20) Which of the following statements about the distribution of income in the United States is true?
A) The United States has the most unequal distribution of income of any high-income country in the world.
B) The United States has a more unequal distribution of income than Bolivia and Botswana.
C) The distribution of income in the United States is fairly equal and there have been no dramatic changes over time.
D) The distribution of income in the United States is unequal and has become significantly more unequal over time.
21) Which of the following statements best represents the opinion of many economists regarding the impact that changes in tax laws have had on recent changes in income inequality in the United States?
A) Reductions in income tax rates have favored high-income individuals more than low-income individuals. As a result, reductions in federal income tax rates have led to more income inequality.
B) Reductions in income tax rates have created greater incentives for low-income individuals to work, save and invest. As a result, reductions in federal income tax rates have led to less income inequality.
C) Reductions in income tax rates probably have had little impact on the distribution of income.
D) Reductions in income tax rates have been offset by increases in corporate income tax rates and payroll taxes. As a result, greater income inequality in the 1990s has been followed by a more equal distribution of income since 2001.
22) The poverty rate is defined as the percentage of the
A) labor force that is poor according to the federal government’s definition of poverty.
B) population that is exempt from paying federal income taxes.
C) population who qualify to receive welfare payments and food stamps.
D) population that is poor according to the federal government’s definition of poverty.
23) Which of the following groups had the highest poverty rate in 2011 in the United States?
A) Asians
B) blacks
C) Hispanics
D) female heads of families
24) What does a Lorenz curve illustrate?
A) a comparison of the distribution of income in two different countries
B) the distribution of income within a country in a given time period
C) the share of taxes paid by different groups of households
D) the change over time in the percentage of households with incomes that place them below the poverty line
25) Which of the following summarizes the information provided by a Lorenz curve?
A) the Lorenz coefficient
B) the income distribution ratio
C) the Gini coefficient
D) the slope (the rise divided by the run) of the Lorenz curve at a particular point on the curve
26) A Gini coefficient of ________ means that an income distribution is perfectly equal, and a Gini coefficient of ________ means the income distribution is perfectly unequal.
A) 0; 1
B) 1; 0
C) 0, 100
D) 100, 0
27) Income inequality in the United States has increased somewhat over the past 25 years. Two factors that appear to have contributed to this are
A) tax cuts on high income individuals and large increases in prices of stocks.
B) strong economic growth and low inflation.
C) rapid technological change and expanding international trade.
D) outsourcing of jobs by U.S. firms and cuts in taxes on capital gains.
28) As a group, people with high incomes are likely to have
A) greater-than-average family inheritances and greater-than-average SAT scores.
B) greater-than-average holdings of stocks and bonds and lower-than-average productivity.
C) greater-than-average productivity and greater-than-average amounts of capital.
D) a stable marriage and no children.
29) Measures of poverty (for example, the poverty line) and the distribution of income (for example, the Lorenz curve and the Gini coefficient) are misleading for which of the following two reasons?
A) First, these measures do not take into account income mobility over time. Second, these measures ignore the effects of government programs meant to reduce poverty.
B) First, none of these measures are adjusted for inflation. Second, they do not measure income on a per capita basis.
C) First, these measures fail to include the income U.S. citizens earn working for foreign firms that have operations located in the United States. Second, these measures fail to include income foreign citizens earn working for U.S. firms that have operations in foreign countries.
D) First, these measures fail to include dividend and interest income earned on stocks and bonds. Second, these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets.
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