Deck 18: The Economics of the Welfare State

Question 1

The _____ is widely used to measure income inequality.

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

Answer 1

Gini coefficient

Question 2

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.

Answer 2

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.

Question 3

Children raised in poverty are more likely to live in poverty as adults than are other children because low income is highly correlated with: I.higher high school dropout rates.
II.a greater risk of mental problems and behavioral disorders.
III.higher rates of illness and hospitalization.

A)I only
B)II only
C)III only
D)I,II,and III

Answer 3

I,II,and III

Question 4

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

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

Question 5

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 6

Which transaction 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)Government spends additional funds on infrastructure.

Question 7

Which factor 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 8

In 2015,_____ of the U.S.population was living in poverty.

A)approximately 13%
B)20% to 24%
C)25% to 29%
D)more than 30%

Question 9

During the past 25 years,the degree of income inequality in the United States has been rising.Which factor 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

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

A)higher;developing
B)higher;other wealthy
C)just a little lower;other wealthy
D)not lower;developing

Question 11

The poverty threshold 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 12

In 2016,the poverty threshold for a household with one person was:

A)$11,880.
B)$21,100.
C)$24,300.
D)$38,000.

Question 13

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

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

Question 14

Which example BEST illustrates social insurance?

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

Question 15

In 2015,which demographic group had the HIGHEST poverty rate?

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

Question 16

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.

Question 17

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 18

Which factor 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 19

Which factor is/are associated with poverty? I.lack of adequate employment
II.lack of education
III.lack of proficiency in English

A)I and II only
B)I and III only
C)II and III only
D)I,II,and III

Question 20

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 21

Which U.S.welfare program is an in-kind benefit that is NOT means-tested?

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

Question 22

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

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

Question 23

Which factor is one that 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 24

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 25

Which program provides in-kind transfers?

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

Question 26

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 27

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 28

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 29

A popular choice 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 30

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 31

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

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

Question 32

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 33

Measured by the amount of money spent by the U.S.government,which U.S.welfare program is the LARGEST?

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

Question 34

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 35

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 36

_____ 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 37

Which factor was NOT mentioned in the textbook as possibly 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 38

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 39

Food stamps are an example of:

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

Question 40

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 41

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 are 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 42

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 43

In 2014,health care expenditures in the United States were approximately _____ per person.

A)$500
B)$1,200
C)$9,500
D)$12,000

Question 44

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 45

Compared with a generation ago,the monetary benefits from public aid programs,adjusted for inflation,are:

A)zero.
B)lower.
C)higher.
D)about the same.

Question 46

Which U.S.welfare program is a monetary benefit that is NOT means-tested?

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

Question 47

Critics of Aid to Families with Dependent Children 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)a reward for not seeking work,and the abandonment of children.

Question 48

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 49

In 2014,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 50

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 51

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 52

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

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

Question 53

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 54

Private health insurance is funded by:

A)the government.
B)tax contributions to Medicare,which come primarily from the richest individuals in a population.
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 55

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 56

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

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

Question 57

_____ 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 58

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

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

Question 59

Which program is NOT an antipoverty program?

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

Question 60

Which U.S.welfare program is a means-tested,in-kind benefit?

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

Question 61

Medicaid is funded by:

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

Question 62

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 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

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 65

Some countries,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 66

A way in which health care in the United States does NOT differ from health care in other wealthy countries is that:

A)people rely more on private health insurance.
B)individuals spend more on health care.
C)significant numbers of people lack health insurance.
D)it provides government health care.

Question 67

Which country does NOT provide health care to all of its citizens?

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

Question 68

The individual mandate is the requirement that:

A)each health care provider must provide care for Medicare patients.
B)each health care provider must provide care for Medicaid patients.
C)each individual must purchase health insurance.
D)everyone must go to school for at least 12 years.

Question 69

The problem with community rating is that it:

A)causes moral hazard.
B)results in poor-quality health care.
C)is very unpopular with health care providers.
D)may cause adverse selection.

Question 70

People who are uninsured are likely NOT so because:

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 71

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

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

Question 72

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

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

Question 73

To ensure that low- and middle-income families have health insurance that they can afford,the Affordable Care Act of 2010:

A)provides government subsidies to low- and middle-income families.
B)provides Medicaid for low- and middle-income families.
C)exempts low- and middle-income families from the individual mandate.
D)forces employers to provide them with health insurance.

Question 74

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

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

Question 75

Most Americans receive their health insurance through:

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

Question 76

An advantage for an individual of having 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 77

As of 2015,approximately _____ of working-age adult Americans have no health insurance.

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

Question 78

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

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

Question 79

Which country 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)the United States
B)Canada
C)France
D)Great Britain

Question 80

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.