Toàn bộ những gì bạn cần để qua môn kinh tế học, tài liệu này tập hợp những câu hỏi trắc nghiệm mới nhất của kinh tế vi mô năm 2018. Về nội dung tài liệu, với các khái niệm phổ biến và khái quát nhất về kinh tế vi mô cũng như những giải thích về các cơ chế hoạt động của nền kinh tế, bộ giáo trình bao gồm 23 phần cung cấp cho người đọc các kiến thức khá toàn diện và chuyên sâu về các nguyên lý kinh tế học như các lý thuyết cổ điển, các lý thuyết về phát triển: nền kinh tế trong dài hạn, các lý thuyết về vòng tròn kinh tế: nền kinh tế trong ngắn hạn, các yếu tố vi mô ẩn sau kinh tế vĩ mô, các tranh luận về chính sách vĩ mô… Tất cả đều được giải thích và đánh giá bởi một vị giáo sư kinh tế hàng đầu trên thế giới. Các khái niệm trong sách được định nghĩa rất rõ ràng, dễ nắm bắt, dễ hiểu, có tóm tắt các chương tạo điều kiện tốt nhất cho việc ôn tập
Chapter 20/Income Inequality and Poverty 67 Chapter 20 Income Inequality and Poverty TRUE/FALSE The poverty line is set by the government so that 10 percent of all families fall below that line and are thereby classified as “poor.” ANS: F DIF: REF: 20-1 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Poverty line MSC: Definitional The United States has more income inequality than Japan, Germany, and Canada ANS: T DIF: REF: 20-1 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Income inequality MSC: Definitional The United States has more income inequality than Brazil and South Africa ANS: F DIF: REF: 20-1 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Income inequality MSC: Definitional Standard measurements of the degree of income inequality take both money income and in-kind transfers into account ANS: F DIF: REF: 20-1 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: In-kind transfers | Income inequality MSC: Definitional John Rawls, who developed the way of thinking called liberalism, argued that government policies should be aimed at maximizing the sum of utility of everyone in society ANS: F DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Utility MSC: Interpretive One existing government program that works much like a negative income tax is the Earned Income Tax Credit ANS: T DIF: REF: 20-3 NAT: Analytic LOC: The role of government TOP: Negative income tax MSC: Interpretive One existing government program that works much like a negative income tax is Medicaid ANS: F DIF: REF: 20-3 NAT: Analytic LOC: The role of government TOP: Negative income tax MSC: Interpretive The invisible hand of the marketplace acts to allocate resources efficiently, but it does not necessarily ensure that resources are allocated fairly ANS: T DIF: REF: 20-0 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative When the government enacts policies to make the distribution of income more equitable, it distorts incentives, alters behavior, and makes the allocation of resources less efficient ANS: T DIF: REF: 20-0 NAT: Analytic LOC: The role of government TOP: Income inequality MSC: Applicative 10 In the United States in 2005, the bottom fifth of the income distribution had incomes below $19,250 ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 68 Chapter 20/Income Inequality and Poverty 11 The top percent of U.S annual family income in 2005 was $184,500 or more ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 12 A U.S family earning $80,000 would be in the top 20 percent of income distribution in 2005 ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 13 Free trade and economic growth have reduced poverty worldwide ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: MSC: Applicative Poverty 14 Although globalization has reduced income inequality, the number of people living in extreme poverty has remained unchanged ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty MSC: Interpretive 15 The measured poverty rate may not reflect the true extent of economic deprivation because it does not include some forms of government assistance ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty rate MSC: Applicative 16 The poverty line is an absolute standard and is based on the cost of providing an adequate diet ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty line MSC: Definitional 17 The poverty line is based on the percentage of people who cannot afford an adequate diet ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty line MSC: Interpretive 18 The poverty rate is a measure of people unable to meet the government’s poverty line ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty line MSC: Interpretive 19 The elderly represent the largest demographic group in poverty ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity MSC: Applicative TOP: Poverty 20 About half of black and Hispanic children in female-headed households live in poverty ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty MSC: Applicative 21 The economic life cycle describes how young people usually have higher savings rates than middle-aged people ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Economic life cycle MSC: Applicative Chapter 20/Income Inequality and Poverty 69 22 Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Economic life cycle MSC: Applicative 23 About four out of five millionaires in the United States earned their money rather than inherited it ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Economic mobility MSC: Applicative 24 Fewer than three percent of families are poor for eight or more years ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: MSC: Applicative Economic mobility 25 Utilitarians believe that the proper goal of the government is to maximize the sum of the utilities of everyone in society ANS: T DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Utilitarianism MSC: Interpretive 26 The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility ANS: T DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Utilitarianism MSC: Interpretive 27 If a government could successfully achieve the maximin criterion, each member of society would have an equal income ANS: F DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Liberalism MSC: Interpretive 28 According to libertarians, the government should redistribute income from rich individuals to poor individuals to achieve a more equal distribution of income ANS: F DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Libertarianism MSC: Interpretive 29 Libertarians believe that the government should enforce individual rights to ensure that all people have the same opportunities to use their talents to achieve success ANS: T DIF: REF: 20-2 NAT: Analytic LOC: The role of government TOP: Libertarianism MSC: Interpretive 30 The poverty rate is an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Poverty rate, Poverty line MSC: Definitional 31 An income distribution may not give an accurate picture of families’ standards of living because it does not include in-kind transfers ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Interpretive 70 Chapter 20/Income Inequality and Poverty 32 A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes ANS: T DIF: REF: 20-2 NAT: Analytic LOC: Efficiency and equity TOP: Libertarianism MSC: Interpretive 33 Temporary Assistance for Needy Families (TANF) is an example of a negative income tax program ANS: F DIF: REF: 20-3 NAT: Analytic LOC: Efficiency and equity TOP: Welfare MSC: Applicative 34 When poor families in developing countries experience an increase in family income, their children supply fewer hours of labor ANS: T DIF: REF: 20-3 NAT: Analytic LOC: Efficiency and equity TOP: Child labor MSC: Applicative 35 Education is the most important factor explaining reductions in child labor in Vietnam ANS: F DIF: REF: 20-3 NAT: Analytic LOC: Labor markets TOP: Child labor MSC: Applicative 36 Internet access is the most important factor explaining reductions in child labor in Vietnam ANS: F DIF: REF: 20-3 NAT: Analytic LOC: Labor markets TOP: Child labor MSC: Applicative 37 Since 1959 the United States’ income distribution has become more equal ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 38 In 2005 the top fifth of income earners accounted for over 50% of all income received by United States’ families ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 39 In 2005 the top percent of income earners accounted for over 50% of all income received by United States’ families ANS: F DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative 40 From 1935 to 2005 the share of total income earned by the bottom fifth of income earners rose and then fell ANS: T DIF: REF: 20-1 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality MSC: Applicative SHORT ANSWER Explain the relationship between labor earnings and the distribution of income ANS: A person's earnings depend on the supply and demand for that person's labor, which in turn depends on natural ability, human capital, compensating differentials, discrimination, and so on Because labor earnings make up about three-fourths of the total income in the U.S economy, the factors that determine wages are also largely responsible for determining how the economy's total income is distributed among the various members of society DIF: MSC: Interpretive REF: 20-0 TOP: Income inequality Chapter 20/Income Inequality and Poverty 71 What is meant by a perfectly equal distribution of income? Use a graph to depict such a situation ANS: If income were equally distributed across all families, each one-fifth of families would receive one-fifth of income That is, 20 percent of all families would receive 20 percent of all income, 60 percent of all families would receive 60 percent of all income, etc DIF: MSC: Analytical REF: 20-1 TOP: Income inequality Given the table shown, which country has a more equal income distribution? Explain your answer Country Country A Country B Bottom Fifth 9.0% 4.8% Second Fifth 13.5% 10.5% Middle Fifth 17.5% 16.0% Fourth Fifth 22.9% 23.5% Top Fifth 37.1% 45.2% ANS: Country A has a more equal income distribution If income were equally distributed across all families, each onefifth of families would receive one-fifth of income Country A is closer to that situation than Country B DIF: MSC: Interpretive REF: 20-1 TOP: Income inequality Explain what information is contained in the poverty rate statistic Are there problems in using an absolute scale to measure poverty? If so, explain them ANS: The poverty rate is the percentage of the population whose family income falls below an absolute level called the poverty line The poverty line is set by the federal government at roughly three times the cost of providing an adequate diet There are several problems associated with measuring poverty using an absolute scale For example, the cost of living may differ across broad geographic regions Families may be better off than their income level indicates if they receive in-kind transfers Finally, it is very difficult to measure a true "standard of living." DIF: MSC: Analytical REF: 20-1 TOP: Poverty rate | Poverty line 72 Chapter 20/Income Inequality and Poverty Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis What are their respective implications for inequality in the income distribution? ANS: Life-cycle variation in income suggests that people’s spending patterns vary less over their lifetimes than their income patterns Young people may borrow so that they can spend more than they earn An example of this would be a young person borrowing to go to college, buy a car, or buy a house Annual earnings peak around age 50 Not surprisingly, many people save more in middle-age than at other times in their life Their savings allow them to pay off the debts incurred when they were younger and to put away money that they will use to supplement their incomes once they retire The permanent income hypothesis tries to account for random and transitory forces that affect income People may borrow when they experience a temporary reduction in income and may save unexpected increases in income (e.g a holiday bonus from an employer) The two theories are not mutually exclusive Both theories would indicate that standard measures of income distribution overstate inequality in the distribution of well-being DIF: MSC: Interpretive REF: 20-1 TOP: Economic life cycle Explain the concept of diminishing marginal utility, and describe the role that it plays in the utilitarian argument for the redistribution of income ANS: Diminishing marginal utility refers to the principle that as a person's income rises, the extra well-being derived from an additional dollar of income falls The utilitarian argument of redistribution from rich to poor hinges on the fact that a dollar of additional income to the poor is valued more than a dollar of additional income to the rich If this is not true, then the transfer from rich to poor would actually reduce the well-being of society DIF: TOP: REF: 20-2 Diminishing marginal utility | Utilitarianism MSC: Interpretive Explain how a "leaky bucket" can be used to illustrate the utilitarian argument that governments should not attempt to completely equalize individual incomes ANS: Utilitarians reject complete equalization of income because they believe that people respond to incentives As such, redistribution will reduce some people’s work efforts, which can actually lead to less total income generated in the economy If the government attempts to redistribute income from the rich to the poor through taxes, some of the money will be lost due to the distorted incentives and deadweight losses associated with the taxes We can think of the government as transporting the redistributed income in a “leaky bucket.” DIF: MSC: Interpretive REF: 20-2 TOP: Utilitarianism Briefly describe the three prominent schools of thought in political philosophy Identify one of the most wellknown philosophers in each school ANS: According to utilitarianism, the government should choose policies to maximize the total utility of society by attempting to achieve a more equal distribution of income Jeremy Bentham and John Stuart Mill were the founders According to liberalism, the government should choose policies deemed to be just, as evaluated by an impartial observer behind a "veil of ignorance." The main decision-making rule is called the maximin criterion, which says that the government should aim to maximize the well-being of the worst-off person in society John Rawls developed the liberalism philosophy in his book A Theory of Justice According to libertarianism, the government should punish crimes and enforce voluntary agreements but not redistribute income that was fairly earned (not stolen) Libertarians argue that society itself earns no income; only individual members of society earn income Robert Nozick was a libertarian DIF: MSC: Analytical REF: 20-2 TOP: Income redistribution Chapter 20/Income Inequality and Poverty 73 The table below reflects the levels of total utility received from income for each of four members of a society Income $1 $2 $3 $4 $5 $6 $7 $8 a b c Peter 15 29 42 54 65 75 84 92 Paul 32 61 87 110 130 147 161 172 Mary 20 38 54 68 80 90 98 103 Jane 16 30 42 52 60 66 70 72 Assume that the society has the following income distribution: Peter $3 Paul $7 Mary $5 Jane $3 Is it possible for the government to increase total aggregate utility by redistributing income among members of society? Explain your answer Assume that the government has $19 to allocate among the four members of society (Assume that no one has any income to start with.) If the government is interested in distributing income in a way that maximizes aggregate total utility, how should it distribute the $19 of income? Does the table above describe a situation characterized by diminishing marginal utility? Explain your answer ANS: a b c No If a dollar is taken from anyone, the possible net gain in utility to any other person is less than or equal to the loss incurred by the person it is taken from Peter $4 Paul $7 Mary $5 Jane $3 Yes Marginal utility declines as income increases for each person DIF: MSC: Analytical REF: 20-3 TOP: Income redistribution 10 Assume that the government proposes a negative income tax that calculates taxes owed by the following formula, Taxes Owed = (1/3 Income) - $10,000 Compute the tax that would be owed given each level of income a b c d e $120,000 $90,000 $60,000 $30,000 $0 ANS: a b c d e $30,000 $20,000 $10,000 $0 No taxes will be owed Instead, the family/person would receive a subsidy of $10,000 DIF: MSC: Analytical REF: 20-3 TOP: Negative income tax 74 Chapter 20/Income Inequality and Poverty 11 Assume that the government proposes a negative income tax that calculates taxes owed by the formula, Taxes Owed = (a Income) - b A family with an income of $40,000 pays $5,000 in taxes, and a family with an income of $12,000 receives an income subsidy of $2,000 a b c d What is the value for “a”? What is the value for “b”? What is the tax liability of a family with an income of $50,000? At what level of income will a family neither pay taxes, nor receive an income subsidy? ANS: a b c d 0.25 or 25% $5,000 $7,500 $20,000 DIF: MSC: Analytical 12 REF: 20-3 TOP: Negative income tax Explain what is meant by "in-kind transfer" programs Briefly outline the advantages and disadvantages of an in-kind transfer program ANS: An in-kind transfer program distributes specific goods and services to individuals who meet some criteria of need based on income Examples of such programs include food stamps, Medicaid, and the distribution of toys and other presents during the Christmas season Advocates of in-kind transfers argue that such transfers ensure that the poor receive assistance that is focused on basic needs such as food and medical care Because the programs are restrictive, society is somewhat reassured that recipients are not spending their benefits on unproductive addictions such as alcohol Advocates of cash payments argue that in-kind transfers are inefficient because the government does not know what goods and services the poor need most DIF: MSC: Applicative 13 REF: 20-3 TOP: In-kind transfers Assume you are a critic of welfare reforms that impose a time limit on the number of years a person is eligible for welfare benefits What is the foundation of your critique? ANS: The critique is based on the premise that most people on welfare would not make a "choice" to pursue a life on welfare if it were not thrust upon them As such, we have an obligation to help them as long as there is demonstrated need DIF: MSC: Applicative 14 REF: 20-3 TOP: Welfare Outline the possible work disincentives created by anti-poverty programs Is there a way to solve this problem without causing other forms of inefficiency to arise? Explain your answer ANS: A high marginal tax rate exists on welfare transfers There is inherently a trade-off between burdening the poor with a high effective marginal tax rate and burdening taxpayers with costly programs to reduce poverty DIF: MSC: Analytical REF: 20-3 TOP: Welfare Sec 00 Income Inequality and Poverty MULTIPLE CHOICE A government's policy of redistributing income makes the income distribution a b c d more equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient more equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient less equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient less equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient Chapter 20/Income Inequality and Poverty 75 ANS: B NAT: Analytic MSC: Applicative ANS: NAT: LOC: TOP: Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal? A more efficient allocation of resources A distortion of incentives Unchanged behavior All of the above are correct 20-0 TOP: Income inequality efficiently but does not necessarily ensure that resources are allocated fairly both fairly and efficiently fairly but does not necessarily ensure that resources are allocated efficiently neither fairly nor efficiently ANS: A NAT: Analytic MSC: Applicative DIF: REF: LOC: Efficiency and equity 20-0 TOP: Income inequality TOP: Income inequality The marketplace allocates resources a b c d fairly efficiently to those desiring them least both efficiently and equitably ANS: B NAT: Analytic MSC: Applicative DIF: REF: LOC: Efficiency and equity 20-0 When the government redistributes income to achieve greater equality, it a b c d distorts incentives improves efficiency focuses on middle income brackets relies on foreign aid to help balance the budget ANS: A NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity The invisible hand of the marketplace acts to allocate resources a b c d Income inequality 75 percent 70 percent 65 percent 50 percent ANS: B NAT: Analytic MSC: Applicative TOP: A DIF: REF: 20-0 Analytic Efficiency and equity | The study of economics, and definitions of economics Income inequality MSC: Definitional a b c d 20-0 In the United States, labor earnings are what percent of total income? a b c d DIF: REF: LOC: Efficiency and equity DIF: REF: LOC: Efficiency and equity 20-0 TOP: Income inequality Government programs that take money from high-income people and give it to low-income people typically a b c d improve economic efficiency by reducing poverty reduce economic efficiency because they distort incentives have no effect on economic efficiency because they both reduce poverty and distort incentives sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency 76 Chapter 20/Income Inequality and Poverty ANS: B NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-0 TOP: Income inequality In the U.S economy, labor earnings make up about a b c d one-half of total income two-thirds of total income three-fourths of total income nine-tenths of total income ANS: C DIF: REF: 20-0 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Income | Labor MSC: Definitional When the government enacts policies to redistribute income, a b c d the objective is to enhance efficiency and a side effect is that the allocation of resources becomes more equal the objective is to enhance efficiency and a side effect is that the allocation of resources becomes less equal the objective is to enhance equality and a side effect is that the allocation of resources becomes more efficient the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient ANS: D NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-0 TOP: Efficiency | Equity 10 Which of the following is correct? a b c d Governments can never improve market outcomes Governments can sometimes improve market outcomes Governments can always improve market outcomes Government can never make the income distribution more equal ANS: B DIF: REF: 20-0 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Income inequality MSC: Definitional 11 Which of the Ten Principles of Economics governments run into when they redistribute income to achieve greater equality? a b c d Trade can make everyone better off The cost of something is what you give up to get it People face trade-offs Markets are usually a good way to organize economic activity ANS: C DIF: REF: 20-0 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Ten principles of economics MSC: Definitional 12 Which of the Ten Principles of Economics come into conflict with each other in this chapter? a b c d A country’s standard of living depends on its ability to produce goods & People face tradeoffs Prices rise when the government prints too much money & Governments can sometimes improve market outcomes Governments can sometimes improve market outcomes & People face tradeoffs People face tradeoffs & Prices rise when the government prints too much money ANS: C DIF: REF: 20-0 NAT: Analytic LOC: The study of economics, and definitions of economics TOP: Ten principles of economics MSC: Definitional Chapter 20/Income Inequality and Poverty 109 36 Suppose that income is subject to increasing marginal utility From a utilitarian perspective, a b c d some income redistribution from rich to poor would increase social welfare some income redistribution from poor to rich would increase social welfare any income redistribution would probably reduce social welfare any income redistribution would probably increase social welfare ANS: B NAT: Analytic MSC: Analytical DIF: REF: LOC: Efficiency and equity 20-2 TOP: Utilitarianism 37 Liberalism is the political philosophy espoused by a b c d Robert Nozick John Stuart Mill John Rawls Jeremy Bentham ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 38 The maximin criterion is attributed to which political philosophy? a b c d Utilitarianism Liberalism Libertarianism Repubicanism ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 39 Raising the welfare of the worst-off person in society is an important goal of which political philosophy? a b c d Utilitarianism Liberalism Libertarianism Secularism ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 40 “The government should choose policies deemed to be just, as evaluated by an impartial observer behind a ‘veil of ignorance.’” This statement is most closely associated with which political philosophy? a b c d Liberalism Utilitarianism Libertarianism Welfarism ANS: A NAT: Analytic MSC: Definitional DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 41 Suppose that Jamal is moving to a state where personal incomes are distributed randomly If Jamal believes in liberalism, he would prefer a b c d an income distribution that is relatively equal that everyone has the same work opportunities and market-determined wage rates that private property be transformed to government property to safeguard people’s incomes less economic assistance to the poor because it distorts the price system ANS: A NAT: Analytic MSC: Analytical DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 110 Chapter 20/Income Inequality and Poverty 42 The philosopher John Rawls argued that a b c d people would choose a more equal distribution of income if they had to determine an economic distribution system before knowing their place in it people would choose income inequality to allow the maximum use of their individual talents government has a role to ensure income equality to prevent social unrest people would choose income equality because it is morally right ANS: A NAT: Analytic MSC: Analytical DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 43 Liberalism is founded on a premise that behind a "veil of ignorance," a b c d justice cannot be agreed upon everyone’s income should be equal everyone would agree to "just" rules to reallocate income society should maximize the sum of individual utilities ANS: C NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-2 TOP: Liberalism 44 The maximin criterion for government policies is associated with a b c d the school of thought called utilitarianism the school of thought called liberalism the school of thought called libertarianism the school of thought called stoicism ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Utility 45 According to the doctrine of liberalism, principles of justice are the result of a b c d fair agreement and bargain command-and-control policies domination of the powerful by the weak workers owning the factors of production ANS: A NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 46 The political philosophy that views the redistribution of income as a form of social insurance is a b c d Utilitarianism Liberalism Libertarianism Welfarism ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 47 The maximin criterion suggests that social policy should a b c d expropriate the factors of production from the capitalist class ensure an equal distribution of income elevate the well-being of those at the bottom of the income distribution elevate the well-being of all workers ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism Chapter 20/Income Inequality and Poverty 111 48 Liberalism suggests that public policies should aim to a b c d maximize the sum of utility of everyone in society maximize the well-being of the average person in society maximize the well-being of the worst-off person in society minimize the difference between the utility of the best-off person in the society and the utility of the worst-off person in society ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Utility 49 A society consists of three individuals: Arthur, Billie, and Chris In terms of income and utility, Arthur is currently best-off, Billie ranks in the middle, and Chris is worst-off Which of the following statements is correct? a b c d Utilitarianism suggests that government policies should strive to maximize Billie’s utility Liberalism suggests that government policies should strive to maximize Chris’s utility Libertarianism suggests that government policies should strive to maximize Arthur’s utility Mobilism suggests that government policies should strive to make Chris better off than Billie ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Utility 50 The rule for redistribution proposed by John Rawls in his book A Theory of Justice is called the a b c d "optimal ignorance" rule libertarian justice rule maximin criterion egalitarian criterion ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 51 According to the maximin criterion, income should be transferred from the rich to the poor as long as it a b c d raises the well-being of the least fortunate does not alter incentives to work and save promotes an equal distribution of income does not lower the welfare of the elderly ANS: A NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 52 If society chose to maximize average utility rather than minimum utility, a b c d society would achieve perfect income equality society would achieve the maximin objective its justice would be more utilitarian than Rawlsian its justice would be more Rawlsian than utilitarian ANS: C NAT: Analytic MSC: Analytical DIF: REF: 20-2 LOC: The role of government TOP: Liberalism 53 Would the maximin criterion achieve perfect income equality? a b c d Yes There would be no way to reallocate resources to raise the utility of the poor Yes The maximin criterion would eliminate poverty No It is impossible for complete equality to benefit the worst-off people in society No Complete equality would reduce incentives to work, which would reduce total income, which would reduce the incomes of the worst-off people in society ANS: D NAT: Analytic MSC: Analytical DIF: REF: LOC: Efficiency and equity 20-2 TOP: Liberalism 112 Chapter 20/Income Inequality and Poverty 54 "Only individual members of society earn income, not society itself." This statement is most closely associated with the political philosophy of a a b c d utilitarian liberal libertarian None of the above is correct ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 55 “The government should punish crimes and enforce voluntary agreements but not redistribute income.” This statement is most closely associated with which political philosophy? a b c d Liberalism Utilitarianism Libertarianism Welfarism ANS: C NAT: Analytic MSC: Definitional DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 56 “Equality of opportunities is more important than equality of incomes.” This statement would be most likely attributed to which political philosophy? a b c d Utilitarianism Liberalism Libertarianism Welfarism ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 57 Robert Nozick criticizes Rawls' concept of justice by using an example of a b c d minimum wage laws the grade distribution in an economics class a leaky bucket the price of tea in China ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 58 Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome? a b c d Utilitarianism Liberalism Libertarianism Welfarism ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 59 According to a libertarian, if income were to be distributed equally, a b c d productivity would increase social utility would increase the marginal productivity of the poor would fall, whereas the marginal productivity of the rich would rise productivity would decrease ANS: D NAT: Analytic MSC: Applicative DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism Chapter 20/Income Inequality and Poverty 113 60 Libertarians believe that in considering economic fairness, one should primarily consider the a b c d outcome of the system process by which outcomes arise maximin criterion maximizing total social utility ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 61 Libertarianism identifies a redistribution of income role for government when a b c d individual incomes vary widely the income distribution is altered by illegal means (e.g theft) a social planner is needed to smooth out the transitory income stream workers lose their jobs as a result of structural changes in the economy ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 62 Libertarians believe that a b c d it is more important to evaluate the process by which economic outcomes are produced, rather than the outcomes themselves government should attempt to redistribute income from the rich to the poor when the gap between rich and poor is more than 20% Efficiency of opportunities is more important than efficiency of income levels it is more important to evaluate economic outcomes first and then the process that produced them ANS: A NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Utility 63 In general, which of the following would libertarians argue is more important than equal outcomes? a b c d Equal opportunities Equal incomes Providing a social safety net Assuring fair compensation for workers ANS: A NAT: Analytic MSC: Interpretive DIF: REF: 20-2 LOC: The role of government TOP: Libertarianism 64 Bill earns more than Donna A legislator proposes taxing Bill to supplement Donna's income A libertarian would view this proposal as a b c d a way to increase social justice a way to enhance Donna's income in a socially responsible way validation of the superiority of a libertarian maximin criterion over Rawlsian social justice an inappropriate role for government, since government cannot morally redistribute income that is not its own ANS: D NAT: Analytic MSC: Analytical DIF: REF: LOC: Efficiency and equity 20-2 TOP: Libertarianism 114 Chapter 20/Income Inequality and Poverty Sec 03 Income Inequality and Poverty Policies to reduce poverty MULTIPLE CHOICE Binding minimum-wage laws a b c d are most effective at alleviating poverty when labor demand is highly elastic force a market imbalance between the supply and demand for labor increase the efficiency of labor markets are typically associated with a rise in employment among the poor ANS: B NAT: Analytic MSC: Applicative DIF: REF: LOC: Labor markets 20-3 TOP: Minimum wage Figure 20-3 Refer to Figure 20-3 If the government imposes a minimum wage above W o, it is likely to a b c d increase employment to a level above Qo reduce employment to a level below Qo provide more income to the working poor than they collectively received before the minimum wage was set have no effect on employment ANS: B NAT: Analytic MSC: Applicative TOP: Minimum wage Refer to Figure 20-3 An effective minimum wage would be set at a level a b c d above Wo, and employment would rise above Qo above Wo, and employment would fall below Qo below Wo, and employment would rise above Qo below Wo, and employment would fall below Qo ANS: B NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: Reading and interpreting graphs DIF: REF: 20-3 LOC: Reading and interpreting graphs TOP: Minimum wage Minimum wage laws a b c d benefit all unskilled workers create unemployment, but if demand is relatively elastic, the unemployment effects will be minor may help the nonpoor, such as teenagers from wealthy families reduce poverty by reducing unemployment Chapter 20/Income Inequality and Poverty 115 ANS: C NAT: Analytic MSC: Interpretive DIF: REF: LOC: Labor markets TOP: Minimum wage 20-3 labor demand is inelastic so firms can adjust production too many older employees benefit at the expense of teenage workers many minimum-wage earners are teenagers from middle-class families All of the above are correct ANS: C NAT: Analytic MSC: Interpretive DIF: REF: LOC: Labor markets 20-3 TOP: Minimum wage Economists who support minimum-wage legislation are likely to believe that the a b c d demand for unskilled labor is relatively inelastic demand for unskilled labor is relatively elastic supply of unskilled labor is relatively elastic supply of unskilled labor is relatively inelastic ANS: A NAT: Analytic MSC: Analytical DIF: REF: LOC: Labor markets 20-3 TOP: Minimum wage TOP: Welfare A common criticism of welfare programs is that they a b c d create self-reliant individuals encourage strong family values encourage illegitimate births have increasing benefits over time, in real terms ANS: C NAT: Analytic MSC: Applicative Minimum wage Critics of the minimum wage argue that a b c d TOP: affects employees but not employers lowers the productivity of workers raises the cost of labor to firms All of the above are correct ANS: C NAT: Analytic MSC: Applicative 20-3 A binding minimum wage a b c d DIF: REF: LOC: Efficiency and equity DIF: REF: LOC: Labor markets 20-3 Since the early 1970s, welfare benefits have declined, a b c d which is largely due to the success of the negative income tax program which is largely due to the success of private charities yet the percentage of children living with only one parent has increased and the percentage of children living with only one parent has decreased ANS: C NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-3 TOP: Welfare 10 A common criticism of government programs that are designed to assist the poor is that a b c d those who receive assistance rarely meet the criterion for eligibility the majority of those below the poverty line refuse to accept government assistance they create incentives for people to become "needy." they typically account for a majority of annual government expenditures ANS: C NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Welfare 116 Chapter 20/Income Inequality and Poverty 11 Unemployment insurance benefits is a type of a b c d in-kind transfer negative income tax payment property income welfare payment ANS: D NAT: Analytic MSC: Definitional DIF: REF: 20-3 LOC: The role of government TOP: Welfare 12 Which of the following is an example of a welfare program? a b c d Temporary Assistance for Needy Families (TANF) Capital Gains Tax (CGT) Life Cycle Transfers (LCT) North American Free Trade Agreement (NAFTA) ANS: A NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Welfare 13 In the Temporary Assistance for Needy Families program, most families a b c d must have both parents in the home to qualify are female head-of-household families in which the father is absent have adult children with disabilities living at home are ineligible to receive assistance from other support programs ANS: B NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Welfare 14 Anti-poverty programs a b c d encourage saving among recipient groups impose a very low marginal tax rate on income are only made available to those with no other source of income may discourage the poor from escaping poverty on their own ANS: D NAT: Analytic MSC: Applicative DIF: REF: LOC: Efficiency and equity 20-3 TOP: Welfare 15 Critics of welfare reform argue that a b c d drug addiction has increased among the working poor the emphasis on work has forced many mothers into low-paying jobs while not providing adequate child care homelessness has increased dramatically the number of people on welfare rolls increased after reform ANS: B NAT: Analytic MSC: Applicative DIF: REF: LOC: Labor markets 20-3 TOP: Welfare 16 Supporters of welfare reform argue that a b c d childhood literacy rates have increased private charities have provided sufficient child-care resources for working mothers employment has increased among the demographic groups traditionally on welfare, including single mothers tax evasion declined among employers of former welfare recipients ANS: C NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Welfare Chapter 20/Income Inequality and Poverty 117 17 Proponents of welfare reform claim that programs that not establish a time limit on recipient benefits harm children by a b c d forcing mothers to work outside the home encouraging a psychological dependency on government programs encouraging child abuse by absent fathers creating drug addiction ANS: B NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Welfare 18 Which of the following statements is not correct? a b c d Welfare programs may encourage illegitimate births The decline in welfare benefits since the 1970s has been associated with a decline in the percentage of children living with a single parent Welfare programs may reduce incentives for people to work A negative income tax program uses tax revenues collected from high-income families to provide cash subsidies to low-income families ANS: B NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Welfare 19 Which of the following statements is correct? a b c d A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are not lowincome workers A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit A disadvantage of an Earned Income Tax Credit (EITC) is that a person who is unable to work due to a disability does not benefit from the program All of the above are correct ANS: D NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Welfare | Minimum wage 20 Which of the following statements is correct? a b c d An advantage of a minimum-wage law is that it may benefit unskilled workers who are not lowincome workers An advantage of a negative income tax program is that a poor person who chooses not to work many hours would receive a cash benefit An advantage of an Earned Income Tax Credit (EITC) is that a person who is unable to work due to a disability does not benefit from the program Following the reform of welfare in 1996 there was a large decrease in the welfare rolls ANS: D NAT: Analytic MSC: Analytical DIF: REF: LOC: Efficiency and equity 20-3 TOP: Welfare | Minimum wage 21 Which of the following statements is not correct? a b c d An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled An advantage of a negative income tax program is that it encourages the poor to work in order to be eligible An advantage of a minimum wage law is that it benefits some unskilled workers ANS: C DIF: REF: 20-3 NAT: Analytic LOC: The role of government TOP: Welfare | In-kind transfers | Minimum wage MSC: Analytical 118 Chapter 20/Income Inequality and Poverty 22 A negative income tax system was designed to a b c d provide in-kind benefits to the poor provide a minimum income to the poor reduce taxes on the rich when their incomes surpass the maximum income tax bracket subsidize food consumption in poor families ANS: B NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 23 A tax provision that works much like a negative income tax is the a b c d Earned Income Tax Credit (EITC) Temporary Assistance for Needy Families (TANF) deduction for charitable contributions mortgage interest rate deduction ANS: A NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 24 A negative income tax system would a b c d make taxes more regressive sever the link between tax policy and income distribution collect from high-income households and give transfers to low-income households eliminate progressive tax rates ANS: C NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 25 The only qualification to receive government assistance under a negative income tax is a b c d pre-school children to be enrolled in job training a working head-of-household a low income ANS: D NAT: Analytic MSC: Applicative DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 26 Which of the following formulas is most representative of a negative income tax proposal? a b c d Taxes Owed = (1/4 of Income) $2 Taxes Owed = (1/2 of Income) 3/4 Taxes Owed = (1/2 of Income) + $10,000 Taxes Owed = (1/3 of Income) - $10,000 ANS: D NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 27 Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000 If a family doesn't earn any income, how does the negative income tax affect them? a b c d They will receive an income subsidy of $1,000 They will receive an income subsidy of $3,000 They will receive an income subsidy of $10,000 They will not be affected at all, since the negative income tax requires a family to earn income ANS: C NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax Chapter 20/Income Inequality and Poverty 119 28 Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000 A family that earns an income of $60,000 will a b c d pay $10,000 in taxes receive an income subsidy of $3,000 receive an income subsidy of $10,000 neither pay taxes nor receive an income subsidy ANS: A NAT: Analytic MSC: Analytical DIF: REF: LOC: Efficiency and equity 20-3 TOP: Negative income tax 29 Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income) - 10,000 A family that earns an income of $30,000 will a b c d neither pay taxes nor receive an income subsidy receive an income subsidy of $500 pay $1,000 in taxes pay $600 in taxes ANS: A NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 30 Which of the following is not a characteristic of the Earned Income Tax Credit (EITC)? a b c d It does not discourage recipients from working It is less distortionary than other anti-poverty programs It helps the disabled who cannot work It applies only to the working poor ANS: C NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: Negative income tax 31 Medicaid and food stamps are a b c d available only to the elderly forms of in-kind assistance forms of cash assistance transfer payments ANS: B NAT: Analytic MSC: Definitional DIF: REF: 20-3 LOC: The role of government TOP: In-kind transfers 32 In-kind transfers are politically popular because a b c d they provide high quality food and shelter they provide cash allow resale of food stamps for cash, if needed the public believes that the aid is not going to support addictions ANS: D NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: In-kind transfers 33 Which of the following is an advantage of an in-kind transfer in comparison to a cash payment? a b c d In-kind transfers cost less to administer than cash transfers In-kind transfers restrict the use of the benefit; thus, recipients receive necessities such as food and health care In-kind transfers are more efficient than cash transfers In-kind transfers give the recipient more utility than cash transfers ANS: B NAT: Analytic MSC: Analytical DIF: REF: 20-3 LOC: The role of government TOP: In-kind transfers 120 Chapter 20/Income Inequality and Poverty 34 Which of the following is most likely to explain why young children in developing countries often work? a b c d Their parents want them to gain valuable work experience Their parents not view education as important Their families are poor Their families’ religious practices encourage child labor ANS: C NAT: Analytic MSC: Applicative DIF: REF: LOC: Labor markets 20-3 TOP: Child labor 35 Which of the following statements is not correct? a b c d When most Americans picture child labor, they think of young children working in factories In fact, many young children in poor countries work on family farms Many young children work in poor countries rather than attend school because education is not valued in those countries An increase in income for families in poor countries is often associated with an increase in the number of children attending school In the past, most policies aimed at deterring child labor focused on educating the parents about why their children should not work ANS: B NAT: Analytic MSC: Applicative DIF: REF: LOC: Labor markets 20-3 TOP: Child labor 36 Which of the following statements about the minimum wage is correct? a b c d An increase in the minimum wage enhances the well-being of all unskilled workers An increase in the minimum wage has no effect on the well-being of middle-class families Advocates of the minimum wage argue that the demand for labor is relatively inelastic Critics of the minimum wage argue that it is an undesirable way of helping the poor because it is costly to the government ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: Minimum wage 37 For which of the following programs can a person qualify solely by having a low income? a b c d both Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) but not Supplemental Security Income (SSI) Supplemental Security Income (SSI) but not Temporary Assistance for Needy Families (TANF) neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security Income (SSI) ANS: D NAT: Analytic MSC: Definitional DIF: REF: 20-3 LOC: The role of government TOP: Welfare 38 The U.S welfare system was revised by a 1996 law that a b c d consolidated all of the previous assistance programs into a single program limited the amount of time that people could receive assistance said it was no longer necessary for poor people to demonstrate an additional “need,” such as small children or a disability, to qualify for assistance turned all federally-run welfare programs over to the states ANS: B NAT: Analytic MSC: Definitional DIF: REF: 20-3 LOC: The role of government TOP: Welfare 39 Poor families are eligible for financial assistance, without having to demonstrate any additional “need,” a b c d under the current welfare system and under a negative income tax under the current welfare system but not under a negative income tax under a negative income tax but not under the current welfare system under neither the current welfare system nor under a negative income tax Chapter 20/Income Inequality and Poverty 121 ANS: C DIF: REF: 20-3 NAT: Analytic LOC: The role of government TOP: Negative income tax | Welfare MSC: Definitional 40 Relative to direct cash payments, in-kind transfers have the advantage of being a b c d more politically popular more efficient more respectful of the poor of a higher dollar value than cash payments ANS: A NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: In-kind transfers 41 An example of an in-kind transfer to the poor is a b c d the negative income tax the Earned Income Tax Credit (EITC) Medicaid Temporary Assistance for Needy Families (TANF) ANS: C NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: In-kind transfers 42 Eric V Edmonds, an economist who has studied child labor issues, asserts that a b c d international trade has led to more children working in agriculture in Vietnam culture, not poverty, leads families to put their children to work policies to curb child labor have the effect of “liberating millions of children from dismal lives working in factories.” policies to curb child labor have the effect of “punishing the poorest for being poor.” ANS: D NAT: Analytic MSC: Interpretive DIF: REF: 20-3 LOC: The role of government TOP: Child labor 43 Many Democrats who campaigned in the 2006 elections supported raising the U.S minimum wage Critics of raising the minimum wage argue that minimum-wage laws are a b c d too expensive for local governments to fund too expensive for local governments to administer imprecise in their ability to help the working poor easy for businesses to pay ANS: C NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-3 TOP: Minimum wage 44 Many Democrats who campaigned in the 2006 elections supported raising the U.S minimum wage Supporters of raising the minimum wage argue that minimum-wage laws are a b c d a tax-free way to help the working poor; after all, business bear the burden of paying higher wages, not the government better that the Earned Income Tax Credit (EITC) in targeting the working poor; after all, the EITC may benefit teenagers from middle-class families who work summer jobs at the minimum wage better than in-kind transfers such as food stamps in providing food rather than unhealthy items such as drugs or alcohol a way to increase employment of those likely to make the minimum wage ANS: A NAT: Analytic MSC: Interpretive DIF: REF: LOC: Efficiency and equity 20-3 TOP: Minimum wage 122 Chapter 20/Income Inequality and Poverty 45 Which of the following is not an example of a welfare program? a b c d Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) food stamps minimum wage laws ANS: D NAT: Analytic MSC: Applicative DIF: REF: LOC: Efficiency and equity 20-3 TOP: Welfare 46 Which of the following statements is not correct? a b c d An advantage of the Earned Income Tax Credit (EITC) is that it targets the working poor better than the minimum wage because it does not benefit teenagers from middle-class families who work summer jobs at the minimum wage A disadvantage of in-kind transfer programs such as food stamps is that they force recipients to purchase from a restricted set of items which may not include things that the poor need the most such as diapers or cleaning supplies A disadvantage of minimum wage laws is that they are expensive for state and local governments to fund Effective minimum wage laws create a surplus of labor ANS: C DIF: REF: 20-3 NAT: Analytic LOC: Efficiency and equity TOP: Minimum wage, Welfare, Negative income tax MSC: Analytical 47 Which of the following statements is correct? a b c d ANS: NAT: TOP: MSC: An disadvantage of Supplemental Security Income (SSI) is that it does not encourage families to break up in order to qualify for assistance A disadvantage of in-kind transfer programs such as food stamps is that they force recipients to purchase from a restricted set of items which may not include things that the poor need the most such as diapers or cleaning supplies A disadvantage of minimum wage laws is that they are expensive for state and local governments to fund An advantage of a negative income tax is that it encourages the poor to work in order to receive government assistance B DIF: REF: 20-3 Analytic LOC: Efficiency and equity Minimum wage, Welfare, Negative income tax, Work incentives Analytical 48 Which of the following statements is correct regarding the international phenomenon of child labor? a b c d The highest percentage of child laborers work in factories Policies that restrict the opportunities for children to work are likely to punish the poorest families The most significant reason why children work is that their parents not understand the benefits of childhood education When a family experiences an increase in income, the children are more likely to work longer hours, especially if they are working in agriculture ANS: B NAT: Analytic MSC: Applicative DIF: REF: LOC: Efficiency and equity 20-3 TOP: Child labor TOP: Child labor 49 Initial policy efforts to curb child labor focused on a b c d educating parents educating children banning child-made products taxing employers that hire children ANS: A NAT: Analytic MSC: Analytical DIF: REF: LOC: Labor markets 20-3 Chapter 20/Income Inequality and Poverty 123 50 Most children work in which sector of the economy? a b c d agriculture manufacturing information technology service sector jobs, such as McDonalds ANS: A NAT: Analytic MSC: Analytical DIF: REF: LOC: Labor markets 20-3 TOP: Child labor 51 Eric V Edmonds says which of the following explains most of the drop in child labor rates in Vietnam? a b c d the availability of good schools the availability of jobs rising family income internet access ANS: C NAT: Analytic MSC: Analytical DIF: REF: LOC: Labor markets 20-3 TOP: Child labor 52 Which of the following statements is not correct? a b c d The biggest explanation for international child labor is poverty Critics of the welfare system argue that it breaks up families One of the problems with measuring income inequality is valuing in-kind transfers Utilitarians believe that the government should punish crimes but should not redistribute income ANS: D DIF: REF: 20-1 | 20-2 | 20-3 NAT: Analytic LOC: Efficiency and equity TOP: Income inequality | Utilitarianism | Welfare | Child labor MSC: Analytical 53 Which of the following statements is correct? a b c d Followers of the liberalism political philosophy believe that society should maximize the total of individual utilities The poverty line is adjusted for regional differences in the costs of raising children One advantage to the Earned Income Tax Credit (EITC) is that it benefits the working poor When family incomes rise in poor countries, young children are more likely to be taken out of school to work on family farms ANS: C DIF: REF: 20-1 | 20-2 | 20-3 NAT: Analytic LOC: Efficiency and equity TOP: Poverty | Liberalism | Negative income tax | Child labor MSC: Analytical 54 Which of the following statements is not correct? a b c d ANS: NAT: TOP: MSC: Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits The Earned Income Tax Credit (EITC) is very similar to a negative income tax Minimum wage laws will likely increase unemployment The elderly are more likely to be poor than single mothers D DIF: REF: 20-1 | 20-2 | 20-3 Analytic LOC: Efficiency and equity Income inequality | Poverty | Minimum wage | Negative income tax Analytical ... equity 20- 1 TOP: Poverty line Chapter 20/ Income Inequality and Poverty 93 Figure 20- 1 Number of Poor 83 Refer to Figure 20- 1 The absolute number of people in poverty a b c d is higher in 200 1... Interpretive DIF: REF: 20- 1 LOC: Reading and interpreting graphs TOP: Poverty rate 94 Chapter 20/ Income Inequality and Poverty Figure 20- 2 Poverty Rates by Age 86 Refer to Figure 20- 2 In 200 1, the percent... equity 20- 1 TOP: Poverty rate The distribution of income for Abbyville is as follows: Number of Families 300 500 900 600 200 Income less than $15,000 between $15,000 and $20, 000 between $20, 000