Deck 17: Income Distribution and Welfare Programs

Question 1

Which welfare term describes welfare programs that restrict benefits by some demographic characteristic?

A) in-kind welfare
B) categorical welfare
C) means-tested welfare
D) nonhedonic welfare

Answer 1

categorical welfare

Question 2

In the United States from the late 1960s through the late 1970s,the share of income accruing to the bottom income quintile _____ and the share accruing to the top income quintile _____.

A) fell; fell
B) fell; grew
C) grew; grew
D) grew; fell

Answer 2

grew; fell

Question 3

In 2013 in the United States,the poorest 20% of the population receive approximately _____ of aggregate income.

A) 3.2%
B) 8.5%
C) 14.5%
D) 19.5%

Answer 3

3.2%

Question 4

The share of a nation's total income that accrues to the poor relative to the rich is a measure of:

A) the poverty line.
B) relative income inequality.
C) the iron triangle of welfare programs.
D) absolute deprivation.

Question 5

Which statement suggests that a relative measure of inequality is better than an absolute measure?

A) Self-reported well-being may fall as neighbors' incomes rise.
B) If those worse off achieve a sufficient level of consumption,it doesn't matter how rich the richest people are.
C) Living in a 1,000-square-foot house is no more adequate when others live in 1,500-square-foot houses than when others live in 3,000-square-foot houses.
D) A person's well-being is determined by their access to basic necessities,such as food,clothing,and shelter.

Question 6

Suppose someone criticizes the federal measure of the poverty line by saying that it does not account for Medicaid receipts,but that it should account for them.This is an example of which of the following criticisms of the federal poverty line?

A) The definition of income is incomplete.
B) The bundle has changed.
C) Differences in the cost of living across areas are ignored.
D) It is inconsistent with international measures.

Question 7

Which welfare term best describes welfare programs that provide medical services to recipients?

A) in-kind welfare
B) categorical welfare
C) means-tested welfare
D) nonhedonic welfare

Question 8

In Sandtown-Winchester,a low-income neighborhood in Baltimore,the average life expectancy is _____ years; only 3 miles away in the wealthy Baltimore neighborhood of Roland Park,life expectancy averages _____ years.

A) 48; 67
B) 67; 84
C) 75; 84
D) 83; 87

Question 9

In the United States from 1980 to the present,the share of income accruing to the bottom income quintile _____ and the share accruing to the top income quintile _____.

A) fell; fell
B) fell; grew
C) grew; grew
D) grew; fell

Question 10

Which of the following is NOT true about the evolution of poverty in the United States?

A) In 2009,a family of four with an annual income below $23,050 was considered to be living in poverty.
B) The poverty rates fell for all persons,for the elderly,and for the very young in the 1960s and early 1970s.
C) The share of income received by the lowest quintile in the United States is smaller than in any other developed nation.
D) Poverty rates for those under 18 and those over 65 have risen since the 1960s.

Question 11

Suppose the government sends a monthly check to those earning less than $400 per week.This is an example of:

A) in-kind welfare.
B) categorical welfare.
C) cash welfare.
D) earned income.

Question 12

Currently in the United States,the share of income earned by the top 1% is now similar to what it was in the:

A) 1920s.
B) 1930s.
C) 1950s.
D) 1960s.

Question 13

Suppose someone criticizes the federal measure of the poverty line by saying that it should,but does not,account for regional differences in housing prices.This is an example of which of the following criticisms of the federal poverty line?

A) It is based on an oversimplified definition of family size.
B) The bundle has changed.
C) Differences in cost of living across areas are ignored.
D) It is inconsistent with international measures.

Question 14

Which refers to the federal government's measure of "minimally acceptable" income?

A) the poverty line
B) relative income inequality
C) the iron triangle
D) income shares

Question 15

At its peak,cash welfare spending by the federal government amounted to:

A) 1.7% of the federal budget.
B) 10.7% of the federal budget.
C) 24.5% of the federal budget.
D) 33.3% of the federal budget.

Question 16

Suppose someone criticizes the federal measure of the poverty line by saying that the typical family spends less of its budget on food than families used to spend.This is an example of which of the following criticisms of the federal poverty line?

A) It is based on an oversimplified definition of family size.
B) The bundle has changed.
C) Differences in the cost of living across areas are ignored.
D) It is inconsistent with international measures.

Question 17

Which statement suggests that an absolute measure of poverty is better than a relative measure of inequality for measuring the well-being of less well-off individuals?

A) Self-reported well-being may fall as neighbors' incomes rise.
B) If those least fortunate achieve a sufficient level of consumption,it doesn't matter how rich the richest people are.
C) Driving a $10,000 car is more adequate when others drive $10,000 cars than when others drive $30,000 cars.
D) A person is only living in poverty if they have substantially less than others.

Question 18

How much the poor have relative to some measure of a reasonable "minimally acceptable" income level can be best described as:

A) relative income inequality.
B) the iron triangle of welfare programs.
C) absolute deprivation.
D) allocative inefficiency.

Question 19

Which welfare term best describes welfare programs that provide recipients with a monthly check?

A) in-kind welfare
B) cash welfare
C) means-tested welfare
D) nonhedonic welfare

Question 20

In Sandtown-Winchester,a low-income neighborhood in Baltimore,the median household income is _____; only 3 miles away in the wealthy Baltimore neighborhood of Roland Park,median household income is _____.

A) $12,000; $24,000
B) $18,000; $56,000
C) $24,000; $107,000
D) $36,000; $124,000

Question 21

Which of the following is an in-kind program pair?

A) food stamps and Supplemental Security Income
B) Medicaid and Temporary Assistance for Needy Families (TANF)
C) TANF and Supplemental Security Income
D) public housing and Special Supplemental Nutrition Program for Women,Infants,and Children (WIC)

Question 22

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996:

A) removed time limits on welfare recipients.
B) removed work requirements on welfare recipients.
C) gave more flexibility to the states in choosing the structure of cash welfare payments.
D) replaced block grants from the federal government with matching grants.

Question 23

The federal government restricts Temporary Assistance for Needy Families (TANF)to no longer than _____ year(s)and mandates that recipients start working after receiving at most ________ months of TANF benefits,although there are some loopholes in these requirements.

A) 3; 12
B) 3; 24
C) 5; 12
D) 5; 24

Question 24

Which potential target group for welfare benefits would best satisfy the two characteristics of a good targeting mechanism?

A) single mothers
B) people who have a missing leg
C) people earning less than $8 per hour
D) people without health insurance

Question 25

The conclusion that "welfare lock" should be removed means that:

A) the government should not incarcerate the fathers of children in single-mother welfare homes because it reduces child support payments.
B) the government should unlink cash welfare from other in-kind benefits.
C) the government should reduce the benefits reduction rate to increase the benefits of working.
D) all welfare payments should be given based on unchangeable characteristics.

Question 26

Suppose that the government could know for sure each individual's earnings capacity.This would allow government to:

A) eliminate moral hazard to welfare recipients.
B) prevent high-wage earners from working less in response to taxation.
C) eliminate the administrative costs associated with welfare programs.
D) reduce the administrative costs associated with welfare programs.

Question 27

In what way is instituting a work or training requirement in a welfare program an ordeal mechanism?

A) It imposes a cost on high-ability individuals who want to receive welfare only to increase their leisure.
B) It prevents those receiving welfare from doing so for longer than society deems optimal.
C) It provides a long-term solution to the problems of those receiving welfare.
D) It imposed the same burden on those who deserve assistance and those who don't.

Question 28

Suppose that welfare is restricted to unmarried mothers who have at least one child.This type of welfare could be best characterized as:

A) in-kind welfare.
B) categorical welfare.
C) means-tested welfare.
D) cash welfare.

Question 29

Which statement is TRUE regarding the 50% national reduction in welfare caseloads since the welfare reform legislation passed in 1996?

A) About one-third of the decline in the welfare rolls can be ascribed to reform,with the rest due to the improving economy
B) Nearly all of the reduction in welfare caseloads was caused by the welfare reform.
C) Nearly all of the reduction in welfare caseloads was caused by the economic expansion in the late 1990s.
D) A nontrivial part of the reduction was due to the decreased fertility rates that were caused by the welfare reform.

Question 30

Which welfare term describes welfare programs that deliver certain goods to recipients?

A) in-kind welfare
B) categorical welfare
C) means-tested welfare
D) cash welfare

Question 31

Which is a moral hazard associated with transferring money from high-income to low-income groups?

A) The taxation of higher-income individuals may cause them to work less hard.
B) The taxation of higher-income individuals may cause them to save less.
C) Individuals may reduce their labor supply to qualify for the means-tested transfers.
D) The administrative costs of the transfer are high.

Question 32

Which statement describes the paradox of ordeal mechanisms?

A) Welfare systems not only make the high-income individuals worse off,they reduce the well-being of low-income individuals in the long run.
B) Making the receipt of welfare benefits less attractive and less generous may actually make the recipients better off.
C) Low-income individuals are made worse off for having received welfare because of the corresponding reduction in self-worth.
D) Welfare programs make the high-income individuals better off,even though they are the ones who are taxed to fund the welfare program.

Question 33

The cash welfare benefit for individuals with no other income that may be reduced as income increases is referred to as the ________; the schedule that shows how welfare benefits will be reduced as other income increases is the _______.

A) benefit guarantee; work requirement
B) benefit reduction rate; benefit guarantee
C) work requirement; benefit reduction rate
D) benefit guarantee; benefit reduction rate

Question 34

Which statement is TRUE if the benefit reduction rate of a welfare program is reduced?

A) Total labor supply will go up.
B) Everyone who was working will choose to work less.
C) Total labor supply may go up or down.
D) Work incentives are not affected by the benefit reduction rate.

Question 35

Which of the following must be TRUE for an ordeal mechanism to be effective?

A) The disincentive to work from taxing the high-income individuals must be minimized.
B) The disincentive to work for welfare recipients must be less than the additional social welfare received from making them better off.
C) The gains from the program to welfare recipients must exceed the cost imposed on welfare recipients.
D) The cost imposed on welfare recipients must be equal to zero.

Question 36

The purpose of ordeal mechanisms is to:

A) assist those who have been particularly unlucky in life
B) better target welfare benefits to those with particularly low incomes
C) redistribute income from high-income individuals to low-income individuals without reducing the national savings rate
D) separate those who truly need assistance from those who can support themselves.

Question 37

Suppose that the government were to directly subsidize the market wages of those already on welfare for one month.Which of the following is TRUE?

A) This type of program creates disincentives to work for those receiving welfare.
B) This type of program can result in increased rates of enrollment in the welfare program.
C) This type of program is typically more costly than a general wage subsidy to the labor supply of the lowest-income workers.
D) This type of program has no effect since welfare benefits must be reduced to compensate for wages earned.

Question 38

Which statement identifies a problem with enforcement of child support obligations of absent fathers as a way of solving the mothers' welfare dependence?

A) Much empirical evidence supports the idea that stronger enforcement of child support reduces the incidence of single motherhood by making it financially costly for fathers to abandon their families.
B) Since nearly 90% of court-ordered child support payments are made,the benefits from increased enforcement are quite small.
C) Most of the fathers who are not making child-support payments are poor,so not much money can be collected from them.
D) The mothers' welfare benefits are not dependent on whether or not an absent father is making child support payments.

Question 39

Suppose that a monthly check is given to people with HIV or AIDS who earn less than $400 per week.This is an example of:

A) in-kind welfare.
B) noncategorical welfare.
C) categorical and means-tested welfare.
D) in-kind and means-tested welfare.

Question 40

Which welfare term describes welfare programs that are provided only to people qualifying on the basis of income and asset levels?

A) in-kind welfare
B) categorical welfare
C) means-tested welfare
D) cash welfare

Question 41

Empirical research shows that the welfare reform of 1996 has lowered welfare rolls without lowering the incomes of single mothers in the United States.Discuss the additional factors one must consider in order to determine whether this reform was successful in terms of raising the well-being of poor families.

Question 42

Suppose that the government is considering whether to implement a child care subsidy program for low-income families.
(a)Is this child care subsidy different from a wage subsidy to low-income families with children? Assume that all low-income families with children use formal child care in order to work.Explain.
(b)Why might the government want to regulate the quality of the child care? What problems might such regulation cause? Explain.

Question 43

Discuss reasons why many states have moved from mailing food stamps to recipients to sending electronic debit cards.Has this change increased or decreased the ordeal mechanism associated with food stamps?

Question 44

Suppose that the government were to allow the definition of poverty to change with the cost of living in different areas to fully offset a difference in cost of living.Discuss the potential moral hazards caused by this change.

Question 45

Suppose the way that your state links the receipt of welfare benefits to attending job-training sessions is being debated.A recent study has found that the job training has little to no effect on the earning prospects of your welfare recipients.One politician argues that,for this reason,the job-training requirement should be eliminated.Others aren't so sure.What do you think?

Question 46

Does cash welfare have a constructive or destructive role in the lives of lower-income groups,according to Republicans and Democrats? Discuss the political views each party expressed during the debate on the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

Question 47

Which is NOT a method of improving the outside option to welfare in order to reduce moral hazard problems?

A) providing job skills training for welfare recipients
B) directly subsidizing the market wages
C) using ordeal mechanisms
D) fully enforcing the child support obligations of the fathers of children whose mothers are welfare recipients