ch.13 Inequality, Social Insurance, and Redistribution

Which of the following studies would NOT offer a useful understanding of inequality? - A study of who is most affected by inequality - A study of inequality across countries - A study of intergenerational mobility - A study of the highest family income across countries

A study of the highest family income across countries

The elderly and the disabled are protected by: - Earned Income Tax Credit. - Temporary Assistance to Needy Families. - Supplemental Security Income. - food support.

Supplemental Security Income.

It is estimated that 90 percent of the money that is being redistributed is lost to "leaks" such as administrative costs. If $25,000 is redistributed from a family in the highest quintile (earning $190,000) to a family in the lowest quintile (who earned only $15,000), how much money will actually be received by the lowest family? - $22,500 - $1,500 - $2,500 - $13,500

$2,500

_____ refers to the poverty line that measures whether your basic needs are met, assuming a universal, time-invariant standard for basic needs. - Relative poverty - The poverty rate - The poverty line - Absolute poverty

Absolute poverty

Which of the following is NOT considered a cost of redistribution? - Administrative cost - Disincentive to work - Tax avoidance - Income redistribution

Income redistribution

What would happen if the government redistributed until we all got the same income no matter what? - People would put more effort into work and businesses. - This would increase the total production in the economy. - Those who are sick, disabled, elderly, or unemployed would be destitute. - People would have no incentive to work hard or start a new business.

People would have no incentive to work hard or start a new business.

_____ insures us against the possibility of making bad decisions about retirement. - Disability insurance - Worker's compensation - Social Security - Unemployment insurance

Social Security

In the United States, the federal government set the poverty line based on food purchases in 1955. How does the government adjust the poverty line over time? - The poverty line is adjusted and updated for inflation. - Food purchases are reevaluated with each census and a new poverty line is determined. - It has altered tax rates from time to time. - It has held the poverty rate constant over time.

The poverty line is adjusted and updated for inflation.

_____ refers to the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. - Social insurance - A progressive tax - The social-safety net - Social Security Income

The social-safety net

The wealthiest quintile holds 89% of all the wealth. This inequality partly reflects the fact that wealth: - cannot be measured at one specific time. - is a stock representing the amount of money you have at the time. - is a flow that can flow in and out. - accumulates and is passed from generation to generation.

accumulates and is passed from generation to generation.

Income taxes are taxes collected on: - all income, regardless of its source. - all recurring income from wages. - all earned income, excluding investment - income and pensions. - earned income from wages.

all income, regardless of its source.

The safety net provides poor families with: - very generous support. - mostly cash assistance. - minimum support. - maximum support.

minimum support.

Which of the following is NOT considered an example of inequality in outcome? - Consumption - Entrepreneurship - Purchasing power - Wealth

Entrepreneurship

Which of the following is NOT an analytic framework for analyzing redistribution? - How fair is this redistribution? - How large are the benefits of redistributing income to the needy? - How do income disparities create unequal opportunities? - How large are the costs due to the leaky bucket?

How do income disparities create unequal opportunities?

Incomes refers to: -all the money you earn in a period of time, such as a year. - average lifetime earnings. - all assets that you currently have. the social safety net.

all the money you earn in a period of time, such as a year.

Social Security, unemployment insurance, workers' compensation, and disability insurance payments all: - guarantee a comfortable retirement. - are means-tested and designed to cover only some people. - are based on your past earnings. - are provided at the minimum amount.

are based on your past earnings.

The logic of redistribution is that it _____by redistributing money to the folks who can benefit most from it. - provides equality of wealth - can raise total benefits - increases work incentives - can raise total income in society

can raise total benefits

Utilitarians believe that government redistribution is beneficial because transferring $100 from a billionaire to a single mom at the bottom of the income distribution will:

lead to more utility in society.

The U.S. official poverty rate calculation is based primarily on: - how many people get food support from the government. - the percentage of households that earn - less than the median family income. average consumption spending. - market earnings.

market earnings.

The taxes that fund most social insurance programs are _____ in which we all pay the same percentage of our income regardless of whether we earn a little or a lot. - progressive - based on consumption - proportional taxes - regressive

proportional taxes

Social insurance programs, such as Social Security and Medicare, receive money through: - a regressive tax system on workers' income. - sale taxes on people who are above the poverty line. - regular payments from people at the top of the income distribution. - regular payments from workers and firms.

regular payments from workers and firms.

The well-being scores of a low-income person and a high-income person are 5.20 and 7.50 respectively. If $25,000 were redistributed from the high-income person to the low-income person, the well-being of the high-income person would fall by 0.05, while the well-being of the low-income person would rise by 0.80. Consequently, this redistribution causes total well-being to: - rise by 0.75. - rise by 0.85. - fall by 0.75. - fall by 0.85.

rise by 0.75.

The poverty line is a: - share of income that is below average income. - somewhat arbitrary threshold. - fixed threshold that applies to all families. -rate that workers get paid below the minimum wage.

somewhat arbitrary threshold.

The relationship between well-being and levels of income shows an upward-sloping curve which flattens out as income rises. This means that _____ as income rises. - well-being does not increase - the extra benefit from extra income gets smaller - the extra benefit from extra income stays the same - total utility decreases

the extra benefit from extra income gets smaller

Data shows that the United States has less intergenerational mobility than Germany. That means that: - German children's success is mostly tied to their parents' success. - the economic status of U.S. children is not related to their parents' economic status. - the economic status of U.S. children is more independent of their parents' economic status than the economic status of German children is. - the success of U.S. children depends more on parents' economic status than the success of German children does.

the success of U.S. children depends more on parents' economic status than the success of German children does.

Omar is an economist who believes that the maximization of individual well-being should be the government's priority, by redistribution of wealth as necessary. Omar is an advocate of: - utilitarianism. - the social safety net. - intergenerational mobility. - utility.

utilitarianism

Your total purchasing power and your economic resources are best represented by your: - permanent income. - living standards. - annual income. - wealth.

wealth.

Single parents often rely on _____, and many of the jobless get by with the help of _____. - Supplemental Security Income; welfare - welfare; food support - welfare; Earned Income Tax Credit - food support; Supplemental Security Income

welfare; food support