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Exam 20: Income Inequality and Poverty

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Question 31

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The measured poverty rate may not reflect the true extent of economic deprivation because it does not include some forms of government assistance.

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B) False

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Question 32

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Table 20-8 Income Inequality in the United States The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau $\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Year } & \text { Bottom Fifth } & \text { Second Fifth } & \text { Middle Fifth } & \text { Fourth Fifth } & \text { Top Fifth } & \text { Top 5\% } \\\hline \mathbf{2 0 1 0} & 3.3 \% & 8.5 \% & 14.6 \% & 23.4 \% & 50.2 \% & 21.3 \% \\\hline \mathbf{2 0 0 5} & 3.4 & 8.6 & 14.6 & 23.0 & 50.4 & 22.2 \\\hline \mathbf{2 0 0 0} & 3.6 & 8.9 & 14.8 & 23.0 & 49.8 & 22.1 \\\hline \mathbf{1 9 9 5} & 3.7 & 9.1 & 15.2 & 23.3 & 48.7 & 21.0 \\\hline \mathbf{1 9 9 0} & 3.8 & 9.6 & 15.9 & 24.0 & 46.6 & 18.5 \\\hline \mathbf{1 9 8 5} & 3.9 & 9.8 & 16.2 & 24.4 & 45.6 & 17.6 \\\hline \mathbf{1 9 8 0} & 4.2 & 10.2 & 16.8 & 24.7 & 44.1 & 16.5\\\hline \end{array}$ -Refer to Table 20-8. If the distribution of income were completely equal, what percentage of income would the bottom fifth of the population earn?

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Question 33

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Marco earns more than Antonio. A legislator proposes taxing Marco to supplement Antonio's income. A libertarian would view this proposal as

Aniella believes that the demand for unskilled labor is relatively inelastic. Carmella believes that the demand for unskilled labor is relatively elastic. Which is an advocate of minimum-wage laws?

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. The Human Development Report computes a measure of inequality by dividing the income of the richest 10% of the population by the income of the poorest 10%. What is the value for this measure of inequality in Imagination?

Which political philosophy argues that the government should choose policies to maximize the total utility of everyone in society?

Given the table shown, which country has a more equal income distribution? Explain your answer. $\begin{array} { | l | l | l | l | l | l | } \hline \text { Country } & \text { Bottom Fifth } & \text { Second Fifth } & \text { Middle Fifth } & \text { Fourth Fifth } & \text { Top Fifth } \\\hline \text { Country A } & 9.0 \% & 13.5 \% & 17.5 \% & 22.9 \% & 37.1 \% \\\hline \text { Country B } & 4.8 \% & 10.5 \% & 16.0 \% & 23.5 \% & 45.2 \% \\\hline\end{array}$

The United States has a more equal income distribution than many developing economies such as Mexico, South Africa, and Brazil.

Which of the following statements is not correct?

Of the following countries, which has the most equal distribution of income? United States, Brazil, Mexico, China, Japan, Germany, United Kingdom, Russia

Figure 20-1 ​ ​ -Refer to Figure 20-1. Between 1959 and 2017 the poverty rate has

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?

Table 20-8 Income Inequality in the United States The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau $\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Year } & \text { Bottom Fifth } & \text { Second Fifth } & \text { Middle Fifth } & \text { Fourth Fifth } & \text { Top Fifth } & \text { Top 5\% } \\\hline \mathbf{2 0 1 0} & 3.3 \% & 8.5 \% & 14.6 \% & 23.4 \% & 50.2 \% & 21.3 \% \\\hline \mathbf{2 0 0 5} & 3.4 & 8.6 & 14.6 & 23.0 & 50.4 & 22.2 \\\hline \mathbf{2 0 0 0} & 3.6 & 8.9 & 14.8 & 23.0 & 49.8 & 22.1 \\\hline \mathbf{1 9 9 5} & 3.7 & 9.1 & 15.2 & 23.3 & 48.7 & 21.0 \\\hline \mathbf{1 9 9 0} & 3.8 & 9.6 & 15.9 & 24.0 & 46.6 & 18.5 \\\hline \mathbf{1 9 8 5} & 3.9 & 9.8 & 16.2 & 24.4 & 45.6 & 17.6 \\\hline \mathbf{1 9 8 0} & 4.2 & 10.2 & 16.8 & 24.7 & 44.1 & 16.5\\\hline \end{array}$ -Refer to Table 20-8. The trend in income inequality from 1980 to 2010 is .

Which group (or groups) would be the most upset by wide variation in the income distribution?

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 line in Imagination is $18,000, what is the poverty rate?

With which three demographic variables is poverty correlated?

Table 20-4 ​ Source: U.S. Bureau of Census ​ ​ -Refer to Table 20-4. In 2017, the top quintile of families have

Scenario 20-3 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) − $16,000 -Refer to Scenario 20-3. Below what level of income would families start to receive a subsidy from this negative income tax?

Explain how a "leaky bucket" can be used to illustrate the utilitarian argument that governments should not attempt to completely equalize individual incomes.

One way of expressing the tradeoff between income equality and efficiency is to say the more equally the pie is divided, the .