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Exam 20: Income Inequality and Poverty

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Question 1

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Which political philosophy concludes that equality of opportunities is more important than equality of outcomes?

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Question 2

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Which of the following statements is characteristic of utilitarianism?

A) An extra dollar of income provides higher marginal utility to a poor person than to a rich person.
B) Social policies should be created behind a "veil of ignorance."
C) Society should strive to maximize the utility of its wealthiest member.
D) Equality of opportunity is more important than equality of incomes.

E) A) and B)
F) A) and C)

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Question 3

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What is one argument made by proponents of in-kind transfers over cash payments to the needy?

Which of the following does not explain the rise in income inequality in the United States from 1970 to 2017?

An advantage of a negative income tax is that it does not encourage the breakup of families because the only criterion for assistance is family income.

Which of the following is not an example of a welfare program?

Standard measurements of the degree of income inequality take both money income and in-kind transfers into account.

On what type of income do many economists believe that people base their consumption?

Scenario 20-5 Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which Taxes owed = (1/4 of income) - $15,000. -Refer to Scenario 20-5. Zooey's friend Alfredo owes $0 in taxes. How much does he earn?

Based on U.S. data for 2017, the poverty rate is the highest for which group of people?

Table 20-7 Distribution of Income in Imagination $\begin{array} { | l | l | l | } \hline \text { Number of Families } & \text { Income Range } & \text { Average Income } \\\hline 23,500 & \text { less than } \$ 18,000 & \$ 15,890 \\\hline 42,410 & \text { between } \$ 18,000 \text { and } \$ 36,000 & \$ 27,450 \\\hline 57,330 & \text { between } \$ 36,000 \text { and } \$ 54,000 & \$ 46,220 \\\hline 63,490 & \text { between } \$ 54,000 \text { and } \$ 72,000 & \$ 65,000 \\\hline 24,770 & \text { between } \$ 72,000 \text { and } \$ 90,000 & \$ 80,790 \\\hline 23,500 & \text { more than } \$ 90,000 & \$ 118,750 \\\hline\end{array}$ -Refer to Table 20-7. If the poverty rate in Imagination is 25%, in what income range on the table is the poverty line?

Scenario 20-4 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/4 of income) - $14,000 -Refer to Scenario 20-4. This negative income tax ensures that families earn at least $56,000.

The life-cycle pattern of income variation causes inequality in the distribution of annual income, but it does not necessarily represent .

Table 20-6 Poverty Thresholds in 2018 by Size of Family and Number of Related Children Under 18 Years ​ Source: U. S. Bureau of the Census, Current Population Survey. ​ ​ ​ -Refer to Table 20-6. What is the poverty line in 2018 for a family of six with three children?

Suppose that a family saves and borrows to buffer itself against changes in income. These actions relate to which problem in measuring inequality?

About half of black and Hispanic children in female-headed households live in poverty.

Temporary Assistance for Needy Families (TANF) is an example of a negative income tax program.

Figure 20-2 ​ -Refer to Figure 20-2. Which of the following is consistent with the data reported in the figure?

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 it?

Alyssa currently earns $105,000 a year, while her junior partner, Oakley, earns $65,000 a year. From the perspective of a utilitarian, if both of their incomes are subject to diminishing marginal utility, taking a dollar from Alyssa and giving it to Oakley will