Question 1

-In Exhibit R-1, a Lorenz curve is depicted in diagram

Accepted Answer

A)   I
B)   II
C)   III
D)   IV
E)   both I and IIF) None of the above
G) A) and B)

Question 2

Winner-take-all refers to

Accepted Answer

A)   top performers in a labor market receiving much more than those who are just slightly less productive
B)   computing and technology companies driving their competitors out of the market
C)   rich households paying less in taxes now than they did 30 years ago
D)   a negative income tax system that allows individuals to become superstars
E)   the Lorenz curve shifting closer to the diagonal as the rich become richerF) A) and E)
G) A) and B)

Question 3

In an economy where the poorest quintile of the population receives 5 percent of the income, the Lorenz curve at the quintile

Accepted Answer

A)   is the diagonal
B)   registers 5 percent of the income
C)   lies above the diagonal
D)   registers 95 percent of the income
E)   of the richest quintile must be 95 percent of the incomeF) A) and E)
G) A) and D)

Question 4

U.S. corporate stock is distributed fairly equally among U.S. stockholders.

Accepted Answer

A) True 
 B)False

Question 5

In an economy where one person receives all the income, the Lorenz curve is

Accepted Answer

A)   the two sides of the right angle triangle
B)   the diagonal
C)   a U-shaped curve that lies below the diagonal
D)   a U-shaped curve that lies above the diagonal
E)   a downward sloping line from 100 percent of income (on the vertical axis)  to 100 percent of population (on the horizontal axis) F) All of the above
G) A) and E)

Question 6

In which of the following scenarios would the Gini coefficient measure zero?

Accepted Answer

A)   People earn the same income.
B)   John receives a wage of $1 per hour.
C)   The king ends up with all the nation's income.
D)   There is a one-to-one ratio of income to population.
E)   100 percent of the income is held by 100 percent of the population.F) C) and E)
G) D) and E)

Question 7

A Gini coefficient based on population deciles tends to be lower than a Gini coefficient based on income.

Accepted Answer

A) True 
 B)False

Question 8

A very high Gini coefficient implies a very wealthy country.

Accepted Answer

A) True 
 B)False

Question 9

The main attractive feature of a negative income tax program is

Accepted Answer

A)   it is politically clean and simple
B)   it keeps the IRS out of the picture
C)   it avoids cash payments to the poor
D)   it is totally financed out of the incomes of the poor creating for them a sense of individual responsibility
E)   it only subsidizes the unemployedF) A) and B)
G) C) and D)

Question 10

According to Lerner, if we do not know people's utility functions, we

Accepted Answer

A)   cannot engage in redistributing incomes among people
B)   can still assume that the marginal utility of a dollar for the rich is higher than for the poor
C)   make less of a mistake by assuming that they are equal
D)   should let the market determine the distribution of income
E)   should assume they are unequal because it is the most likelyF) B) and E)
G) A) and B)

Question 11

If Coca-Cola opens a bottling plant in Brazil, what effect would it have on that country's Gini coefficient?

Accepted Answer

As income equality increases, the Gini c...

Question 12

Two South Pacific islands, Aba and Ema, have very different Gini coefficients. Aba's is 0.90 and Ema's is 0.40. That's enough information to tell you that

Accepted Answer

A)   both islands have a relatively equal income distribution because their Gini coefficients are both less than 1
B)   Aba's income is growing faster than Ema's
C)   Ema's distribution of income is less equal than Aba's
D)   Ema's distribution of income is more equal than Aba's
E)   Aba's population is growing faster than Ema'sF) C) and E)
G) B) and E)

Question 13

According to advocates of income inequality, if income were to be distributed equally,

Accepted Answer

A)   productivity would increase
B)   it would take a little time for the distribution to become unequal again
C)   efficient allocation of resources would occur
D)   the MRP of the poor would rise and the MRP of the rich would fall
E)   productivity would decreaseF) All of the above
G) A) and B)

Question 14

Suppose a negative income tax program is established at 25 percent, and a poverty threshold minimum of $15,000 is guaranteed for a family of four. What is the highest income a family could earn in the workplace before being cut out of the governmentprogram?

Accepted Answer

A)   $20,000
B)   $15,000
C)   $18,750
D)   $60,000
E)   $10,000F) All of the above
G) B) and D)

Question 15

If an economy has perfect income equality, its Gini coefficient would be

Accepted Answer

A)   1
B)   100 percent
C)   100
D)   0
E)   50-50F) A) and E)
G) A) and C)

Question 16

Government assistance programs in the United States

Accepted Answer

A)   have expanded significantly since their establishment in 1964.
B)   consist mainly of cash payments.
C)   are funded entirely by the federal government.
D)   have typically required beneficiaries to participate in community work or job training programs.
E)   are primarily funded by state governments.F) All of the above
G) C) and E)

Question 17

The two standard ways of defining poverty thresholds are

Accepted Answer

A)   percentage of median income and basic needs
B)   number of poor and quintiles
C)   unearned income of the poor and and welfare
D)   ratio of the poor's wealth and ratio of the poor's income
E)   below minimum wage income and above minimum wage incomeF) A) and B)
G) A) and C)

Question 18

The Lorenz curve and the Gini coefficient are different in that the Lorenz curve

Accepted Answer

A)   includes income earned in foreign countries while the Gini coefficient only includes domestic income
B)   is much more accurate a reflection of income distribution than the Gini coefficient
C)   is a graphic representation and the Gini coefficient is a numerical measurement of income distribution
D)   includes income from government programs while the Gini does not
E)   compares different countries while the Gini only reflects data within a countryF) C) and E)
G) B) and E)

Question 19

The problem with using a basic needs measure of poverty is that

Accepted Answer

A)   the median income changes
B)   what we think of as basic needs now differs from what basic needs were 20 years ago
C)   we don't know how to measure basic needs
D)   basic needs is a relative concept of poverty
E)   population changesF) B) and E)
G) None of the above

Question 20

Which philosopher believes that advocates of a position on income distribution must look at a society in the making, where no one yet knows what rules govern economic activity and income distribution?

Accepted Answer

A)   Karl Marx
B)   A. P. Lerner
C)   Max Lorenz
D)   Corrado Gini
E)   John RawlsF) All of the above
G) D) and E)

Exam 18: Income Distribution and Poverty

-In Exhibit R-1, a Lorenz curve is depicted in diagram

Correct AnswerverifiedShow Answer

In an economy where one person receives all the income, the Lorenz curve is

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A very high Gini coefficient implies a very wealthy country.

Correct AnswerverifiedShow Answer

In an economy where the poorest quintile of the population receives 5 percent of the income, the Lorenz curve at the quintile

Correct AnswerverifiedShow Answer

According to Lerner, if we do not know people's utility functions, we

Correct AnswerverifiedShow Answer

Winner-take-all refers to

Correct AnswerverifiedShow Answer

In which of the following scenarios would the Gini coefficient measure zero?

Correct AnswerverifiedShow Answer

If an economy has perfect income equality, its Gini coefficient would be

Correct AnswerverifiedShow Answer

Suppose a negative income tax program is established at 25 percent, and a poverty threshold minimum of $15,000 is guaranteed for a family of four. What is the highest income a family could earn in the workplace before being cut out of the governmentprogram?

Correct AnswerverifiedShow Answer

The Lorenz curve and the Gini coefficient are different in that the Lorenz curve

Correct AnswerverifiedShow Answer

The problem with using a basic needs measure of poverty is that

Correct AnswerverifiedShow Answer

If Coca-Cola opens a bottling plant in Brazil, what effect would it have on that country's Gini coefficient?

Correct AnswerverifiedAs income equality increases, the Gini c...View AnswerShow Answer

Which philosopher believes that advocates of a position on income distribution must look at a society in the making, where no one yet knows what rules govern economic activity and income distribution?

Correct AnswerverifiedShow Answer

According to advocates of income inequality, if income were to be distributed equally,

Correct AnswerverifiedShow Answer

The two standard ways of defining poverty thresholds are

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The main attractive feature of a negative income tax program is

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Government assistance programs in the United States

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Two South Pacific islands, Aba and Ema, have very different Gini coefficients. Aba's is 0.90 and Ema's is 0.40. That's enough information to tell you that

Correct AnswerverifiedShow Answer

A Gini coefficient based on population deciles tends to be lower than a Gini coefficient based on income.

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U.S. corporate stock is distributed fairly equally among U.S. stockholders.

Correct AnswerverifiedShow Answer

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As income equality increases, the Gini c...
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