Chapter 15 INCOME

Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create_____________.

A poverty trap

Under which of the following government programs would the federal government's welfare spending rise or fall depending on the number of poor people, and on how each state set its own welfare contribution?

AFDC

________________allows the government to collect wealth for redistribution based on the amount of stored wealth that is being passed on in the form of an inheritance.

An estate tax

The size distribution of income in Figure 33.1 reveals that

Incomes are more equally distributed in Alpha than in Omega.

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will shift the demand curve for low-income workers to the while shifting the demand curve for high- income workers to the .

Left; Right

A government program guarantees $18,000 in income, even for those who do not work at all. If the recipient earns income by working, then the $18,000 benefit is reduced by 50 cents for each $1 earned. Will this program eliminate the poverty trap?

No, enacting such a program may still reduce the incentive to work.

When the Census Bureau counts the number of poor Americans, it counts

Only money income

The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following?

Safety Net

Under which of the following antipoverty programs does the federal government give a fixed amount of money to each state?

TANF

From the Great Depression of the 1930s until 1996, the United States' most visible antipoverty program was Aid to Families with Dependent Children, which provided cash payments to

all mothers with children who were below the poverty line

A Lorenz curve graphs the__________ received by everyone up to a certain quintile.

cumulative shares of income

Government developed a method called ________________to assist the working poor through the tax system. The amount of the tax break _____________with the amount of income earned,_______________.

earned income credit; increases; up to a point

The trick in graphing a Lorenz curve is that you must transform the shares of income________________, which are shown in the first column of numbers in the table, into____________, shown in the______________column of numbers.

for each specific quintile; cumulative income; second

The food stamp benefit

has time limits and is not a complete disincentive to work.

A Lorenz curve refers to a graphic illustration of the share of population on the _______________ and the cumulative percentage of total income received on the________________.

horizontal axis; vertical axis

Every Lorenz curve diagram begins with a line .

sloping up at a 45-degree angle

Which of the following is a key requirement imposed under the Welfare Reform Act's new antipoverty program?

states receiving TANF grants must impose work or school attendance requirements

If Congress voted every few years to redefine completely what poverty means,

then it would be difficult to compare poverty rates over time.

If the level of incomes rises for high-income workers but doesn't change for low-income workers,

then poverty will not change and inequality will rise.

One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then

to divide all households into quintiles.