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Exam 20: Income Inequality and Poverty

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Question 171

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Diminishing marginal utility suggests that

A) more is always preferred to less.
B) the well-being of society is maximized when the distribution of income is equal.
C) the poor are less efficient at spending money than the rich.
D) the poor receive more satisfaction from the last dollar spent than the rich.

E) A) and C)
F) A) and B)

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Question 172

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Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

A) utilitarianism
B) liberalism
C) libertarianism
D) welfarism

E) B) and C)
F) C) and D)

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Question 173

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Scenario 20-1 The government is proposing switching from a progressive tax system in which families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35% of any income over $100,000 to a tax system in which every family pays 20% of their income less $20,000. -Refer to Scenario 20-1. Which group would be most in favor of the switch from the current progressive tax policy to the new policy?

With which three demographic variables is poverty correlated?

The Earned Income Tax Credit (EITC) is a tax provision that allows poor working families to receive income tax refunds greater than the taxes they paid during the year. Therefore, the EITC works much like a .

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $150,000 owe?

The Callaway family owns a small bait and tackle shop in a resort town in Wisconsin. An economic recession reduces the number of tourists for one summer, which reduces the family's income for that year. For the Callaway family, their

On what type of income do many economists believe that people base their consumption?

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Measures of poverty that fail to account for the value of in-kind transfers

Pietro is 40 years old and is laid off from his job at the paper plant and borrows from his savings for 8 months until he finds a new job. Pietro's

Suppose that young people often borrow and then repay the loans when they are older. These actions relate to which problem in measuring inequality?

Explain the relationship between labor earnings and the distribution of income.

Since 1970 the United States' income distribution has become more equal.

What is the term for a measure of happiness or satisfaction a person receives from his or her circumstances?

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

In the United States from 1935 to 2011 the share of total income earned by the bottom fifth of income earners rose and then fell.

In the U.S. economy, labor earnings make up about

Assume you are a critic of welfare reforms that impose a time limit on the number of years a person is eligible for welfare benefits. What is the foundation of your critique?

Suppose society consists of four individuals: Andy, Bill, Carl, and David. Andy has $20,000 of income, Bill has $40,000 of income, Carl has $60,000 of income, and David has $80,000 of income. A utilitarian would argue that