Homework: Chapter 20 Homework

Table 1 shows the distribution of market income in an economy. The government redistributes income by collecting income taxes and paying benefits shown in Table 2. Following the income​ redistribution, total income is​ $93.8 million. Calculate the income share of the secondsecond 20 percent of households after tax and redistribution. ​>>> Answer to 1 decimal place. The secondsecond 20 percent of households earns ​$ nothing million after tax and benefits. The secondsecond 20 percent of households earns nothing percent of total income after tax and benefits. The fourthfourth 20 percent of households earns ​$ 20.220.2 million after tax and benefits. The fourthfourth 20 percent of households earns 21.521.5 percent of total income after tax and benefits.

17 18.1

The table shows the distribution of market income. Suppose the government taxes the 60 percent of households with the highest market incomes 10 percent and distributes the tax collected as equal benefits to the 40 percent of the population with lowest market income. What percentage of total market income is redistributed to the lowestlowest 20 percent of​ households? What is the income share of the thirdthird 20 percent of households after tax and​ redistribution? ​>>> Answer to 1 decimal place. The lowestlowest 20 percent of households receives benefits equal to nothing percent of total market income. The thirdthird 20 percent of households earns nothing percent of total income after tax and benefits. The fourthfourth 20 percent of households earns 2727 percent of total income after tax and benefits.

4.3 18

Which of the following is an example of market income​? A. Jim earns a wage of​ $5,000 a month. B. The government increased its unemployment benefits by 5 percent. C. The US government paid a​ $10,000 education voucher to households with kids under age 10. D. The government pays an annual farm subsidy of​ $12 million.

Jim earns a wage of​ $5,000 a month.

Based on this​ data, which country has the more unequal​ distribution? A. The United States B. Canada C. Neither. They have the same degree of inequality. D. It is impossible to tell without more information.

The United States

Choose the statement that is incorrect. A. The demand for the labor of trade school graduates is less than the demand for the labor of​ low-skilled factory workers. B. Trade school teaches skills that a person can use in more than one firm. C. Some people are attending trade school to learn a trade that they believe will not be outsourced. D. More people are attending trade school because factory jobs are disappearing. E. People are retraining as auto mechanics because this is a skill that will not be outsourced.

The demand for the labor of trade school graduates is less than the demand for the labor of​ low-skilled factory workers.

The single biggest factor affecting income distribution is​ ______. A. education B. race C. region D. type of household

education

Read the news​ clip, then answer the following questions. If most of the wealth of the wealthiest households consists of stocks and most of the wealth of other households consists of their​ homes, explain how the information provided in the news clip changed the distribution of wealth. Which wealth quintile would experience a decrease in its share of​ wealth? The percentage of total wealth of the lowest quintiles​ _______. The percentage of total wealth of the wealthier quintiles​ _______. A. ​increased; decreased B. ​decreased; increased C. ​increased; increased D. ​decreased; decreased

​increased; decreased

The top table shows the distribution of market income and the bottom table shows the distribution of money income. What is the percentage of total market income that is redistributed from the highest income​ group? What are the percentages of total market income that are redistributed to the lower income​ groups? ​>>> Answer to 1 decimal place. The percentage of total market income that is redistributed from the highest income group is nothing percent. With​ redistribution, the income of the lowest income group increases by nothing percent. And the income of the second 20 percent increases by nothing percent. And the income of the third 20 percent increases by nothing percent. And the income of the fourth 20 percent increases by nothing percent.

4.7 2.3 1.5 0.7 0.2

What features of​ Bernie's plan make the distribution of income more​ unequal? Feature 1 Free healthcare Feature 2 Free college tuition Feature 3 Transportation infrastructure program to create 1 million jobs for disadvantaged youth Feature 4 Increased taxes for wealthy individuals Feature 5 Increased taxes for corporations Feature 6 Increased tax on Wall Street trades ​ _____ influence(s) ​ _____ more unequal. A. Feature​ 2; the allocation of​ people's current budget and might make the future distribution of income B. Features​ 4, 5 and​ 6; the​ after-tax income of the wealthy and will make the distribution of money income C. Feature​ 3; will make the current distribution of market income D. Feature​ 1; the allocation of​ people's current income and might make the future distribution of income

Feature​ 2; the allocation of​ people's current budget and might make the future distribution of income

Which influence adds​ more, on​ average, to a​ household's income: getting a professional​ degree, getting​ married, becoming ​ older, or moving to New​ York? Which of these​ influences, on​ average, adds​ least? ​_______ adds​ more, on​ average, to a​ household's income, and​ _______ adds least. A. Moving to New​ York; getting a professional degree B. Becoming​ older; getting married C. Getting a professional​ degree; moving to New York D. Getting a professional​ degree; becoming older

Getting a professional​ degree; moving to New York

Which of the following is an example of money income​? A. Randy pays interest on his credit card balance of​ $50 a month. B. The US government provides cash transfers to households earning less than​ $1,000 a month. C. Education is a significant factor that influences human capital. D. Median household wealth in the US was​ $60,000 in 2012.

The US government provides cash transfers to households earning less than​ $1,000 a month.

The table shows the distribution of income in the Australia. Complete the column of the table that records the cumulative percentages of income in Australia received by the cumulative percentages of households. Households Income ​(percentage) Cumulative percentage of Households Income Lowest 20 percent 8 Lowest 20 nothing Second 20 percent 13 Lowest 40 nothing Third 20 percent 18 Lowest 60 nothing Fourth 20 percent 23 Lowest 80 nothing Highest 20 percent 38 100 100.0 The graph shows the Lorenz curve for the United States. Draw the line of equality. Draw a point to show the cumulative percentage of income received by the lowest 40 percent of Australian households. Label it 1. Draw a point to show the cumulative percentage of income received by the lowest 80 percent of Australian households. Label it 2. Draw the Lorenz curve for Australia. Label it. Based on the data​ provided, which country has the more unequal income​ distribution? A. The United States B. Australia C. Neither. They have the same degree of inequality. D. It is impossible to tell without more information.

The United States

Which of the following statements is​ correct? A. The farther the Lorenz curve is from the line of​ equality, the more unequal is the distribution of income. B. The Lorenz curve for wealth is closer to the line of equality than the Lorenz curve for income. C. The closer the Lorenz curve is to the line of​ equality, the more unequal is the distribution of income. D. If the Lorenz curve crosses the line of equality the distribution of income is more unequal at high income levels than at low income levels.

The farther the Lorenz curve is from the line of​ equality, the more unequal is the distribution of income.

​Education, household​ size, household type​ (marital status), age of​ householder, race, and region of residence all influence the degree of income inequality. Rank these influences in order of importance from most to least important. Place 1 beside the most important​ influence, 2 beside the second most​ important, and so on to 4 beside the least important influence. nothing EducationEducation nothing Age of householder and race of householdAge of householder and race of household nothing Household size and type left parenthesis marital status right parenthesisHousehold size and type (marital status) nothing Region of residenceRegion of residence

The influences on income inequality in order of importance are 1 Education 2 Household size and type​ (marital status) 3 Age of householder and race of household 4 Region of residence.

Income gap closes in rural suburbs ​Middle-income households are seeking affordable housing by fleeing the cities and moving into​ fast-growing suburbs on farmland near metropolitan areas. ​Source: USA Today​, September​ 14, 2007 Choose the correct statement. A. The households that remain in metropolitan areas are in the lowest and highest​ quintiles, and the income inequality across these groups is small. B. Inequality across income in the rural suburbs is growing. C. ​Fast-growing rural suburbs have greater income equality than metropolitan areas because suburbs have more households from the highest quintile. D. The rural suburbs have predominantly households in the middle three income quintiles so the income inequality is low. E. Income inequality is greater across the three middle income quintiles than between the lowest and highest quintiles.

The rural suburbs have predominantly households in the middle three income quintiles so the income inequality is low.

Economic inequality arises from all of the following except ​______. A. inequality of human capital B. a shortage of​ high-skilled labor C. inequality of education attainment D. discrimination

a shortage of​ high-skilled labor

When governments redistribute​ income, they​ ______. A. set the tax and benefit rates that make everyone work and save more B. are influenced by how people vote in elections C. give every dollar collected in taxes to poor people D. improve economic efficiency

are influenced by how people vote in elections

During​ 2000, 2005, and​ 2006, ______. A. at the lower end of the income​ distribution, income inequality increased between 2000 and 2005 and then decreased slightly during 2006 B. income inequality increased in all quintiles C. income inequality decreased in all quintiles D. income inequality decreased at the upper end of the income distribution

at the lower end of the income​ distribution, income inequality increased between 2000 and 2005 and then decreased slightly during 2006

The​ $1.4 billion trick to make us accept income inequality Lotteries take money from the poor and redistribute it unequally.The​ poor, the​ uneducated, and minorities play the lottery the​ most, and it takes a big chunk of their income. ​Source: The Huffington Post​, January​ 12, 2016 If the news clip is​ correct, how does a lottery change the distribution of​ income? Draw two Lorenz curves to illustrate your answer. Lotteries result in the distribution of income ▼ becoming more equal becoming more unequal remaining unchanged . Draw the Lorenz curve in a country that does not have lotteries. Label it Before. Draw the Lorenz curve for the country after the introduction of lotteries. Label it After. ​>>> To reposition the label click on the cross by the label box and dragging it.

becoming more unequal

Consider a policy that taxes the bottom 60 percent of income earners at a​ 0% tax rate and reduces redistribution to 1 percent of tax revenue. This policy​ ______. A. has a net social gain over the current​ system, which uses more resources in redistribution B. has a net social loss because people in the two highest quintiles will have an incentive to work less C. has a net social gain because reducing the necessity of 60 percent of workers to file income tax saves resources D. has a net social loss because workers in the two highest quintiles must pay higher taxes E. both A and C are correct

both A and C are correct

Disposable income is market income plus​ _____ paid by the government​ _____ taxes. A. cash​ benefits; minus B. ​interest; plus C. cash​ benefits; plus D. ​subsidies; minus

cash​ benefits; minus

The three main types of programs that redistribute income by making direct payments to people in the lower part of the income distribution include all of the following except​ ______. A. college tuition compensation B. welfare programs C. unemployment compensation D. social security programs

college tuition compensation

A Lorenz curve plots the​ _____. A. average income received by each quintile against the number of households in the quintile B. percentage of total income received by each quintile against the percentage of households in the quintile C. cumulative percentage of income against the cumulative percentage of households D. trend in the cumulative percentage of income received by each quintile against trend in the number of households

cumulative percentage of income against the cumulative percentage of households

Incomes in China and India are a small fraction of incomes in the United States. But incomes in China and India are growing more quickly those in the United States. Draw the world Lorenz curve before the growth in income in China and India. Label it Before. ​>>> Reposition the label by clicking on the edge of the label box and dragging it. Draw the world Lorenz curve after the growth in income in China and India. Label it After. Inequality between the people in China and India and the people in the United States is​ ______. A. decreasing B. increasing C. staying relatively constant D. increasing in some years and decreasing in other years

decreasing

​California: The nation​'s most unequal state In​ California, researchers​ found, it really matters where you live. Residents of Silicon Valley live more than four years longer than the average​ American, earn nearly double the​ income, and have nearly triple the number of graduate degrees. Residents of Central Valley live nearly a year less than the average​ American, earn barely more than a​ poverty-line income, and nearly four in ten failed to graduate from high school. ​Source: CNN, May​ 6, 2015 Explain why the first sentence is not correct. The first sentence is not correct because ​ ______ is the most important determination of economic inequality. A. age of householder B. size of houshold C. race D. educational qualification E. type of household

educational qualification

The quintile that saw it share of wealth decrease the most was the ▼ highest lowest middle quintile.

highest

Better schools and more education​ ______. A. increase the supply of​ low-skilled labor because the compensation for acquiring better education increases. The wage rate falls B. increase the supply of​ low-skilled labor because the value of marginal product increases. The supply of labor of these better educated workers​ increases, and the wage rate falls C. increase the equilibrium quantity of​ low-skilled labor, and the wage rate falls D. increase the demand for​ low-skilled labor because the value of marginal product increases. The demand for labor of these better educated workers​ increases, and the wage rate rises E. decrease the demand for​ low-skilled labor because better educated workers are paid higher wages

increase the demand for​ low-skilled labor because the value of marginal product increases. The demand for labor of these better educated workers​ increases, and the wage rate rises

Income gap in New York is called​ nation's highest New York continues to have the highest income gap of any state. Experts claim that the income gap arises from the large number of poor unskilled immigrants. The economic immobility of these workers arises from a barrier to education. ​Source: nytimes.com, January​ 27, 2006 The large increase in foreign immigrants who are largely​ poor, unskilled workers​ ______. A. decreases the demand for​ low-skilled labor and lowers the wage rate of​ low-skilled labor B. increases the supply of​ high-skilled labor and lowers the wage rate of​ low-skilled labor C. increases the supply of​ low-skilled labor and lowers the wage rate of​ low-skilled labor D. increases the supply of​ low-skilled labor and decreases the supply of​ high-skilled labor. The wage rate of​ low-skilled labor falls and the wage rate of​ high-skilled labor rises E. decreases the supply of​ high-skilled labor and raises the wage rate of​ high-skilled labor

increases the supply of​ low-skilled labor and lowers the wage rate of​ low-skilled labor

Economists think that discrimination in the labor market​ ______ a likely explanation for the persistent inequality in earnings between women and men and among the races because​ ______. A. is​ not; all wage differentials can be attributed to differences in the region of residence B. ​is; firms that discriminate face lowers costs and higher economic profit than firms that do not discriminate C. is​ not; all wage differentials can be attributed to differences in education D. is​ not; firms that discriminate face higher costs and lower economic profit than firms that do not discriminate E. ​is; firms are persistently willing to pay higher wages to workers from groups that they prefer

is​ not; firms that discriminate face higher costs and lower economic profit than firms that do not discriminate

Read the news​ clip, then answer the following questions. The data in the news clip tells us that the wealth Lorenz curve​ ______. During the Great​ Recession, the distribution of wealth​ ______. A. lies below the line of​ equality; became less equal B. is equal to the line of​ equality; did not change C. is equal to the line of​ equality; became less equal D. lies below the line of​ equality; became more equal E. lies below the line of​ equality; did not change

lies below the line of​ equality; became less equal

Read the news​ clip, then answer the following question. The change in the median income and the change in the poverty rate tell us​ ______. A. that the Lorenz curve in 2006 is further from the line of equality than the Lorenz curve in​ 2005, and the Lorenz curve in 2006 is closer to the line of equality than the Lorenz curve in 2000 B. that the Lorenz curve in 2006 is closer to the line of equality than the Lorenz curve in​ 2005, and the Lorenz curve in 2006 is further from the line of equality than the Lorenz curve in 2000 C. that the Lorenz curve in 2006 is closer to the line of equality than the Lorenz curve in​ 2005, and the Lorenz curve in 2006 is closer to the line of equality than the Lorenz curve in 2000 D. nothing about the U.S. Lorenz curve

nothing about the U.S. Lorenz curve

In recent​ years, as the gap between the rich and the poor has​ increased, the Lorenz curve has​ ______. A. not​ changed, but there has been a movement down along it B. shifted away from the line of equality C. shifted closer to the line of equality D. not​ changed, but there has been a movement up along it

shifted away from the line of equality

Read the news​ clip, then answer the following question. Where is wealth more unequally​ distributed: China or the United​ States? Wealth is more unequally distributed in​ _____ because​ _______. A. ​China; inequality has increased over the past decade B. the United​ States; the poorest 25 percent own more wealth in China than they do in the United States C. the United ​ States; 36.7 percent of the wealth is owned by 1 percent while 60 percent own only 1.7 percent D. ​China; 33 percent of the wealth is owned by 1 percent while 25 percent own only 1 percent E. the United​ States; 63.6 percent of the wealth is owned by 1 percent while 40 percent own no wealth

the United ​ States; 36.7 percent of the wealth is owned by 1 percent while 60 percent own only 1.7 percent

In the United States in​ 2010, 30 million people had​ full-time managerial and professional jobs that paid an average of​ $1,200 a week and 10 million people had​ full-time sales positions that paid an average of​ $600 a week. Managers and professionals are paid more than salespeople for all of the following reasons except​ ______. A. the demand curve for managers and professionals lies below that of salespeople B. managers and professionals have more human capital C. the supply curve of managers and professionals lies above that of salespeople D. the typical manager or professional has incurred a higher cost of education E. managers and professionals have a higher value of marginal product

the demand curve for managers and professionals lies below that of salespeople

In the United States in​ 2010, 30 million people had​ full-time professional jobs that paid an average of​ $1,200 a week. At the same​ time, 10 million people had​ full-time sales positions that paid an average of​ $600 a week. Shopping online has become popular and more and more firms offer their goods and services for sale online. If this trend continues​ ______. A. the demand for salespeople will decrease and the wage rate will definitely fall B. the demand for salespeople will decrease and the wage rate will definitely rise C. the supply of salespeople will increase because fewer will be employed D. the demand for salespeople will decrease and the wage rate might rise or fall depending on the change in supply of salespeople E. the demand for salespeople will decrease and the wage rate will stay relatively unchanged

the demand for salespeople will decrease and the wage rate might rise or fall depending on the change in supply of salespeople

The top table shows the distribution of market income and the bottom table shows the distribution of money income. If we increase the amount of income redistribution to the point at which the lowest income group receives 15 percent of total income and the highest income group receives 30 percent of total​ income, ______. A. the amount of income received by a given person will change but the total income earned remains unchanged B. the redistribution creates the big tradeoff C. the excess burden of the tax is minimized D. each dollar collected from a rich person becomes a dollar received by a poor person E. it is more efficient than the current income redistribution

the redistribution creates the big tradeoff

Why are graduates who work as waiters going to coding​ school? Graduates are going to coding school because​ _________ A. they want a job that requires more skill B. the job of a coder is more interesting than being a waiter. C. the human capital of a coder exceeds that of a waiter D. the value of the marginal product of a coder is greater than that of a waiter E. coders have an easier job that pays a higher wage

the value of the marginal product of a coder is greater than that of a waiter

Income redistribution in the United States results in the income share of the​ ______ rising and the income share of the​ ______ falling. A. four lowest​ quintiles; highest quintile B. three lowest​ quintiles; other two quintiles C. two lowest​ quintiles; other three quintiles D. lowest​ quintile; other four quintiles

three lowest​ quintiles; other two quintiles

Of all the Americans who live in​ poverty, most are​ ______ families, while the highest poverty rate is among​ ______ families. A. ​Hispanic; white B. ​white; black and Hispanic C. ​black; Hispanic D. ​black; white

white; black and Hispanic