Chapter 21 Review
If Area I = 1,700 and Area J = 3,300, what is the Gini coefficient?
.34 (I/I+J)
The middle 20% of the population earn ________ of total income.
16% (32-16)
Income inequality in the United States has increased in part due to globalization. How does globalization contribute to income inequality?
It allows domestic firms to hire low −skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of low −skilled workers to fall relative to the wages of other workers.
Income inequality in the United States has increased in part due to technological change. How does technological change contribute to income inequality?
It has created many higher −income jobs for skilled and trained workers, leaving the income of less −skilled workers relatively unchanged by comparison.
When we compare shares of income earned by U.S. households over the past 40 years, which of the following statements about the distribution of income is true?
The largest gain in income percentage is in the top 5% of households.
Lorenz curve
a curve that plots, for any given percentage of the pop, the proportion of total income earned by that particular group of people
income mobility
ability to move to a different part of the income distribution
diminishing marginal utility
belief that having more of something makes you happier but in successively smaller increments
The belief that having more of something makes you happier but in successively smaller increments is called
diminishing marginal utility
Income distribution in the United States over the past 40 years has become more equal
fa;se
The results of a survey conducted by Dan Ariely and Michael Norton found that Americans
have a preference for much greater equality in wealth distribution than currently exists
median income
income of middle person in an income distribution
If growing income inequality results from changes in technology that, as a whole, make society better off, this will
increase the size of economic pie
globalization
increasing integration of the world's economies
The question "Is the U.S tax system disproportionate enough?" is a ________ question, and the question "How would higher taxes make the rich behave?" is a ________ question.
normative;positive
Gini coefficient
number that measures a society's income inequality, based on how income is distributed across quintiles. The Gini coefficient is derived from the Lorenz curve and ranges from 0 (perfect equality) to 1 (perfect inequality)
Rachel, a large pineapple producer in Hawaii, lobbies Congress to limit imports of pineapples in order to be able to sell her pineapples at a higher price and greatly increase her income. This possible source of income inequality is due to
rent seeking
income distribution
share of income received by different groups
From 1970 to 2012, the Gini coefficient in the United States has
steadily increased
utilitarianism
the belief that the ethically proper thing to do in any situation is the thing that maximizes society's overall happiness and minimizes society's overall suffering
If Martha's income doubled to $220,000 while the incomes of the other four residents did not change, what would happen to the original median income on Richlandia?
would not change
In the United States, the highest quintile of income earners contribute ________ of all federal tax dollars received, and the lowest quintile of income earners contribute ________ of all federal tax dollars received
68.8%; 0.4%
