth and a declining share earned by the top fifth
C) both the share earned by the top fifth and the share earned by the bottom fifth rising
D) both the share earned by the top fifth and the share earned by the bottom fifth falling
E) falling total income in the top fifth

Question 10

Taxes and in-kind transfers make the distribution of income more unequal.

Question 11

On average,college graduates earn significantly more income than those with less education and the disparity tends to widen into middle age.

Question 12

Differences in earnings based on age and education reflect a normal life cycle pattern of income.

Question 13

In a market economy,household income is determined primarily by

A) the age of the head of household
B) the gender of the head of household
C) luck
D) the productivity of labor resources
E) government transfer payments

Question 14

Using the Lorenz curve,the degree of income inequality is measured by

A) The line connecting all points for which a given percentage of families receives exactly the cumulative percentage of income
B) the distance of the Lorenz curve from the line of perfect equality
C) the flat diagonal line that applies to a perfectly elastic demand curve
D) the number of times the Lorenz curve crosses the line of perfect equality
E) is derived by dividing the number of people below the poverty line by the total population

Question 15

The Lorenz curve shows the

A) functional distribution of income
B) personal distribution of income
C) relative percentage of income going to each of the resources
D) demand for unskilled versus unskilled labor
E) cumulative percentage of income received by cumulative percentages of households

Question 16

The distribution of income in the United States is

A) more concentrated than the distribution of income in other developed countries throughout the world
B) significantly more even than the distribution of income in other developed countries throughout the world
C) quite similar to the distribution of income in other developed countries throughout the world
D) significantly less even than the distribution of income in most developing countries
E) quite similar to the distribution of income in most developing countries

Question 17

In a market economy,income is primarily determined by

A) the productivity of household resources
B) the level of transfer payments
C) government monetary and fiscal policy
D) the geographic distribution of resources
E) the amount of financial assets owned by households

Question 18

If income were distributed solely according to marginal productivity,

A) every family would be above the poverty level
B) it would be distributed evenly
C) it would be distributed normally
D) workers in capital-intensive industries would earn less than workers in labor-intensive industries
E) some individuals would not receive any income

Question 19

In the United States,most income comes from

A) capital gains
B) stocks and bonds
C) providing labor resources
D) illegal transactions
E) government transfer payments

Question 20

If the marginal productivity of labor was the sole determinant of household income in the U.S. ,then

A) no households would be poor according to the official government definition of poverty
B) no households would be poor according to a relative definition of poverty
C) the distribution of income would be unequal
D) every household would have sufficient income to meet biological needs
E) there would be no need for government programs to redistribute income

Question 21

The problem with allocating income according to productivity is that some people have difficulty earning income.

Question 22

All of the following are problems with assessing the income distribution,except:

A) There is no objective standard to evaluate them
B) Effects of taxes and in-kind transfers are neglected
C) Doesn't take into account the fact that household sizes differ across quintiles
D) A better measure of income inequality is the distribution of spending
E) Effects of the underground economy are taken into account

Question 23

The normal life-cycle pattern of income reflects differences in earnings based on

A) race and education
B) gender and education
C) age and education
D) race
E) household size

Question 24

Compared to the distribution of money income,the distribution of income that takes into consideration the effects of taxes and in-kind benefits

A) is less even
B) is the same
C) is more even
D) is fairer
E) is less fair

Question 25

When family incomes are ranked from lowest to highest,the middle income is known as the

A) median income
B) mean income
C) means-tested income
D) official poverty level
E) transfer income

Question 26

The distribution of income

A) is about the same in most countries
B) tends to be more equal in developing countries than in developed countries
C) is more concentrated in the United States than in Canada or Japan
D) is more even in developing countries than in the Russia
E) is not related to a country's level of development

Question 27

Compared to the United States,the income distribution in other major industrial nations tends to be

A) more concentrated
B) less concentrated
C) similar
D) impossible to calculate
E) not comparable because tax structures differ among countries

Question 28

The U.S.Department of Agriculture defines the official poverty level as

A) the bottom 10 percent of the income distribution
B) the poorest 2 million households
C) income less than $15,000
D) income equal to three times the estimated cost of a nutritionally adequate diet
E) being unemployed for more than two months

Question 29

In determining the poverty level,the Census Bureau counts cash transfers,but not in-kind transfers,thereby understating the actual amount of antipoverty transfers made.

Question 30

Which of the following statements about income and education in the United States is correct?

A) There is no relationship between income and education.
B) At every age,average earnings are higher for those with more education.
C) Average earnings are higher for those with more education,but only if they are over the age of 60.
D) Average earnings are higher for those with more education,but only if they are under the age of 60.
E) Income levels peak at a younger age for those with college educations than they do for those with only elementary educations.

Question 31

A fair distribution of income for the U.S.economy is

A) not an economic issue
B) defined by the Department of Agriculture
C) a positive economic question
D) a normative economic question
E) a state and local issue but not a national one

Question 32

If official U.S.poverty statistics included in-kind transfer payments,

A) the poverty rate would be close to zero
B) the poverty rate would be lower
C) the government deficit would be lower
D) the inflation rate would be higher
E) the top 10 percent of those in the income distribution would be wealthier

Question 33

In every age group,average income in the United States increases with education.

Question 34

In 2002,the official poverty level for a family of four was approximately

A) $1,000
B) $5,193
C) $18,392
D) $24,000
E) $33,062

Question 35

The official poverty level in the United States

A) has been the same since 1980
B) is the same as in other developed countries because it is based on a United Nations definition
C) is defined by the United Nations
D) is defined by the Department of Agriculture and based on food costs
E) has been adjusted for inflation but not for changes in family size

Question 36

Of the following,who would probably have the highest income?

A) a couple,both of whom have high school educations and work at WalMart
B) a husband who has a high school degree and a middle-management job and his wife,who is a full-time mother
C) a couple,both of whom have high school educations;he is a high school teacher and she is a librarian
D) a husband who has a college degree and is a high school teacher and his wife,who has an MBA and works as a insurance company executive
E) a couple,both of whom have college degrees and are high school teachers

Question 37

In-kind transfer programs such as Medicaid have increased more rapidly than other welfare programs over the last decade.

Question 38

Families receive income from two primary sources:

A) resource earnings and transfers
B) transfers and subsidies
C) wages and rents
D) transfers and gifts
E) interest and dividends

Question 39

Measurement of the official poverty level

A) includes all transfers
B) excludes all transfers
C) includes cash transfers but not in-kind transfers
D) includes in-kind transfers but not cash transfers
E) is always measured in real rather than nominal terms

Question 40

The income distribution in less-developed nations tends to be

A) more uneven than in developed economies
B) less uneven than in developed economies
C) similar to that in developed economies
D) impossible to calculate
E) not comparable because tax structures differ among countries

Question 41

Which of the following is a social insurance program?

A) Medicaid
B) food stamps
C) unemployment compensation
D) Temporary Assistance for Needy Families
E) general assistance

Question 42

Which of the following is a social insurance program?

A) Medicaid
B) Food stamps
C) Social Security
D) Temporary Assistance for Needy Families
E) FDIC

Question 43

Since most welfare programs are administered by the federal government,there is uniformity in both eligibility and the dollar value of benefits in a state by state comparison.

Question 44

Social Security was established

A) in the 1930s to provide retirement income to those with a work history
B) in the 1930s to provide jobs for the unemployed
C) in the 1930s to provide health insurance
D) in the 1960s to provide retirement income to those with a work history
E) in the 1960s to provide health insurance

Question 45

A problem with official U.S.poverty data is that they

A) omit the rural poor
B) do not account for inflation
C) omit in-kind transfers such as food stamps
D) do not reflect changes in the cost of living
E) omit dividends and interest

Question 46

A major difference between social insurance and income assistance programs is that

A) social insurance programs are run by the states and income assistance programs are run by the federal government
B) funding for social insurance programs comes exclusively from the federal government,whereas income assistance programs are funded both at the state and federal levels
C) benefits from social insurance programs are related to a worker's contributions to the programs,whereas benefits from income assistance programs are not
D) social insurance programs are available only to households with children
E) income assistance programs are available only to households without children

Question 47

Transfer programs that do not tie benefits to contributions are called

A) social insurance programs
B) income assistance programs
C) health aid programs
D) bonus programs
E) compensation programs

Question 48

Eligibility for income assistance benefits requires a prior financial contribution from the individual covered;eligibility for social insurance programs does not.

Question 49

Poverty is

A) a relative concept
B) an absolute concept
C) more prevalent in North American countries than in other areas
D) an insufficient income level to purchase all necessities
E) the same in all countries

Question 50

The largest drop in the percentage of families below the poverty level occurred

A) in the 1960s
B) in the 1970s
C) in the 1980s
D) in the early 1990s
E) during the recession of the early 1980s

Question 51

Which of the following is an in-kind transfer payment?

A) Medicaid
B) Social Security
C) workers' compensation
D) unemployment insurance
E) Temporary Assistance to Needy Families

Question 52

In order to qualify for unemployment insurance and worker's compensation,a person must have

A) paid taxes the previous year
B) an employment record
C) a family of four
D) food stamps
E) a driver's license

Question 53

In the United States

A) only those who have made previous contributions to the program are entitled to receive the benefits of social insurance programs
B) anyone with children is entitled to receive the benefits of social insurance programs
C) anyone over 65 is eligible to receive the benefits of social insurance programs
D) all taxpayers are eligible to receive the benefits of social insurance programs
E) all poor families with children are eligible to receive the benefits of social insurance programs

Question 54

The social insurance system generally redistributes income from

A) rich to poor and from old to young
B) rich to poor and from young to old
C) poor to rich and from old to young
D) poor to rich and from young to old
E) consumers to producers

Question 55

The purpose of social insurance is to

A) encourage charitable donations
B) provide money to the poor
C) provide in-kind aid to the poor
D) redistribute income for the old to the young
E) supplement the incomes of those who have worked but are now retired,temporarily unemployed,or disabled

Question 56

The U.S.poverty level for a family of four in 2005 was:

A) $1 per person per day
B) $2 per person per day
C) $4 per person per day
D) $13.70 per person per day
E) $15.60 per person per day

Question 57

The official poverty definition in the U.S.is having an income that

A) provides minimum biological needs
B) is less than three times the cost of a nutritionally adequate yet frugal diet
C) places the household in the bottom 20 percent of the income distribution
D) is less than the average U.S.welfare allowance
E) is approximately equal to the average household income of Canada

Question 58

The major social insurance program in the United States is

A) Social Security
B) Temporary Assistance for Needy Families
C) Medicare
D) Medicaid
E) food stamps

Question 59

Food stamps and Medicaid are in-kind transfer programs.

Question 60

According to the Census Bureau,

A) a greater percentage of families are below the poverty level now than in 1960
B) a smaller percentage of families are below the poverty level now than in 1960
C) the same percentage of families are below the poverty level now as in 1960
D) the percentage of families below the poverty level has fallen dramatically since 1970
E) 30 percent of families are below the poverty level

Question 61

Which of the following is incorrect regarding the income assistance programs?

A) They can be cash transfer or in-kind transfer programs
B) They are means tested
C) The largest income assistance program is Medicaid
D) They require recipients to have a work history
E) The fastest growing income assistance program is Supplemental Security Income

Question 62

Which of the following accounts for approximately three-fourths of all welfare spending?

A) the school lunch program
B) the earned income tax credit
C) unemployment compensation and workers' compensation combined
D) "in-kind" transfers
E) cash transfers

Question 63

For which of the following groups has the poverty rate declined most in the United States?

A) unmarried heads of households
B) married heads of households
C) less-educated African-Americans
D) African-Americans with high school but not college educations
E) people 65 and older

Question 64

The qualifying income level for Medicaid

A) is $10,000
B) is $14,000
C) is set separately by each state
D) is set yearly by the Bureau of the Census
E) varies inversely with the number of children in the family

Question 65

Which of the following is not a form of social insurance?

A) Social Security
B) Temporary Assistance for Needy Families
C) Medicare
D) unemployment insurance
E) workers' compensation

Question 66

Temporary Assistance for Needy Families and Supplemental Security Income are

A) cash transfers for income assistance
B) cash transfers for social insurance
C) in-kind transfers for income assistance
D) in-kind transfers for social insurance
E) intended to provide health care for the poor

Question 67

The largest U.S.welfare program is

A) Aid to Families with Dependent Children
B) Medicaid
C) Social Security
D) unemployment compensation
E) food stamps

Question 68

The federal government's earned-income tax credit

A) provides support only for elderly and disabled poor
B) represents a type of in-kind transfer program
C) provides food assistance to the working poor
D) reduces taxes if the poor buy housing
E) offers an income tax refund to the working poor greater than the taxes they paid

Question 69

The poverty rate of the elderly in the United States has

A) been constant since 1959
B) risen since 1959 because people are living longer
C) fallen since 1959 because of the growth in Social Security and Medicare programs
D) fallen since 1959 because of the growth in private retirement plans
E) fallen since 1959,mainly because of inflation

Question 70

The federal government has major assistance programs aimed at providing all of the following goods,except one.Which is the exception?

A) housing
B) energy
C) school lunches
D) clothing
E) food

Question 71

The most effective government policy for reducing poverty is to

A) reduce discrimination in the job market based on gender and race
B) abandon all government programs and rely on private charity
C) reduce programs that promote education and training of the poor
D) dramatically increase Medicare payments to the elderly
E) promote economic growth and job creation

Question 72

Which of the following is not "means-tested"?

A) Temporary Assistance for Needy Families (TANF)
B) welfare programs
C) the Food Stamp program
D) Social Security payments to a retiree
E) free and reduced price school lunches for the poor

Question 73

Measured in dollar terms,the two largest U.S.antipoverty programs are

A) cash transfers and medical care
B) cash transfers and food assistance
C) food and housing assistance
D) medical care and food assistance
E) medical care and housing assistance

Question 74

The Food Stamp program provides

A) quality labels on food
B) cash transfers to the poor
C) cash transfers to the elderly
D) vouchers that can be redeemed for food
E) food deliveries to the elderly

Question 75

Food stamps and Medicaid are examples of

A) money transfers
B) resource earnings
C) in-kind transfers
D) tax expenditures
E) capital gains

Question 76

Income assistance programs

A) require that the recipient work and contribute to the program
B) are designed to replace lost income
C) include unemployment compensation and Medicare
D) are funded exclusively by the federal government
E) include both cash and in-kind transfer programs

Question 77

Which of the following groups has experienced the greatest decrease in poverty rates since 1959?

A) the elderly
B) children
C) people 18 to 64 years old
D) women
E) none of the above (i.e. ,all of these groups have had higher poverty rates)

Question 78

In order for Mary to qualify for benefits under a means-tested transfer payment program,

A) she must have worked and contributed to the program
B) she must be able to repay the cash transfer at a later date
C) the head of her household must be able to hold a job
D) she must be totally disabled
E) her household's income and/or assets must fall below a certain level

Question 79

When an economy experiences strong economic growth,

A) the number of families in the bottom 10 percent of the income distribution decreases
B) the income of families in the bottom of the income distribution increases
C) only the top of the income distribution is affected
D) the accompanying inflation cancels out any change in income distribution
E) the rich are no better off because taxes rise with income

Question 80

Data show that the poorest U.S.demographic group is

A) the elderly because Social Security payments have not kept pace with inflation
B) the elderly because they have no steady income
C) the elderly because poverty increases with age
D) households headed by someone under 18 years of age
E) households headed by someone between 40 and 50 years old