Ch14 Poverty - Economic Inequality
Multiple Choice Questions
1. When reference is made to the ______, it means the specific amount of income needed for a basic standard of living.
A. poverty trap
B. income line
C. income gap
D. poverty line
Answer: D Reference:
Explanation:
Type: Multiple Choice
2. A situation of ______arises when one group receives a higher share of total income or wealth than others.
A. poverty
B. inequality
C. poverty entrapment
D. quintiles
Answer: B Reference:
Explanation:
Type: Multiple Choice
3. Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create ______.
A. a poverty trap
B. an income inequity
C. a poverty line
D. a safety net
Answer: A Reference:
Explanation:
Type: Multiple Choice
4. An individual whose income level is just above the poverty line would most likely be classified as being a member of the ______.
A. working poor
B. poverty trapped
C. near-poor
D. illiterate poor
Answer: C Reference:
Explanation:
Type: Multiple Choice
5. The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following?
A. safety net
B. safety quintiles
C. poverty net
D. antipoverty net
Answer: A Reference:
Explanation:
Type: Multiple Choice
6. A method often used by economists to look at distribution of income in a society's economy involves
A. programs for wealth redistribution.
B. quintiles, or dividing a whole group into fifths.
C. imposing taxes to redistribute wealth.
D. quads, or dividing a whole group into fourths.
Answer: B Reference:
Explanation:
Type: Multiple Choice
7. A Lorenz curve refers to a graphic illustration of the share of population on the ______and the cumulative percentage of total income received on the ______.
A. left quintile; right quintile
B. right quintile; left quintile
C. horizontal axis; vertical axis
D. vertical axis; horizontal axis
Answer: C Reference:
Explanation:
Type: Multiple Choice
8. In circumstances dealing with poverty, the term ______means taking income from those with higher incomes and providing income to those with lower incomes.
A. safety net
B. estate tax
C. minimum wage
D. redistribution
Answer: D Reference:
Explanation:
Type: Multiple Choice
9. ______allows the government to collect wealth for redistribution based on the amount of stored wealth that is being passed on in the form of an inheritance.
A. An inheritance tax
B. A redistribution tax
C. An estate tax
D. A death tax
Answer: C Reference:
Explanation:
Type: Multiple Choice
10. With respect to market forces and/or labor markets that determine peoples' wages, which of the following is a true statement?
A. labor markets consider how much a family needs for health care
B. market forces consider what happens to families in their business decisions
C. labor markets consider how much a family needs for necessities
D. labor markets create considerable inequalities relating to income
Answer: D Reference:
Explanation:
Type: Multiple Choice
11. ______is the level where half of all families had more than that level and half had less.
A. The first quintile
B. The third quintile
C. The median
D. The quintile
Answer: C Reference:
Explanation:
Type: Multiple Choice
12. In the U.S., comparisons of high and low incomes raise issues of economic ______.
A. inequality and poverty
B. equality and wealth distribution
C. wealth distribution and poverty
D. equality and inequality
Answer: A Reference:
Explanation:
Type: Multiple Choice
13. Poverty is measured by the number of people who fall below
A. a certain level of income.
B. the income needed for a basic standard of living.
C. the nation's economic poverty line.
D. all the above are correct.
Answer: D Reference:
Explanation:
14. Economic inequality compares the share of the ______in society that is received by different groups; such as comparing the share of income received by the ______to the share of income received by the ______.
A. total wealth; top 10%; bottom 10%
B. answers a and c are correct.
C. total income; bottom 10%; top 10%
D. none of the above are correct.
Answer: B Reference:
Explanation:
15. In the United States, the official definition of the poverty line traces back to a single person: ______, whose idea was to ______.
A. Mollie Orshansky; define a poverty line based on the cost of a healthy diet
B. Lawrence Ellison; define a range of government policies to reduce poverty
C. Molly Orshansky; define a range of government policies to reduce poverty
D. Max Lorenz; define the Lorenz curve to illustrate the poverty line
Answer: A Reference:
Explanation:
16. In the U.S., poverty rates are relatively low
A. for the elderly
B. for the well-educated
C. for the male-headed households
D. for whites and all of the above
Answer: D Reference:
Explanation:
17. The concept of a poverty line raises a number of complex questions. Which of the following represents such a question?
A. Should the poverty line be adjusted to take income equality into account?
B. Do antipoverty programs belong in a command economy?
C. Should the national poverty line be applied in all states?
D. Why give cash and not just food stamps to the poor?
Answer: C Reference:
Explanation:
Category: Analyze
18. If the 2014 poverty line is based on the amount of money an individual has earned as income, then
A. the poverty line will be adjusted to take the value of non-cash government assistance into account.
B. government programs that provide non-cash assistance to the poor are not considered.
C. the concept of what poverty means in the 21st century should be rethought from scratch.
D. it will be difficult to compare poverty rates over time in a market-driven economy.
Answer: B Reference:
Explanation:
Category: Analyze
19. If Congress voted every few years to redefine completely what poverty means,
A. it will be useful to have a poverty line whose basic definition changes a lot.
B. then it will set two poverty lines that it applies to welfare and the near-poor.
C. then a substantial share of the U.S. population will subsist in dire poverty.
D. then it would be difficult to compare poverty rates over time.
Answer: D Reference:
Explanation:
Category: Analyze
20. If incomes rise for both low-income and high-income workers, but rise less for the high-income workers,
A. then poverty will rise and inequality will fall
B. then poverty will fall and inequality will rise.
C. then poverty will rise and inequality will rise.
D. then poverty will fall and inequality will fall.
Answer: D Reference:
Explanation:
21. If a rise in incomes for both low-income and high-income workers is higher for the high-income workers,
A. then poverty will fall and inequality will rise.
B. then poverty will rise and inequality will rise.
C. then poverty will fall and inequality will fall.
D. then poverty will rise and inequality will rise.
Answer: A Reference:
Explanation:
22. If a rise in incomes is the same proportion for both low-income and high-income workers,
A. then poverty will rise and inequality will remain unchanged.
B. then poverty will rise and inequality will rise.
C. then poverty will fall and inequality will remain unchanged.
D. then poverty will fall and inequality will fall.
Answer: C Reference:
Explanation:
23. If the income level falls for low-income workers, but remains unchanged for high-income workers,
A. then poverty will rise and inequality will fall.
B. then poverty will fall and inequality will fall.
C. then poverty will fall and inequality will rise.
D. then poverty will rise and inequality will rise.
Answer: D Reference:
Explanation:
24. If the level of incomes rises for high-income workers but doesn’t change for low-income workers,
A. then poverty will not change and inequality will fall.
B. then poverty will not change and inequality will rise.
C. then poverty will rise and inequality will fall.
D. then poverty will fall and inequality will rise.
Answer: B Reference:
Explanation:
25. If incomes rise for low-income workers but don’t change for high-income workers,
A. then poverty will fall and inequality will fall.
B. then poverty will rise and inequality will fall.
C. then poverty will rise and inequality will rise.
D. then poverty will fall and inequality will rise.
Answer: A Reference:
Explanation:
26. If the poverty trap were made even more difficult to overcome because a working mother will have extra expenses like transportation and child care that a nonworking mother will not face, then
A. she will have a powerful incentive to work more than one job.
B. the family better off than if she did not work at all.
C. her economic gains from working will be even smaller.
D. working now and in the future is even more attractive.
Answer: C Reference:
Explanation:
27. How does being caught in a poverty tap affect an individual's future job prospects?
A. it causes working in the future even less attractive
B. it causes a lack of job experience and contacts
C. it creates a powerful incentive to acquire skills training
D. it creates the outcomes presented in both a and b
Answer: D Reference:
Explanation:
28. A government program guarantees $18,000 in income, even for those who do not work at all. If the recipient earns income by working, then the $18,000 benefit is reduced by 50 cents for each $1 earned. Will this program eliminate the poverty trap?
A. Yes, enacting such a program will eliminate the poverty trap.
B. No, enacting such a program may still reduce the incentive to work.
C. Yes, and enacting such a program will cost the government less money.
D. Yes, enacting such a program will create adequate incentive to work.
Answer: B Reference:
Explanation:
29. A government has decided to phase out its antipoverty program support payments more slowly to help the near-poor become self-sufficient. One criticism about this policy is likely to be
A. that this antipoverty program costs the government more money.
B. that the near-poor will not be required to pay back benefits.
C. that the near-poor may still lack skills for menial jobs.
D. that antipoverty programs shift wealth from the rich to the poor.
Answer: A Reference:
Explanation:
Category: Evaluate
30. In the U.S., government support programs that are focused specifically on the poor include which of the following?
A. Medicaid credits
B. welfare
C. income stamps
D. food credits
Answer: B Reference:
Explanation:
Type: Multiple Choice
31. From the Great Depression of the 1930s until 1996, the United States’ most visible antipoverty program was Aid to Families with Dependent Children, which provided cash payments to
A. married men with families who were below the poverty line.
B. married women with families who were below the poverty line.
C. all mothers with children who were below the poverty line.
D. only those orphans who were living below the poverty line.
Answer: C Reference:
Explanation:
Type: Multiple Choice
32. Under which of the following government programs would the federal government’s welfare spending rise or fall depending on the number of poor people, and on how each state set its own welfare contribution?
A. ADFC
B. TANF
C. TNAF
D. AFDC
Answer: D Reference:
Explanation:
33. Under which of the following antipoverty programs does the federal government give a fixed amount of money to each state?
A. ADFC
B. TANF
C. AFDC
D. TNAF
Answer: B Reference:
Explanation:
Type: Multiple Choice
34. Which of the following is a key requirement imposed under the Welfare Reform Act's new antipoverty program?
A. states receiving TANF grants must impose work or school attendance requirements
B. no one can receive TNAF benefits for more than 3 years while attending school
C. no one can receive AFDC benefits for more than 5 years over their lifetime
D. states receiving ADFC benefits must impose work or school attendance requirements
Answer: A Reference:
Explanation:
35. There seems to be little evidence that poor families experienced ______as a result of ______.
A. a tax refund; having earned income
B. a tax break; having earned income
C. an increased standard of living; EIC
D. a reduced standard of living; TANF
Answer: D Reference:
Explanation:
36. Government developed a method called ______to assist the working poor through the tax system. The amount of the tax break ______with the amount of income earned, ______.
A. eligible income credit; decreases; and by age of child
B. earned income credit; increases; up to a point
C. eligible income credit; increases; and by age of child
D. earned income credit; decreases; up to a point
Answer: B Reference:
Explanation:
37. Robert is a widower raising 5 year old twin boys. In 2013, after the plant where he had worked for 10 years shut down, he was able to obtain part-time work that paid him $13,000.00 a year. He receives the earned income tax credit. If Robert receives a raise, so that he will earn $16,350, the earned income credit will be
A. reduced by 21 cents per dollar.
B. reduced by 25 cents per dollar.
C. phased out completely.
D. will not be reduced.
Answer: D Reference:
Explanation:
Category: Analyze
38. One reason that the welfare reform bill TANF worked as well as it did is that
A. the EIC was greatly expanded in the early 1990s.
B. the EIC was greatly expanded in the late 1980s.
C. it was able to generate an increase in the returns to work for the poor.
D. its worth about $2,500 per family with children and all of the above.
Answer: D Reference:
Explanation:
39. The food stamp benefit
A. is a state funded program started in 1984.
B. does not contribute to the poverty trap from an economic viewpoint.
C. has time limits and is not a complete disincentive to work.
D. is reduced by $35 for every $100 earned and a and c above.
Answer: C Reference:
Explanation:
40. Medicaid is a federal-state joint program enacted in 1965 that provides medical insurance for
A. the near-poor and the low-income elderly.
B. all those below the poverty line.
C. low-income mothers, but not their spouses.
D. the disabled and all of the above.
Answer: A Reference:
Explanation:
41. To address a common poverty trap problem for many low-paid Americans whose jobs pay enough that a family could lose its eligibility for______, yet those jobs don’t offer ______either, some states guaranteed that children would not loose their coverage if their parents worked.
A. food stamps; retirement benefits
B. Medicaid; health insurance benefits
C. Medicaid; drug insurance benefits
D. food stamps; Medicaid benefits
Answer: B Reference:
Explanation:
42. Which of the following is a safety net that could provide a decent standard of living and/or incentives to work?
A. government-subsidized school lunches and breakfasts
B. Low Income Home Energy Assistance Program
C. the Special Supplemental Food Program for WIC
D. Supplemental Security Income and the above
Answer: D Reference:
Explanation:
Category: Analyze
43. Measuring economic inequality involves comparing those with ______.
A. high incomes and those below the poverty line
B. high incomes and those with low incomes
C. high incomes middle incomes, and low incomes
D. high incomes and those near the poverty line
Answer: C Reference:
Explanation:
Type: Multiple Choice
44. One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then
A. to divide all households into quintiles.
B. comparing the groups.
C. to divide all households by size.
D. comparing the share of the population.
Answer: A Reference:
Explanation:
Type: Multiple Choice
45. A Lorenz curve graphs the ______received by everyone up to a certain quintile.
A. unequal distribution over time
B. normative shares of income
C. cumulative shares of income
D. total share of income
Answer: C Reference:
Explanation:
Type: Multiple Choice
46. Every Lorenz curve diagram begins with a line ______.
A. sloping down at a 45-degree angle
B. sloping up at a 45-degree angle
C. upward sloping U-shape
D. downward sloping hump shape
Answer: B Reference:
Explanation:
Type: Multiple Choice
47. The trick in graphing a Lorenz curve is that you must transform the shares of income ______, which are shown in the first column of numbers in the table, into ______, shown in the ______column of numbers.
A. for each distribution; total income; third
B. for each distribution; total income; second
C. for each specific quintile; cumulative income, third
D. for each specific quintile; cumulative income; second
Answer: D Reference:
Explanation:
48. In the framework of a Lorenz curve, the final entry in the cumulative income column needs to be ______.
A. total income
B. cumulative income
C. 100%
D. 45%
Answer: C Reference:
Explanation:
Type: Multiple Choice
49. Why did inequality of household income increase in the United States in recent decades?
A. growth of single-parent families at the top end of the income distribution
B. higher-earner couples near the top end of the income distribution
C. increase in earnings received by high-skilled labor relative to low-skilled labor
D. demand for high-skilled labor at higher wages increased and b and c
Answer: D Reference:
Explanation:
50. The greater inequality of wages can be viewed as a sign that
A. demand for skilled labor is increasing faster than supply.
B. supply for skilled labor is decreasing faster than demand.
C. demand for skilled labor is decreasing faster than supply.
D. supply for skilled labor is increasing faster than demand.
Answer: A Reference:
Explanation:
Type: Multiple Choice
51. If a society decides to reduce the level of economic inequality, which of the following sets of tools can it use?
A. a tax imposed on the value of inheritances
B. redistribution from those with high incomes to those with low incomes
C. trying to assure that a ladder of opportunity is widely available
D. the three mains sets of tools it can use include all of the above
Answer: D Reference:
Explanation:
Category: Analyze
52. Crystal is a single mother with 2 children. She can earn $10 per hour and can work up to 1,800 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $18,000 per year. For every $1 of income she earns, her level of government support is reduced by $1. Crystal’s labor-leisure opportunity set