Econ Test 2 Review

If the U.S. government determines that the cost of feeding an urban family of six $6,000 per year, then the official poverty line for a family of that type is...

$18,000

In 1950, the burden of one Social Security recipient was shared by...

16 workers.

The current measure of poverty, roughly three times the cost of providing an adequate diet, was established in...

1964

Over the past 50 years, the U.S. poverty rate was at its lowest in...

1973

By 2030, the burden of one Social Security recipient will be shared by...

2 workers.

In 20 years the percent fo all Americans that will be 65 or older will be...

20%

The poverty rate for female households with no spouse present is approximately...

30 percent

Jane retires. The last year she worked, she earned $40,000. Her social security payments the first year total $20,000. Her replacement rate is:

50%

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP? a. increasing life expectancies b. falling fertility rates c. increasing health care costs d. All of the above are correct

All of the above are correct

Which of the following is NOT one of the reasons why America is getting older? a. Americans are living longer b. The birthrate is near record low levels c. Americans are working longer d. Average life expectancy today is 78 years

Americans are working longer

In-kind transfers are transfers to the poor...

Given in the form of goods and services rather than cash.

Economists study poverty and income inequality to answer which of the following questions? a. What are peoples wages? b. How does labor-force experience affect wages? c. How much inequality is there in society? d. How do people adjust their behavior due to taxation?

How much inequality is there in society?

The federal healthcare spending program that specifically targets the poor is called...

Medicaid

The federal healthcare spending program that specifically targets the poor is called...

Medicaid.

The governments health plan for the elderly is called...

Medicare.

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

Overstate the actual poverty rate

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

Social Security

Our largest social insurance program in the US is:

Social Security

The payroll tax differs from the individual income tax because the payroll tax os primarily earmarked to pay for...

Social Security and Medicare

The revenue that the federal government collects from payroll taxes is earmarked to pay for...

Social Security and Medicare

The argument that Social Security decreases savings because it decreases the need to saved privately for retirement is the:

Social Security wealth effect

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

Social Security.

Which of the following represents a transfer payment? a. You transfer $1,000 from your bank account to a mutual fund b. The government sends your grandfather his Social Security check. c. The bank transfers $10 in quarterly interest to your savings account. d. Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account.

The government send your grandfather his Social Security check

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

The increase in life expectancy resulting from advances in health care

Which of the following statements about the effects of rent control is correct? a. the short-run effect of rent control is a surplus of apartments, and the long-run effect of rent control is a shortage of apartments b. the short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments c. In the long-run, rent control leads to a shortage of apartments and an improvement in the quality of available apartments d. the effects of rent control are very noticeable to the public in the short run because the primary effects of rent control can occur very quickly

The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.

What do physicians sovereignty and third-party payment have in common?

They both increase the demand for healthcare

A transfer payment is...

a form of government spending that is not made in exchange for a currently produced good or service.

Economists generally believe that rent control is...

a highly inefficient way to help the poor raise their standard of living.

Rent-control laws dictate...

a maximum rent that landlords may charge tenants.

Poverty is found to be correlated with...

age, race, and family composition.

The principal mandates of the Affordable Care Act include: a. all people are required to have health insurance coverage or pay a fine b. insurance companies cannot turn away, drop, or increase the premiums of their subscribers with pre-existing or new conditions; nor can they place a lifetime limit on benefits c. insurance policies must include a broad range of preventative health care d. all of the above

all of the above

Which of the following cause an increased demand for healthcare? a. defensive medicine b. rapid technological change c. cost shifting d. all of the above

all of the above

Which of the following would be supported by those on the economic right? a. increased competition on the supply side of health care b. increased competition on the demand side of health care c. medical savings accounts d. all of the above

all of the above

The poverty line is: a. established by the federal government b. approximately equivalent to three times the cost of providing an adequate diet c. an absolute level of income below which a family is deemed to be in poverty d. all of the above are correct

all of the above are correct

Which of the following is not correct? a. poverty is correlated with race b. poverty is correlated with age c. poverty is correlated with family composition d. all of the above are correct

all of the are correct

The poverty rate is a measure of the percentage of the people whose income falls below...

an absolute level of income

Government vouchers to purchase food, also known as food stamps, are an example of...

an in-kind transfer

Long Lines

are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.

As rationing mechanisms, prices

are efficient, but long lines are inefficient

Which of the following groups has the lowest poverty rate? a. blacks b. asians c. children (under age 18) d. female households, no spouse present

asians

Which of the following is not correct? a. many measures of inequality are based on income, which may not effect a persons standard of living b. because many of the poorest families receive in-kind transfers, more families have lower standards of living when compared to poverty rates based on income c. because people can borrow and save to smooth out life cycle changes in income, equality measures based only on income may not reflect a persons standard of living d. a persons standard of living depends more on her permanent income than her transitory income, so inequality measures based on current income may be misleading

because many of the poorest families receive in-kind transfers, more families have lower standards of living when compared to poverty rates based on income

When we say that the Social Security tax is a matching tax, we mean that:

both workers and their employers pay the Social Security tax based on the workers' earnings

Under rent control, bribery is a mechanism to

bring the total price of an apartment (including the bribe) closer to the equilibrium price.

In comparison to the average poverty rate...

children are more likely to be poor, but the elderly are less likely to be poor

The argument that Social Security increases savings buy encouraging early retirement is the:

early retirement effect

Which of the following groups has the highest poverty rate? a. blacks b. asians c. children (under age 18) d. female households, no spouse present

female households, no spouse present

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

he fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

Medicare has been the focus of many proposed reforms over the last several years because...

health care costs have risen more rapidly than the costs of other goods and services produced in the economy.

The goal of rent control is to

help the poor by making housing more affordable

Which of the following is not a result of rent control? a. fewer new apartments offered for rent b. less maintenance provided by landlords c. bribery d. higher quality housing

higher quality housing

In-kind transfers are transfers to the poor...

in the form of goods and services rather than cash

The statement that "measures of the distribution of income are based on money income" relates to which problem in measuring inequality?

in-kind transfers

Measuring poverty using an absolute income scale like the poverty line can be misleading because...

income measures do not include the value of in-kind transfers

The poverty rate is based on a family's...

income only

If the value of in-kind transfers are taken into account, the number of families living in poverty in the United States would...

increase by about 10 percent

Compared with 1960, national share expenditures as a share of GDP in the United States have:

increased greatly

The most common explanation for Social Security payments accounting for a larger share of federal government expenditure is...

increases in life expectancy

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is...

increases in life expectancy.

Defensive medicine:

increases the demand for health care

As a rationing mechanism, discrimination according to seller bias is

inefficient and potentially unfair

The percentage of families with incomes below the poverty line...

is known as the poverty rate

Which of the following is not an aspect of the Affordable Care Act? a. expansion of medicaid b. a health care exchange (marketplace) c. universal (or near universal coverage d. jail time for people who refuse to participate

jail time for people who refuse to participate

When we say that Social Security benefits are progressive, we mean that:

low-income workers have a higher replacement rate than high income workers

Under rent control, tenants can expect

lower rent and lower quality housing

Many health economists believe that it will be very difficult to stem the rise in health care costs because...

medical advances are providing better ways to extend and improve human lives but at high costs

Most health care economists believe that it will be very difficult to stem the rise in health care costs because...

medical advances are providing better ways to extend and improve human lives but at very expensive costs.

A governments policy of redistributing income makes the income distribution...

more equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient.

In-kind transfers are...

non-monetary items given to the poor

People over 65 years old now consume...

over one-third of the federal government's budget.

Which type of tax is used to finance the Social Security program in the US?

payroll tax

Both Social Security and Medicare are financed or paid for by...

payroll taxes.

When Social Security is described as a pay-as-you-go system, it means that Social Security:

pays benefits our of the current taxes collected from people who are working

The long-run effects of rent controls are a good illustration of the principle that

people respond to incentives

The presence of a price control in a market for a good or service usually is an indication that...

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

The income level below which families are said to be poor is known as the...

poverty line

A commonly-used gauge of poverty is the...

poverty rate

Which of the following is NOT a rationing mechanism used by landlords in cities with rent control? a. waiting lists b. race c. price d. bribes

price

In a competitive market free of government regulation...

price adjusts until quantity demanded equals quantity supplied.

In a free, competitive market, what is the rationing mechanism?

price.

Which of the following is not a function of prices in a market system? a. prices have the crucial job of balancing supply and demand b. prices send signals to buyers and seller to help them make rational economic decisions c. prices coordinate economic activity d. prices ensure an equal distribution of goods and services among consumers

prices ensure an equal distribution of goods and services among consumers

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

A tax takes $2,500 from Joe whose total income is $25,000. The tax takes $5,000 from James whose income is $100,000. The tax is:

regressive

Rent control policies tend to cause

relatively smaller shortages in the short run than in the long run because supply and demand tend to be more inelastic in the short run than in the long run

The workers retirement benefits as a percentage of his/her final working year's earnings is the:

replacement rate

Plans to partially privatize Social Security would reduce the Social Security tax and:

require that workers establish investment accounts with the taxes saved

Rent control

serves as an example of a price ceiling

A major difference between social insurance and public assistance programs is that:

social insurance covers the entire eligible population, but public assistance only covers the needy

The median age in the U.S. is the age...

the divides the older half of the population from the younger half.

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of...

the elderly population growing more rapidly than the overall population

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely the result of...

the elderly population growing more rapidly than the overall population.

The regular pattern of income variation over a persons life is called...

the life cycle

Many health economists believe that President Obama's 2010 healthcare reform bill and other measures proposed by policymakers to reduce the growth of healthcare costs will have only a limited impact because...

the main source of higher costs is medical advances which extend and improve lives.

An alternative to rent-control laws that would not reduce that quantity of housing supplied is

the payment by government off a fraction of a poor family's rent

The poverty rate is...

the percentage of the population whose family income falls below a specified level

The long-run problem of Social Security is that:

the ratio of workers to recipients is declining

When we say that the Social Security tax is regressive, we mean that:

the tax takes a larger percent of income from the low-income than from the high-income workers

The federal government sets the poverty line at roughly...

three times the cost of providing an adequate diet

Medicaid and Medicare differ in that:

to be eligible for Medicaid, families have to have low income, but there is no means test for Medicare

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

with shortages and waiting lists, they have no incentive to maintain and improve their property.

Economists believe that privatized hospitals would:

would increase efficiency