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| 1 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Suppose the economy's income distribution is represented by line b. An increase in income inequality would be represented by a movement: |
| | A) | to line a |
| | B) | up and to the right along line b |
| | C) | to line c |
| | D) | down and to the left along line b |
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| 2 | |
Suppose an economy consists of only five households, whose pre-tax incomes are $10,000, $15,000, $25,000, $50,000, and $100,000 respectively. If the government were to impose a 10% tax on incomes in excess of $40,000 and transfer the money equally to those whose incomes are below $30,000: |
| | A) | the Lorenz curve would move toward the diagonal |
| | B) | the Lorenz curve would move away from the diagonal |
| | C) | the Lorenz curve would not be affected, since only pre-tax and pre-transfer incomes are included |
| | D) | the economy would be represented by a point upward and to the right from the original point on the Lorenz curve |
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| 3 | |
The degree of inequality in the income distribution can be measured by the: |
| | A) | Phillips index |
| | B) | income deflator |
| | C) | Census Bureau Index |
| | D) | Gini ratio |
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| 4 | |
Compared to annual incomes, lifetime incomes are: |
| | A) | more equally distributed, reflecting substantial income mobility |
| | B) | less equally distributed, reflecting substantial income mobility |
| | C) | less equally distributed, reflecting very little income mobility |
| | D) | distributed about the same, reflecting very little income mobility |
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| 5 | |
Regarding the effect of taxes and transfer payments on the U.S. income distribution, data indicate that: |
| | A) | there is virtually no impact |
| | B) | the progressive tax system accounts for over half of the reduction in income inequality |
| | C) | tax rebates and credits account for over half of the income of those in the lowest quintile |
| | D) | roughly 80% of the reduction in income inequality is attributable to transfer payments |
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| 6 | |
Which of the following would support an argument for redistribution of income from rich to poor? |
| | A) | Diminishing marginal utility of income |
| | B) | Differences in incomes provide incentives to work |
| | C) | Diminishing total utility of income |
| | D) | The equality-efficiency trade-off |
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| 7 | |
Evidence suggests that U.S. income inequality since 1970 has: |
| | A) | increased, as has wealth inequality |
| | B) | increased, although wealth inequality has decreased |
| | C) | decreased, as has wealth inequality |
| | D) | decreased, although wealth inequality has increased |
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| 8 | |
Evidence suggests that, on balance, increased international trade has contributed to greater income: |
| | A) | equality by providing jobs for low-income workers |
| | B) | equality by reducing the prices paid for imported goods |
| | C) | inequality by reducing jobs in the technology sector |
| | D) | inequality by reducing the demand for less-skilled workers |
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| 9 | |
Which of the following statements is incorrect? The poverty rate is lower for: |
| | A) | whites compared to blacks |
| | B) | native-born compared to foreign-born |
| | C) | children under 18 compared to persons 65 or over |
| | D) | married-couple families compared to single householders |
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| 10 | |
Which of the following is designed to provide a uniform minimum income for the aged, blind, and disabled? |
| | A) | OASDHI |
| | B) | SSI |
| | C) | TANF |
| | D) | EITC |
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