Chapter 34

1. Recent data on the personal distribution of income in the United States indicate that
A.average incomes are falling
B.average incomes are constant
C.there is considerable income equality
D.there is considerable income inequality


2. In 1996, the top 5% of families received about what percentage of total income before taxes?
A.10%
B.20%
C.30%
D.40%


3. Which of the following would be evidence of a decrease in income inequality in the United States?
A.a decrease in the percentage of total personal income received by the lowest quintile
B.an increase in the percentage of total personal income received by the highest quintile
C.an increase in the percentage of total personal income received by the four lowest quintiles
D.a decrease in the percentage of total personal income received by the four lowest quintiles


4. Since 1969, there has been
A.a decrease in the percentage of total personal income received by the highest quintile
B.an increase in the percentage of total personal income received by the lowest quintile
C.an increase in the percentage of total personal income received by the highest quintile
D.no significant change in the percentage of total personal income received by any of the five quintiles


5. When a Lorenz curve has been drawn, the degree of income inequality in an economy is measured by the
A.slope of the diagonal that runs from the southwest to the northeast corner of the diagram
B.slope of the Lorenz curve
C.area between the Lorenz curve and the axes of the graph
D.area between the Lorenz curve and the southwest-northeast diagonal


6.

The graph shows four different Lorenz curves (1, 2, 3, and 4).
R-1 34a

The greatest increase in income equality would occur with a shift in a Lorenz curve from
A.1 to 2
B.1 to 4
C.4 to 1
D.3 to 1



7.

The graph shows four different Lorenz curves (1, 2, 3, and 4).
R-1 34a

What point indicates that 80% of the families receive only 40% of the income?
A.c
B.d
C.e
D.g



8.

The graph shows four different Lorenz curves (1, 2, 3, and 4).
R-1 34a

The movement from point b to point f in the graph would indicate that
A.60% of families now receive 40% of income instead of 60% of income
B.60% of income goes to 20% of families instead of 60% of families
C.20% of income goes to 20% of families instead of 60% of families
D.60% of families now receive 20% of income instead of 60% of income



9.

The graph shows four different Lorenz curves (1, 2, 3, and 4).
R-1 34a

Which change would indicate that there has been an increase in income inequality? A movement from point
A.b to a
B.g to d
C.g to f
D.e to d



10. Suppose that Laura earns $5,000 in year 1 and $50,000 in year 2, while Kristin earns $50,000 in year 1 and only $5,000 in year 2. Is there income inequality for the two individuals?
A.Both the annual and the 2-year data indicate equality.
B.Both the annual and the 2-year data indicate inequality.
C.The annual data indicate inequality, but 2-year data indicate equality.
D.The annual data indicate equality, but 2-year data indicate inequality.


11. The empirical data indicate that the tax system and the transfer programs of the government
A.significantly reduce the degree of inequality in the distribution of income
B.produce only a slight reduction in the degree of inequality in the distribution of income
C.significantly increase the degree of inequality in the distribution of income
D.produce only a slight increase in the degree of inequality in the distribution of income


12. Most of the contribution to government redistribution of income comes from
A.taxes
B.transfers
C.income mobility
D.unemployment insurance


13. Which is one cause of unequal income distribution in the United States?
A.an equitable distribution of wealth and property
B.differences in education and training
C.the high levels of noncash transfers
D.the low benefit-reduction rate


14. The fact that some individuals are willing to take riskier jobs or assume more risk in their business is one major reason why there are differences in
A.social insurance programs
B.entitlement programs
C.welfare
D.income


15. Suppose Ms. Anne obtains 5 units of utility from the last dollar of income received by her, and Mr. Charles obtains 8 units of utility from the last dollar of his income. Those who favor an equal distribution of income would
A.advocate redistributing income from Charles to Anne
B.advocate redistributing income from Anne to Charles
C.be content with this distribution of income between Anne and Charles
D.argue that any redistribution of income between them would increase total utility


16. The case for income inequality is primarily made on the basis that income inequality
A.is reduced by the transfer payment programs for the poor
B.is necessary to maintain incentives to work and produce output
C.depends on luck and chance, which cannot be corrected by government action
D.is created by education and training programs that distort the distribution of income


17. The debate over income redistribution focuses on the tradeoff between equality and
A.efficiency
B.unemployment
C.economic growth
D.economic freedom


18. The leaky bucket analogy is used to describe the
A.welfare reform mess
B.trends in the poverty rate
C.economic loss from income redistribution programs
D.piecemeal approach toward income maintenance programs


19. The officially accepted poverty line for a family of four in 1996 was about
A.$ 7,363
B.$ 8,590
C.$10,121
D.$16,036


20. In 1996, which group had the smallest percentage in poverty?
A.Hispanics
B.families headed by women
C.children under 18 years of age
D.the elderly (65 years and older)


21. An example of a social insurance program would be
A.Medicare
B.Medicaid
C.food stamps
D.Aid to families with dependent children


22. Which of the following is designed to provide a nationwide minimum income for the aged, the blind, and the disabled?
A.SSI
B.FFS
C.AFDC
D.OASDHI


23. The goals of welfare plans often conflict because it is difficult to construct a plan that
A.provides reasonable income levels and incentives to work for the poor, but is not too costly
B.is not subject to substantial administrative costs and bureaucratic red tape
C.does not discriminate against those individuals with similar circumstances, but who have similar needs
D.promotes family unity and does not create a "culture of poverty" among the participants in the program


24. Which is a major criticism of the welfare system that led to recent reforms? Welfare payments
A.give incentives for people to work but not to save for periods of unemployment
B.create dependency on government and reduce personal responsibility
C.encourage the formation of families and enables them to get more welfare benefits
D.fail to provide a minimum income for the aged, blind, and disabled


25. Workfare plans of several states
A.provide a high level of guaranteed income for low-income working families
B.provide education and job training opportunities for welfare recipients to help and require them to become employed
C.decrease the level of support for social security programs and transfer the funds to improve the Aid to families with dependent children program
D.substitute the payment of cash for the use of food stamps for those willing to go to work



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