Chapter 12 Practice Quiz Income Distribution, Poverty, and Discrimination

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Chapter 12 Practice Quiz Income Distribution,
Poverty, and Discrimination
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• Currently, the wealthiest 5 percent of all U.S.
  families earned what percentage of total annual
  money income among families?
• a. More than 20 percent.
• b. Less than 10 percent.
• c. More than 25 percent.
• d. More than 50 percent.

A. See Exhibit 1 in the text.
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• 2. A figure that measures the relationship
• between the cumulative percentage of
• money income on the vertical axis and the
• cumulative percentage of families on the
• horizontal axis is called the
• a. family-income curve.
• b. Washington curve.
• c. Lorenz curve.
• d. Gini curve.

C. See Exhibit 4 in the text.
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Exhibit 11 Lorenz Curve
100


Y
80
X
60


Cumulative percent of money income
40
Z


20
W


20
40
60
80
100
Cumulative percentage of families
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• 3. As shown in Exhibit 11, the perfect
• equality line is drawn between points
• a. W and Y along the curve.
• b. X and Z.
• c. W and Y along the straight line.
• d. W and X.

C. Along 45 degree line WY percentages on the
x-axis and y-axis are equal.
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• 4. As shown in Exhibit 11, 20 percent of
• families earned a cumulative share of
• about _______ percent of income.
• a. 5.
• b. 10.
• c. 30.
• d. 50.

A. Read 20 on the x-axis and 5 on the y-axis.
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• 5. As shown in Exhibit 11, 40 percent of
• families earned a cumulative share of about
  _________ percent of income.
• a. 5.
• b. 15.
• c. 30.
• d. 50.

B. Read 40 on the x-axis and 15 on the y-axis.
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• 6. Since 1929, the overall family income
• distribution in the United States has
• become
• a. much more unequal.
• b. much less unequal.
• c. slightly more unequal.
• d. slightly more equal.

D. See Exhibit 5 in the text.
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• 7. Comparing the family income distributions
• of the United States, the Czech Republic, and
• Brazil, the conclusion is that income is
• distributed
• a. most equally in Brazil.
• b. most equally in the United States.
• c. about the same in all three countries.
• d. most equally in Czech Republic.

D. See Exhibit 6 in the text.
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• 8. To establish the poverty line that divides
• poor and nonpoor families, the government
• a. multiplies the cost of a minimal diet by 3.
• b. multiplies the cost of a minimal diet by 5.
• c. adds 50 percent to cost of a minimal diet.
• d. adds 100 percent to cost of a minimal diet.

1. Absolute poverty can be defined in dollars to
   purchase some minimum amount of goods and
   services essential to meeting a person or
   familys basic needs.

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• 9. The poverty line
• a. is defined as one-half average family income.
• b. includes in-kind transfers.
• c. includes Medicaid benefits.
• d. has been attacked for overstating poverty.

1. The poverty line does not include noncash
   transfers, such as food stamps and Medicaid.

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• 10. Which of the following is an in-kind
• transfer?
• a. Social Security payments.
• b. Unemployment compensation.
• c. Food stamps.
• d. Welfare payments.

1. Social Security payments, unemployment
   compensation and welfare payments are cash
   transfer payments included in the poverty line.

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• 11. Which of the following is a cash assistance
• (not an in-kind transfer) program?
• a. Temporary Assistance to Needy Families
  (TANF).
• b. Medicare.
• c. Medicaid.
• d. Food stamps.

A. Medicare and Medicaid provide medical care
services and food stamps are used for food. TANF
provides cash that can be used to purchase goods
and services chosen by recipient.
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• 12. The negative income tax (NIT) is a plan
• under which families
• a. above a level of income pay no tax.
• b. pay the same tax rate except for the
• poor.
• c. below a level of income pay no tax.
• d. below a level of income receive a cash payment.

D. See Exhibit 9 in the text.
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• 13. Which of the following might decrease
• the supply curve of labor?
• a. Discrimination against African-Americans.
• b. Discrimination against women.
• c. Difficult licensing requirements.
• d. All of the above.

1. Discrimination against African-Americans and
   women and different licensing requirements
   reduce the number of workers who are willing to
   work at various possible wage rates.

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Exhibit 12 Negative Income Tax






20
.
Tax
10
.
Tax liability

(thousands of dollars per year)
0
-10
-20
40
50
0
30
60
70
10
20
Family of four income
(thousands of dollars per year)
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14. As shown in Exhibit 12, a family of four pays
income taxes at a. an income of 5,000.
b. any income between zero and 40,000.
c. all levels of income. d. any income
above 40,000.
D. At any income below the break-even income of
40,000, a family receives payments from the
government.
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15. As shown in Exhibit 12, a family of four with
no earned income receives ____ from the
government. a. zero payment b.
the break-even income of 40,000 c. a
20,000 payment d. a 20,000 tax deferment
C. At zero income, payment is read on the
vertical axis as 20,000 (a negative tax
liability).