Question 1

Some critics complain that official U.S. poverty statistics overstate poverty because they do not consider the value of in-kind transfers. A large portion of the in-kind benefits for many poor families is made up of non-cash benefits such as food vouchers, housing subsidies and medical insurance. Should the value of these noncash benefits such as medical insurance be counted as an improvement in the economic well being of low-income families for purposes of calculating poverty statistics? Why or why not?

Accepted Answer

The justification may be more important than the answer. In the case of medical insurance, it seems highly likely that low-income households would probably not be able to afford medical insurance and the services associated with it, if they were not provided free of charge, and would go without them. If that is the case, the value of the services doesn't really improve their living standards (in ways other than better health), since the transfer is really from the government to the service providers.
If in the absence of government assistance, the poor would continue to purchase the same quantity and quality of medical services, they would have to finance them by cutting back on other expenditures, and in that case, the value of the free in-kind health benefits would be raising the families' living standards and reducing poverty. However, it is highly unlikely that this would be the case.

Question 2

How has income distribution changed in the U.S. since 1929? When did inequality decrease and when did it increase?

Accepted Answer

Income inequality in the U.S. decreased from 1929 to 1970; after that, inequality has increased.

Question 3

Describe three methods of affecting income distribution in the U.S.

Accepted Answer

Three methods for affecting income distribution are taxation, expenditures, and the establishment and protection of property rights.

Question 4

What is a Lorenz curve? What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time?

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Question 5

How does the Lorenz curve for the U.S. compare to the Lorenz curve for most developing and developed countries? What does this mean?

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Question 6

"To eliminate poverty, all we need to do is tax the millionaires and billionaires sufficiently, and spread the money around among the poor based on who needs it the most." Do you agree or disagree with this statement? Why?

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Question 7

What is the distributive effect of the Social Security tax? Explain.

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Question 8

Which of the three types of tax systems (progressive, proportional, regressive) redistributes income? Explain.

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Question 9

What does it mean if the gap between a Lorenz curve and the diagonal line gets smaller over time? Explain.

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Question 10

The following diagram shows three Lorenz curves for the country of Ecoland. Based on this diagram, describe what happened to the distribution of income in Ecoland between 1956 and 20. What happened to the Gini Coefficient?

Accepted Answer

The answer of The following diagram shows three Lorenz curves...

Question 11

Describe the difference between share distribution of income and socioeconomic distribution of income.

Accepted Answer

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Question 12

What are the distributive consequences of the U.S. income taxes, the Social Security tax, sales taxes, and property taxes? (Are they progressive, proportional, or regressive?)

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Question 13

Some people in the U.S. argue that the poverty line is too high and some argue that it is too low. Explain both arguments by highlighting the difference between absolute and relative measures of poverty.

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Question 14

How does the distribution of income compare to the distribution of wealth in the U.S.? What does this imply about the respective Lorenz curves?

Accepted Answer

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Question 15

What are the distributive consequences of each of the following taxes: the U.S. income taxes, sales taxes, and property taxes? Are they progressive, regressive, or proportional?

Accepted Answer

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Question 16

What is the difference between wealth and income? Which is a flow concept? Which is a stock concept?

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Question 17

What are the social costs of poverty?

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Question 18

How is the poverty line calculated? Is it an absolute or a relative measure of poverty?

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Question 19

Describe five major U. S. expenditure programs that are used to redistribute income

Accepted Answer

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Question 20

Use the table below to answer the questions.
(a) Draw a Lorenz curve for countries A, B, and C in the table below.
(b) Which country has the least equal distribution of income? The most equal distribution?
 $$\begin{array} { l l l l } 
& { \text { Percent of Income } } \
\text { Quirtile } & \text { A } & \text { B } & \text { C } \
\hline \text { Lowest } & 8.5 & 10.2 & 2.3 \
\text { fifth } & & & \
\text { Second } & 10.1 & 15.2 & 6.1 \
\text { fifth } & & & \
\text { Third fifth } & 12.5 & 18.3 & 12.3 \
\text { Fouth fifth } & 15.1 & 23.1 & 18.1 \
\text { Highest } & 53.8 & 33.2 & 61.2 \
\text { fifth } & & &
\end{array}$$

Accepted Answer

The answer of Use the table below to answer the...

Exam 18: Who Gets What the Distribution of Income