Question : 30) All Gini coefficients must lie between 0 and 1. : 1388038

30) All Gini coefficients must lie between 0 and 1. The lower the value,

A) the more unequal the income distribution.

B) the closer the income distribution is to being equal.

C) the greater the degree of poverty.

D) the lower the degree of poverty according to the federal government’s definition of poverty.

Figure 18-7

Figure 18-7 shows the Lorenz curve for a hypothetical country.

31) Refer to Figure 18-7. The second lowest 20 percent of households

A) earn 12 percent of the society’s total income.

B) earn 16 percent of the society’s total income.

C) earn 28 percent of the society’s total income.

D) earn 40 percent of the society’s total income.

32) Refer to Figure 18-7.  The second highest 20 percent of households

A) earn 24 percent of the society’s total income.

B) earn 28 percent of the society’s total income.

C) earn 42 percent of the society’s total income.

D) earn 72 percent of the society’s total income.

33) If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps,

A) the poverty rate would be lower.

B) poverty would be eliminated.

C) income inequality would be greater.

D) the poverty rate would be overstated.

34) Studies by the U.S. Census Bureau have shown that

A) families remain below the poverty line for an average of five years.

B) there is significant income mobility in the U.S. over time.

C) income mobility in the U.S. is minimal.

D) over half the people below the poverty line never move out of poverty.

35) Which of the following is a transfer payment?

A) the food stamp program

B) a tax deduction

C) Social Security payments

D) an income tax credit

36) The Gini coefficient for the United States in 1980 was 0.403. In 2011, the coefficient was equal to 0.477. This means that

A) per capita income in the United States rose from 1980 to 2011.

B) there was a decrease in the amount of government transfer payments from 1980 to 2011.

C) cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality.

D) income inequality increased from 1980 to 2011.

37) Sheldon Cleaver commented on the difficulty people have in overcoming poverty in the United States: “Most people whose incomes fall below the poverty line have difficulty pulling themselves above the line in future years. In this sense, poverty becomes a vicious cycle. I believe the psychological damage households face when they are branded with the ‘poverty’ label in our society is a major factor in their remaining in poverty. Despair is a major reason why the percentage of people with incomes that lie below the poverty line never falls below 10 percent.” Which of the following correctly evaluates Cleaver’s statement?

A) Cleaver is correct. Economists often fail to take into account psychological factors when they analyze poverty and the distribution of income in the United States. Policies must take such factors into account if we are to make progress in eliminating poverty.

B) Cleaver is correct when he notes that poverty is a chronic problem. The best way to reduce poverty is to force the poor to become better educated so that they can work their way out of poverty.

C) Cleaver is correct, but he is looking at the wrong statistic. The official poverty line understates the true degree of poverty in the United States.

D) Cleaver assumes that all those with incomes below the poverty line in one year remain in poverty in subsequent years. In fact, research has shown that the number of people who remain in poverty for many years is much smaller than the number who are in poverty during any one year.

38) Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that, if considered, would reduce the amount of poverty. Which of the following is an example of these benefits?

A) Individuals can use tax credits and the personal exemption to reduce their taxable incomes. This reduces what they owe the government and increases their disposable incomes.

B) The federal income tax system is progressive. As a result, the poor have higher after-tax incomes than they would have if the income tax system was proportional or progressive.

C) Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps.

D) The federal minimum wage forces employers to pay workers with low skills an efficiency wage.

39) Which of the following statements is true?

A) If transfer payments such as Social Security payments to the retired and disabled were excluded from official statistics used to estimate the percentage of people with incomes below the poverty line, the amount of poverty in the United States would be much greater.

B) Because the federal income tax system is progressive, measuring poverty using after-tax incomes results in a higher poverty rate than if poverty is measured using before-tax incomes .

C) If non-cash benefits such as food stamps and rent subsidies were added to the incomes of low-income families, poverty would be eliminated.

D) In the United States, income remaining after federal taxes are paid is more equally distributed than income before taxes.