1. In 1994, the wealthiest 20 percent of families in the
United States earned
approximately _________ percent of the before-tax total income. (Fill in the
a. 34 percent
b. 47 percent
c. 62 percent
d. 79 percent
2. Imagine two cities, Engelgrad and Legreeville, where the rich, middle, and poor
income recipients in one city have annual incomes identical to their counterparts'
incomes in the other city. In Engelgrad, the poorest families one year almost
always end up as the richest families the next year and become middle-income
families the year after that. In Legreeville, however, the poor remain poor and
the rich remain rich. Which of the following is true about the two cities?
a. Annual data on the distribution of income will indicate that the degree of
income inequality in the two cities is identical.
b. The degree of lifetime income inequality in the two cities is identical.
c. The income mobility for the two cities is identical.
d. The distribution of annual income is more unequal in Legreeville.
3. Compared to high-income families, a larger proportion of low-income families
a. are headed by a person with at least a high school education.
b. have both a husband and a wife who work full time.
c. are headed by a person between 35 and 64 years old.
d. are single-parent families.
4. During 1980-1994, the official poverty rate of non-elderly families
a. steadily declined.
b. remained virtually unchanged.
d. steadily declined until 1985, when it began to increase.
5. When a person who receives welfare benefits earns income, those benefits are
reduced as earned income rises. This is called
a. an implicit marginal tax.
b. the opportunity cost of income.
c. the work-leisure trade-off.
d. reverse discrimination.
6. According to the official measure of poverty, in 1994 the poverty rate of families
in the United States was
a. 8.2 percent.
b. 11.6 percent.
c. 18.5 percent.
d. 22.0 percent.
7. International comparisons indicate that the degree of income inequality is
a. more developed countries.
b. less developed countries.
c. countries with a homogeneous population.
d. the United States.
8. With a negative income tax, an additional dollar earned by a low-income recipient
would always cause the individual's disposable income to
a. increase, but by less than $l.
b. increase by exactly $l.
c. increase by more than $l.
d. decline unless he were a full-time worker.
9. The poverty threshold level defines poverty by calculating the cost of feeding a
family and multiplying it by
10. Which of the following would cause the poverty threshold income level for a given
family to increase by 20 percent from one year to another?
a. a 20 percent increase in the family's income
b. a 20 percent decrease in the family's income
c. a 20 percent increase in the general level of prices
d. a 20 percent increase in real national income