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Exam 20: Income Inequality and Poverty

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Question 41

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Which of the following is not a characteristic of the Earned Income Tax Credit (EITC) ?

A) It does not discourage recipients from working.
B) It is less distortionary than other anti-poverty programs.
C) It helps the disabled who cannot work.
D) It applies only to the working poor.

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

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Question 42

Multiple Choice

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Which of the following is not correct?

A) Poverty is long-term problem for relatively few families.
B) Measurements of income inequality usually do not include in-kind transfers.
C) Measurements of income inequality use lifetime incomes rather than annual incomes.
D) Measurements of income inequality would be more meaningful if they reflected permanent rather than current income.

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

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Question 43

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Scenario 20-7 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/6 of income) - $24,000 -Refer to Scenario 20-7. Below what level of income would families start to receive a subsidy from this negative income tax?

Among all countries in the world, the United States has the most income inequality.

Which of the following is not correct?

Table 20-11 Poverty Thresholds in 2011, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-11. What is the poverty line for a family of eight with two children?

Which of the following groups has the highest poverty rate?

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 = (1/5 of income) - $15,000 -Refer to Scenario 20-4. A family earning $100,000 before taxes would have how much after-tax income?

Table 20-4 Source: U.S. Bureau of Census -Refer to Table 20-4. In 2011, the top fifth of families have

Scenario 20-8 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 20-8. This negative income tax ensures that families earn at least $56,000​.

Assume that the government proposes a negative income tax that calculates taxes owed by the formula, Taxes Owed = (a Income) - a.What is the value for "a"? b.What is the value for "b"? 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. c.What is the tax liability of a family with an income of $50,000? d. At what level of income will a family neither pay taxes, nor receive an income subsidy?

The Smith family owns an apple orchard in Illinois. The Jones family owns an apple orchard in Wisconsin. A late frost destroys half of the Smith family's harvest for one year. For the Jones family, their

Which of the following is correct?

What is the primary problem in comparing income inequality in the US with income inequality in other countries?

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.

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. Sixty percent of all families have incomes below what level?

Critics argue that a disadvantage of the Earned Income Tax Credit is that it does not effectively target the working poor because many recipients are the teenage children of middle-income families.

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $18,000 owe?

Utilitarianism is