Mirco S16D Chapter 15

In relative terms, poverty will always exist

"given an unequal income distribution" and "unless there is absolute income equality".

The existence of which of the following leads to an overestimate of the number of persons in poverty?

"unreported income" and "in-kind benefits received by the poor".

Anytime the ratio of income to poverty for a family is

"greater than 1.00, the family is not considered to be living in poverty" and "between 1.00 and 1.25, the family is considered to be "near poor."

In order to maket the income distribution more equal, the the federal government could

"increase taxes on the rich and increase transfer payments to the poor" and "increase taxes on the rich and increase transfer payments to the middle class".

Differences in income result from differences in

"innate abilities and attributes", "education and other training", and "attitudes toward risk".

If we define poverty using absolute terms, it follows that

"people are poor if they earn less than a specified income level" and "there can be situations in which no one would be considered poor".

Some economists contend that in-kind transfers should be included in the calculation of an individual's income because

"simple money income is not a complete measure of one's command over goods and services" and "in-kind items make a person "better off" than the person's actual money income would lead us to believe".

The Gini coefficient is a number between

0 and 1.

In 2009, the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

3%

The Lorenz curve of perfect income equality is a

45-degree line.

In 2009, the top 20 percent of households in the United States earned collectively approximately what percent of the total income of all households?

50 percent

A person is more likely to be poor if he or she is

African-American or Hispanic rather than white.

Which of the following is not an example of in-kind transfer payments?

Aid to Families with Dependent Children (AFDC)

Which of the following is an example of human capital?

Education

Which of the following statements is true?

In 2009, the lowest 20 percent of all income earners earned less than 5 percent of the total money income.

Which of the following was not given as a reason for income differences in the text?

Low minimum wage

A public good is

a good that if consumed by one person can be consumed by other persons to the same degree and the consumption of which cannot be denied to anyone.

If we define poverty as income below $10,000 per year, we have set a(n) __________ definition of poverty.

absolute

The Gini coefficient is computed by dividing the

area between the line of perfect income equality and the actual Lorenz curve by the total triangular area below the line of perfect income equality.

If the Gini coefficient is zero, there is

complete income equality.

If the Gini coefficient is 1, there i

complete income inequality.

One measure of the severity of poverty is the ratio of income to poverty which is calculated by

dividing a family's income by the family's poverty income threshold.

Wage discrimination exists when individuals of __________ are paid different wage rates.

equal ability and productivity

In 2012 a woman won a $100 million lottery. Her income is (most likely) largely due to her

good luck

The larger the Gini coefficient, the

greater the degree of income inequality.

"In-kind" transfer payments are made

in the form of goods and services.

The Lorenz curve is a graph of the __________ of the population.

income distribution

The Gini coefficient measures the degree of

income inequality.

One way to reduce the degree of income inequality is to

increase transfer payments going to people with low labor and asset incomes and increase taxes on people with high labor and asset incomes.

The social insurance justification for government welfare assistance holds that

individuals currently not receiving welfare think they might one day need welfare assistance and thus they support welfare programs today.

To an economist, wage discrimination exists when

individuals of equal marginal revenue products are paid different wage rates.

A winner-take-all market

is one in which the top producer or performer in the market earns significantly more than others in the same market.

An individual's income equals

labor income + asset income + transfer payments - taxes.

Evidence seems to indicate that the distribution of income prior to adjusting for taxes and in-kind transfer payments is

less equal than after adjusting for taxes and in-kind transfer payments.

Refer to EXHIBIT 15-1. If the Gini coefficient equals 0, then the Lorenz curve is

line OB.

When the actual Lorenz curve is a 45-degree line, there is

perfect income equality.

When the actual Lorenz curve is as far away from the 45-degree line as possible, there is

perfect income inequality.

As a determinant of a person's income, luck is more important in the __________ run, as continuous reoccurrences of one kind of luck are __________.

short; unlikely

The Lorenz curve is a graphical representation of

the distribution of income.

Refer to EXHIBIT 15-1. If the Gini coefficient equals 1, then the Lorenz curve is

the horizontal axis from 0 to A and the line AB.