Chapter 21: Poverty, Inequality, and Discrimination

The most common international poverty measure is the number of people living on less than

$1.90 per day.

A Gini coefficient ranges from

0 to 1

If one person earned all of the income and no one else earned anything, the Gini coefficient would be

1

According to the most recent estimates, 896 million people lived in poverty (living on less than $1.90 per day) in 2012, or roughly _____% of the world's population.

13

In 2014, approximately _____ percent of the population lived under the official poverty line in the United States.

15

Today, Black and Hispanic Americans have poverty rates _____ times as high as white Americans.

2

In the United States, the poverty line was set in the 1960s by taking the cost of food for a family of a given size and multiplying it by

3

Chronically poor is usually defined as spending

3 or more years in poverty.

Prior to 1996, the federal government administered a program called ___________________ which gave money to poor households with children.

Aid to Families with Dependent Children

In the case of the labor market, we often see that women earn less than men. From this, we can conclude which of the following?

An omitted variable is possibly responsible for the variation Income is correlated with gender

The government adjusts the official poverty line each year based on the

Consumer Price Index. The CPI measures increases in the price of a set of common consumer goods.

Which of the following is correct?

Discrimination can be consistent with an efficient market. Under some conditions, markets may help to eliminate discrimination.

True or false: Inequality within countries has largely been on the rise in poor, not rich countries.

False

Women are more educated and have more work experience than men, on average:

False

Higher numbers correlate with greater income inequality for a

Gini coefficient.

<blank> capital is the set of skills, knowledge, experience, and talent that determine people's productivity as workers.

Human

A poverty rate based on a relative measure is high, income mobility is low, and there is perfect income equality:

Impossible

There is no poverty based on a relative measure, income mobility is high, and there is perfect income equality:

Impossible

One way to consider the relationship between inequality and opportunities is to look at

Income mobility

Some people argue that unpaid internships should be illegal. In what ways is an unpaid internship part of a poverty trap?

Individuals who do not have savings often cannot afford to accept an unpaid internship. High-quality unpaid internships can lead to higher-paying jobs in life

<blank> within countries has largely been on the rise for all countries.

Inequality

A graphic representation of income distribution that maps percentage of the population against cumulative percentage of income earned by those people is a

Lorenz curve

A poverty rate based on an absolute measure is high, income mobility is high, and there is high income equality:

Possible

A poverty rate based on an absolute measure is high, income mobility is zero, and there is perfect income equality:

Possible

Which of the following statements explain(s) why the government may need to subsidize loans for a college education?

Students from low-income families often cannot borrow from their parents Individuals are unable to offer up collateral for a student loan

The inability to get a loan even though a person likely would be able to repay the loan plus interest is a

a poverty trap called a credit constraint.

Defining poverty as income below a certain amount, fixed at a given point in time, is using

an absolute poverty threshold measure

Poverty lines define poverty as measured by <blank> income in a given year

average

Poverty lines define poverty as measured by

average income in a given year.

programs often combine redistributive goals with economic-development goals.

conditional cash-transfer

A program in which financial support is given only to people who engage in certain actions is a

conditional cash-transfer.

An absolute poverty threshold is usually set based on the

cost of certain essential goods

In 2011, the Census Bureau introduced an alternative poverty measure that adjusts for

differences in the cost of living

A Lorenz curve with a slope of one indicates that

every person in a population earned the exact same amount.

The poverty rate is the percentage of the population that

falls below the absolute poverty line.

Critics of the official U.S. poverty definition note that it fails to account accurately for expenditures other than

food

In the United States, the official poverty line is based on the price of

food

In 1959, almost one _____ of the population lived in poverty.

fourth

People who grow up in poor families are more likely to be poor because the parents

have limited resources to pass along.

Because income is not distributed perfectly equally anywhere in the world, the top quintiles earn a disproportionately _____ share of income and the lower quintiles earn a disproportionately _____ share of income.

high; low

You acquire <blank> capital by getting a good education, being healthy, and gaining experience in jobs, but also by watching and learning from the people around you. Listen to the complete question

human

Credit constraints can serve as a poverty trap by reducing the ability to acquire __________.

human capital

People who grow up in poor families or communities are likely to have reduced opportunities to acquire

human capital

A government might prefer _____ transfers because it prevents recipients from spending cash on luxury items or on socially disapproved goods such as alcohol or drugs.

in-kind

A program that provides specific goods or services directly to needy recipients, rather than cash is an

in-kind transfer program.

Because skills and abilities are influenced by the environment people grew up in, evidence indicates that one who grows up in poverty is more likely to have

less human capital.

Means-testing can also create perverse incentives because recipients have an incentive to

limit their means in order to receive benefits.

The goal of using _____ programs is to target resources toward those who need them the most.

means-tested

People who grow up in poor families are

more likely to be poor.

The absolute number of white people in poverty is higher than the absolute number of black or Hispanic people because there are

more white people in the United States.

In 2011, the Census Bureau introduced an alternative poverty measure based on

prices of food, clothing, shelter and utilities

Accounting for differences in the price of goods across countries is done using a tool called the

purchasing power parity index.

The international poverty line is based on:

purchasing power parity.

Homeless shelters and food banks are examples of programs designed to _____ resources.

redistribute

a <blank> poverty measure is not directly tied to the cost of living.

relative

In the United Kingdom, the poverty line is set at 60% of the median income. This is a(n)

relative poverty measure

To accurately capture a family's ability to consume essential goods like food, shelter, and clothing, absolute poverty thresholds must be defined carefully with

respect to the cost of living

The international poverty line is $1.90 per day at purchasing power parity which means that in each country the poverty line is the amount in local currency that will allow you to buy the same basket of goods that $1.90 would buy in ______.

the United States

Income mobility

the ability to improve one's economic circumstances over time

One reason for big differences in income distribution between countries is

the extent to which governments redistribute income through the public budget.

Economic development, safety nets, and redistribution of resources are

three different types of public policy approaches related to poverty and inequality.

<blank> poverty is usually measured as a spell of poverty that lasts at least two consecutive months within a year.

transient

More than a quarter of the population experiences <blank> poverty at some point in their lives, perhaps due to losing a job or experiencing sickness or injury.

transient

The U.S. poverty definition does not account for differences in

cost of living in different parts of the country

The purchasing power parity index accounts for differences in the price of goods across

countries

Poverty traps can explain why the poor

often stay poor.

Poor health as a ________________ is more relevant in very low income countries than it is in the United States.

poverty trap

Poor health is a straightforward example of a

poverty trap.

A Gini coefficient is a

single-number measure of income inequality.

People in rich countries are specializing more and more in high-tech, high-skill, high-education work, and they reap huge benefits because of

skill-biased technical change.

The recognition that the benefits of economic growth have increasingly been going to highly skilled workers with a lot of education is described as

skill-biased technical change.

Women are discriminated against in the hiring process:

true

Women are discriminated against when being considered for promotions or raises:

true

Women choose lower-paying professions (e.g., becoming a nurse rather than a doctor):

true

Government programs that give money to the poor are commonly referred to as

welfare

Programs that describe a(n) ________ range from food stamps that help the poor buy food to Head Start, an early education program.

welfare state

In situations where businesses discriminate in response to the preferences of consumers,

discrimination is consistent with efficient markets.

The government adjusts the official poverty line

each year

Programs that policy makers believe will act as investments in future economic growth can be grouped under the category

economic development

The proportion of the population that lived in poverty plummeted throughout the 1960s and early 1970s, in part, because of

economic growth.

The Gini coefficient would be zero if the

income distribution were perfectly equal.

A relative poverty threshold can be misleading by defining someone living in a very rich country as "poor" because she has less than the people around her even though she has enough to

cover essential expenses.

It is possible to moderate the (often) perverse incentive of a means-tested program by

phasing out benefits as income increases.

The percentage of the population that falls below the absolute poverty line is the

poverty rate.

A credit constraint is a type of non-physical

poverty trap

A self-reinforcing mechanism that causes the poor to remain poor is a

poverty trap

<blank> programs are designed to help people weather temporary bad periods, but they also help people survive old age, disability, or other long-term conditions.

social insurance

Government programs under which people pay into a common pool and are eligible to draw on benefits under certain circumstances is referred to as

social insurance

Economic research shows that people at all income levels find jobs and other opportunities through

social networks.

Making a choice based on the difference in average characteristics between two groups is called

statistical discrimination

The idea that government has a responsibility to promote the economic well-being of its citizens is referred to as a(n)

welfare state.

What is human capital?

The set of skills, knowledge, experience, and talent that determine the productivity of workers.

The practice of making choices using generalizations based on observable characteristics to fill in missing information is

discrimination

The goal of <blank> is not only the immediate effect of the policy on poverty but also the growth it will produce for the entire economy in the future.

economic development

We can distinguish among three different types of public policy approaches related to poverty and inequality:

economic development redistribution of resources safety nets

Economic research shows that people at all income levels find jobs and other opportunities through friends, parents, and others in the community through

social networks.

If every person in a population earned the exact same amount, the Lorenz curve would be a

straight line with a slope of one.