Chapter 12
Practice Quiz
Income Distribution, Poverty,
and Discrimination
1
1. 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.
2
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.
3
Exhibit 11 Lorenz Curve
Cumulative percent of money income
100
Y
•°
80
X
•°
60
40
20
Z•
°
W
•°
20
40
60
80
Cumulative percentage of families
100
4
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.
A. Absolute poverty can be defined in
dollars to purchase some minimum
amount of goods and services essential to
meeting a person or family’s 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.
D. 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.
C. 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 AfricanAmericans.
b. Discrimination against women.
c. Difficult licensing requirements.
d. All of the above.
D. 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 0
of dollars
per year) -10
-20
0
10
20
30
40
50
60
Family of four income
(thousands of dollars per year)
70
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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).
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