Macro Chap 8: Inequality

The table presents recent data from the World Bank. Based on the data in the table, which statement is correct?

Average income in the bottom quintile is lower in Sri Lanka than in Mongolia.

Which statement describes a poverty line based on absolute poverty?

Income is below $5 per day per person in the household

During the midst of the coronavirus pandemic, your uncle was part of a group of employees that his company laid off. His family's household income declined dramatically, and they struggled to provide for his two children. Which would NOT have been a U.S. government program potentially available to him?

Social Security

Which gift is most like an income transfer rather than an in-kind transfer?

a gift card branded through one of the main credit card companies

What relationship exists between income and well-being in the well-being curve found in the figure?

a positive relationship with decreasing marginal gains in well-being as income rises

Much of the rise in income inequality in recent years in the United States comes from

a rising gap between the incomes of highly educated and less educated workers

Many government programs associated with the welfare state are believed to cause deadweight loss, since they:

affect incentives to work and to save

Permanent income is a persons:

average income over their lifetime

Focusing on differences in the amount people actually spend on goods and services as a measure of their material well-being rather than comparing their current incomes leads to a focus on _____ in discussions of the level of economic inequality across households.

consumption

Medicaid is funded by

federal and state governments

Social Security is a(n) _____ that is _____.

monetary transfer; not means-tested

Myrda works as an audio technician on Broadway, and frequently experiences short-term unemployment. When she is working, she saves a good portion of her income, upon which she relies when she is unemployed. Myrda's approach is consistent with the:

permanent income hypothesis

Which is NOT a rationale for the creation of the social safety net?

providing universal healthcare

The tech startup where you worked went out of business. You were worried about depleting your wealth entirely but avoided that outcome thanks to:

social insurance

Which income redistribution would increase total well-being the most?

someone in the 95th percentile to someone in the 10th percentile

Actual poverty is less than the official poverty rate primarily because

tax credits and noncash benefits are not included when calculating incomes

Use Figure: Major U.S. Redistribution Programs. The figure lists welfare programs available to individuals. The second row includes Social Security and Medicare and thus specifies programs _____

that are non-means-tested

The official poverty line depends on _____ and is adjusted every year to reflect changes in the cost of living

the size and composition of a family

Social insurance programs do NOT:

use a means test to qualify people for benefits

You hope to find a job, which enables you to earn a high income, but you recognize that others making less may have a higher living standard because they have more:

wealth