Deck 17: The Economics of the Welfare State

Question 1

Which of the following is the BEST example of social insurance?

A) liability insurance for automobiles
B) food stamps
C) housing subsidies
D) Social Security

Answer 1

Social Security

Question 2

An example of a social insurance program is:

A) expenditure on national defense.
B) Social Security payments to the disabled.
C) the food stamp program.
D) purchasing a new city police car.

Answer 2

Social Security payments to the disabled.

Question 3

There is considerable _____ among the quintiles of the distribution of income, with many families moving from _____ quintiles and others moving from _____ quintiles.

A) immobility; lower to higher; higher to lower
B) mobility; higher to lower; lower to higher
C) immobility; lower to even lower; higher to even higher
D) stability; lower to higher; higher to higher

Answer 3

mobility; higher to lower; lower to higher

Question 4

Which of the following is NOT a major cause of poverty in the United States?

A) inadequate educational attainment
B) discrimination
C) lack of adequate health coverage
D) welfare

Question 5

Which of the following is NOT a leading cause of poverty in the United States?

A) lack of adequate employment
B) lack of education
C) the welfare system
D) discrimination

Question 6

The percentage of the population that falls below the poverty line is called the:

A) poor rate.
B) poverty rate.
C) homeless rate.
D) absolute number of people in poverty.

Question 7

America's Gini coefficient is _____ than that of most _____.

A) higher; developing nations
B) higher; other wealthy nations
C) just a little lower; other wealthy nations
D) no lower; developing nations

Question 8

Studies of family income over time reveal that:

A) most people in the highest quintile tend to fall to the lowest quintile during their lifetime.
B) income mobility is rare for all quintiles of the income distribution.
C) many people who move down the income ladder are young.
D) many people who start out at the bottom of the income ladder when they are young move up the income ladder as they age and move down again when they retire.

Question 9

During the past 25 years the degree of income inequality in the United States has been rising. Which of the following is NOT a possible reason for this phenomenon?

A) technological progress that has increased the demand for high-skilled workers relative to the demand for low-skilled workers
B) increased imports of labor-intensive products
C) increased immigration
D) higher divorce rates

Question 10

In 2014 the poverty threshold for a household with one person was about:

A) $11,670.
B) $21,100.
C) $25,600.
D) $38,000.

Question 11

Which of the following transactions is a transfer payment?

A) The government pays an employee by making a direct transfer to the employee's bank account.
B) An army officer transfers part of her pay to the government to pay her taxes.
C) A senior citizen receives a Social Security payment.
D) All of these are transfer payments.

Question 12

Which of the following LACK(S) is (are) associated with poverty?

A) adequate employment
B) education
C) proficiency in English
D) adequate employment, education, and proficiency in English

Question 13

Economists believe that looking at the distribution of income by quintiles at one moment overstates the true inequality of income because:

A) it ignores the effect of taxes.
B) it ignores the effect of transfer payments.
C) families near the bottom of the distribution in any given year may be having an unusually bad year, while those at the top may be having an unusually good one.
D) families near the bottom of the distribution in any given year are often having an unusually good year, while those at the top are often having an unusually bad one.

Question 14

Government payments to individuals for which no good or service exchanged are:

A) spending.
B) purchases.
C) spending on goods and services.
D) transfer payments.

Question 15

In 2012 _____ of the U.S. population was living in poverty.

A) approximately 15%
B) 20% to 24%
C) 25% to 29%
D) more than 30%

Question 16

Given that the definition of poverty has not been adjusted to reflect the long-term rise in average incomes, you would expect _____ in the percentage of the population living below the poverty line.

A) a decrease
B) an increase
C) no change
D) It is impossible to determine how the percentage of the population living in poverty might change.

Question 17

The poverty line is adjusted each year to reflect:

A) changes in the cost of living.
B) changes in the size of the average family.
C) the long-term rise in the average standard of living.
D) changes in the cost of living and changes in the size of the average family.

Question 18

Children raised in poverty are more likely to live in poverty as adults than are other children, because low income is highly correlated with higher:

A) high school dropout rates.
B) risk of mental problems and behavioral disorders.
C) rates of illness and hospitalization.
D) high school dropout rates, risk of mental problems and behavioral disorders, and rates of illness and hospitalization.

Question 19

In 2012, which of the following demographic groups had the HIGHEST poverty rate?

A) African-Americans
B) Hispanics
C) Whites
D) female-headed families with no husband present

Question 20

In the United States, the mobility between income groups is:

A) relatively high.
B) not important because less than 1% of the population lives below the poverty line.
C) difficult because of public assistance programs.
D) very rare.

Question 21

A popular explanation for the most important cause of the increase in income inequality in recent years is:

A) the elimination of many income redistribution programs.
B) rapid technological change.
C) the failing education system.
D) the failing education system and rapid technological change.

Question 22

Which of the following programs provides in-kind transfers?

A) the Earned Income Tax Credit
B) Temporary Assistance for Needy Families
C) Social Security
D) Medicaid

Question 23

Over the past two decades, the share of income going to the richest Americans has _____ than the share going to the poorest Americans.

A) risen faster
B) risen more slowly
C) fallen faster
D) fallen more slowly

Question 24

In the United States in the first two decades following World War II:

A) income distribution in the United States became less equal.
B) income equality measures stayed the same.
C) income distribution became more nearly equal.
D) there was no way to determine income distribution.

Question 25

When a welfare program is provided to those whose income falls below some minimum, it is said to be:

A) means-tested.
B) an in-kind benefit.
C) a monetary benefit.
D) a negative income tax.

Question 26

Which of the following was NOT mentioned in the textbook as a possible factor in increasing income inequality in the United States since 1968?

A) increases in immigration
B) growth in international trade
C) technological change
D) a reduction in the number of people attending college

Question 27

Which of the following U.S. welfare programs is an in-kind benefit that is NOT means-tested?

A) Medicaid
B) Medicare
C) food stamps
D) Social Security income

Question 28

Food stamps are an example of:

A) a negative income tax.
B) an in-kind benefit.
C) a monetary benefit.
D) unemployment insurance.

Question 29

A _____ program is one for which the recipient qualifies on the basis of _____.

A) social insurance; income
B) means-tested; age
C) means-tested; income
D) social insurance; need

Question 30

There are six households in a rural community. Each household earns $40,000 per year. Suppose that a new resident builds a mansion in the community and that the income in the new household is $4 million per year. After the new resident arrives, the median household income has _____ and the mean household income has _____.

A) increased; increased
B) not changed; increased
C) increased; not changed
D) not changed; not changed

Question 31

The _____ identifies the level of income at which half of the households in the population earn more and half of the population earns less.

A) median household income
B) mean household income
C) poverty level
D) Gini coefficient

Question 32

A factor that has been associated with the increase in income inequality in the United States is the:

A) decrease in households headed by single women.
B) reduction in the percentage of the population over age 65.
C) increase in immigration.
D) slowdown in technological change.

Question 33

The _____ is widely used to measure income inequality.

A) Gini coefficient
B) median household income
C) poverty rate
D) ability-to-pay principle

Question 34

Redistribution programs are means-tested. To qualify for such a program, a person must demonstrate that:

A) his or her family is larger than the mean family size for the country as a whole.
B) his or her average (or mean) family income has fallen (or not gone up) during the past three years.
C) though unemployed, he or she is making serious efforts to get a job.
D) his or her income (or means) is below a certain specified level.

Question 35

In the United States since World War II, the distribution of income has:

A) become more nearly equal.
B) become more unequal.
C) stayed about the same.
D) changed first toward equality and then, after 1968, toward greater inequality.

Question 36

A factor that has been associated with the increase in income inequality in the United States is:

A) the growth in technology.
B) the reduction in the percentage of the population over the age of 65.
C) the smaller gap between the wages of skilled and unskilled workers.
D) affirmative action programs.

Question 37

Food stamps, Medicaid, and housing subsidies are all:

A) negative income taxes.
B) unemployment benefits.
C) in-kind transfers.
D) part of the Temporary Assistance for Needy Families program.

Question 38

If a nation's Gini coefficient is rising over time, it is an indicator of:

A) an increase in the poverty rate.
B) a decrease in the poverty rate.
C) an increase in income inequality.
D) a decrease in income inequality.

Question 39

Measured by the amount of money spent by the U.S. government, which of the following U.S. welfare programs is the largest?

A) food stamps
B) unemployment insurance
C) Medicare
D) Social Security

Question 40

Among the following, which factor has been associated with the increase in income inequality in the United States?

A) a decrease in households headed by single women
B) a reduction in the percentage of the population over age 65
C) a smaller gap between the wages of skilled and unskilled workers
D) the way technological change has affected labor demand

Question 41

_____ is (are) a means-tested monetary benefit in in a welfare program.

A) Food stamps
B) Medicaid
C) Temporary Assistance for Needy Families
D) Unemployment insurance

Question 42

_____ is a means-tested program.

A) Expenditure on national defense
B) Social Security payments to the disabled
C) The food stamp program
D) Purchasing a new city police car

Question 43

In 2012, health care expenditures in the United States were approximately _____ per person.

A) $500
B) $1,000
C) $9,000
D) $12,000

Question 44

In the United States, individuals pay directly (out of pocket) _____ of medical costs.

A) 100%
B) between 70% and 80%
C) 50%
D) less than 15%

Question 45

Suppose ABC Health is a private health insurance company that offers an identical policy to all customers. Each customer pays a premium equal to the average consumer's annual medical expenses. This is a system that has the potential to fail because of the _____ problem.

A) adverse selection
B) income inequality
C) single-payer
D) equity versus efficiency

Question 46

Private health insurance is funded by:

A) the government.
B) tax contributions to Medicare.
C) extremely ill people, who pay very high premiums.
D) members of a large pool of individuals, each paying a fixed premium to a private company that agrees to pay some portion of the medical expenses of the members.

Question 47

The negative income tax:

A) describes a badly designed tax system.
B) is a system in which low incomes are taxed at a higher rate than high incomes.
C) is a program in which low-income working families receive income supplements rather than having to pay taxes.
D) is the minimum tax that must be paid by a business even if it has a negative income (or a loss).

Question 48

The provision of specific goods and services (rather than cash) to needy people by way of welfare programs is:

A) the income effect.
B) the wealth effect.
C) in-kind benefits.
D) Rawlsian assistance.

Question 49

Compared to a generation ago, benefits from public aid programs, adjusted for inflation, are:

A) zero.
B) less.
C) more.
D) about the same.

Question 50

In most wealthy countries excluding the United States, the government pays _____ of medical costs.

A) 100%
B) 70% to 80%
C) 30% to 40%
D) less than 20%

Question 51

Critics of Temporary Assistance for Needy Families argue that it creates perverse incentives such as:

A) family breakup, since a family with both spouses present may not qualify for aid.
B) a reward for not seeking work.
C) the abandonment of children.
D) family breakup, a reward for not seeking work, and the abandonment of children.

Question 52

_____ programs are designed to provide benefits to people whose income falls below some minimum.

A) Means-tested
B) Relative income
C) Absolute income
D) Nominal income

Question 53

In 2012, health care expenditures in the United States accounted for _____ of GDP.

A) approximately 1%
B) 15% to 20%
C) 40% to 50%
D) over 80%

Question 54

The age group in the United States which has undergone the largest reduction in the poverty rate because of government programs was:

A) 65 years old and older.
B) young and middle-aged adults.
C) children 6 to 18 years old.
D) children under 6 years old.

Question 55

The largest _____ program in the United States is _____.

A) social insurance; Medicaid
B) social insurance; Social Security payments to retired persons
C) means-tested; farmers' aid
D) means-tested; Social Security payments to retired persons

Question 56

Which of the following U.S. welfare programs is a means-tested in-kind benefit?

A) Social Security
B) Temporary Assistance to Needy Families
C) food stamps
D) unemployment insurance

Question 57

Which of the following U.S. welfare programs is a monetary benefit that is NOT means-tested?

A) Earned Income Tax Credit
B) Social Security
C) food stamps
D) Medicaid

Question 58

Which of the following programs is NOT an antipoverty program?

A) the Earned Income Tax Credit
B) Temporary Assistance for Needy Families
C) Social Security
D) Medicaid

Question 59

In the United States, the government pays _____ of medical costs.

A) 100%
B) between 70% and 80%
C) approximately 50%
D) less than 20%

Question 60

Becky works for a large grocery store that provides a health insurance program to all workers. This is an example of:

A) Medicaid.
B) employment-based health insurance.
C) government health insurance.
D) a single-payer health care system.

Question 61

An advantage of employment-based insurance is that it:

A) reduces moral hazard.
B) helps reduce the problem of adverse selection.
C) increases government tax revenues.
D) guarantees better care than is provided by government insurance such as Medicare.

Question 62

Approximately _____ of Americans have no health insurance.

A) 1% to 10%
B) 11% to 20%
C) 21% to 50%
D) over 50%

Question 63

The U.S. government health insurance program for people aged 65 years and older is:

A) Medicare.
B) Medicaid.
C) the Veterans Administration.
D) health savings accounts.

Question 64

Which of the following countries gives all of its citizens a choice between private doctors and hospitals and care in a system run directly by the government?

A) United States
B) Canada
C) France
D) Great Britain

Question 65

Medicaid is funded by:

A) private charities.
B) the federal government only.
C) state governments only.
D) federal and state governments.

Question 66

Sometimes healthy people drop their health insurance, leaving only sicker people to buy insurance. This creates a situation known as:

A) moral hazard.
B) an efficient free market outcome.
C) adverse selection.
D) maximizing profits.

Question 67

The means-tested U.S. government health insurance program is:

A) Medicare.
B) Medicaid.
C) the Veterans Administration.
D) health savings accounts.

Question 68

Which of the following countries does NOT provide health care to all of its citizens?

A) United States
B) Canada
C) France
D) Great Britain

Question 69

Which of the following countries has a single-payer system funded through taxes in which the government is the principal payer of medical bills for all of its citizens?

A) United States
B) Canada
C) France
D) Great Britain

Question 70

Some nations, including Canada, have adopted a health care system in which the government pays the medical bills. This is known as a(n) _____ system.

A) employment-based
B) private health insurance
C) means-tested
D) single-payer

Question 71

When adverse selection occurs, healthy people pay premiums that are _____ their actual health care costs.

A) higher than
B) equal to
C) less than
D) positively correlated to

Question 72

Progress in medical science has contributed to _____ health care costs.

A) increasing
B) decreasing
C) constant
D) randomly fluctuating

Question 73

An advantage of employment-based insurance is that it:

A) increases moral hazard.
B) increases the likelihood of adverse selection.
C) increases government tax revenues.
D) receives favorable tax treatment.

Question 74

Which of the following countries has a health care system that directly employs health care workers and runs hospitals and clinics that are free to the public?

A) United States
B) Canada
C) France
D) Great Britain

Question 75

Community rating is a regulation that requires:

A) cities to give ratings to movies shown in local theaters.
B) insurance companies to offer the same policies for the same premium to everyone, regardless of medical history.
C) insurance companies to charge higher premiums to healthy people.
D) insurance companies to charge higher premiums to the sickest people in the community.

Question 76

Children in low-income families that can't afford insurance but are above the poverty threshold are covered by:

A) Medicare.
B) Medicaid.
C) SCHIP (State Children's Insurance Health Program)
D) the Veteran's Administration.

Question 77

Insurance companies attempt to minimize adverse selection by:

A) relying on the government to pay for health insurance.
B) screening and employment-based health insurance.
C) relying on the free market to allocate risk efficiently.
D) charging high premiums to young, healthy people.

Question 78

Health care in the United States is DIFFERENT FROM that of other wealthy countries in all of the following ways EXCEPT that:

A) Americans rely more on private health insurance.
B) Americans spend more per person on health care.
C) the United States is the only country in which large numbers of people lack health insurance.
D) the United States is the only country that provides government health care.

Question 79

People may be uninsured for all of the following reasons EXCEPT that:

A) their employer does not provide health insurance.
B) they are too old to qualify for health insurance.
C) they are relatively healthy and choose to save their money rather than buy insurance.
D) they are unemployed and can't afford to purchase insurance.

Question 80

Most Americans receive their health insurance through:

A) Medicare.
B) Medicaid.
C) their employer.
D) direct purchase.