practice assessment: income distribution/poverty This is a practice assessment as a review for Exam 4.

It is not a graded assignment, put is provided as an example of the type of questions that could appear on your Exam. The answers are provided so that you may check your work. All answers can be found in either the powerpoint slides from Angel or your textbook chapter 2. 1. A Lorenz curve is a graph that A. ranges between zero and one. B. measures the percentage of aggregate income received by households ranked from poorest to richest. C. measures the percentage of aggregate income received by households ranked from richest to poorest. D. shows an index of the amount of inequality in a population. E. shows a negative income tax system. 2. Different Lorenz curves for the same nation measured at different points in time show A. the changes in the actual degree of income inequality over time. B. the changes in the actual population over time. C. the changes in the actual disposable income earned by various sectors of the population over time. D. the changes in income inequality with respect to the trends in the distribution of income in the world over time. E. the changes in actual taxes paid over time. 3. The Lorenz curve is a graph that shows the: A. Distribution of wealth B. Degree of income inequality C. Effect of discrimination on incomes D. Tradeoff between equality and efficiency Use the figure below to answer the following question(s):

4. Refer to the above graph. A nation that has an income distribution of perfect equality would be represented by the above curve: A. a B. b C. c D. d

5. Which is an example of a noncash transfer? A. An inheritance of $1 million B. Payments for labor services rendered C. Postage stamps D. Medicare 6. When the distribution of income is adjusted for noncash transfers, the income distribution shows: A. Perfect equality B. Greater equality C. Greater inequality D. Little, if any, change 7. Taxes and transfer payments A. Reduce the degree of income inequality B. Increase the degree of income inequality C. Have no effect upon the location of the Lorenz curve D. Make the Lorenz curve a straight 45-degree line 8. A flow of wages and salary earnings, along with rent interest and profits is: A. Wealth B. Income C. Transfers D. Utility 9. A. B. C. D. About what percentage of the population in the United States lived in poverty in 2010? 15 percent 24 percent 34 percent 44 percent

10. The lowest quintile of households in the income distribution receives about: A. 2.2 percent of the total income. B. 3.4 percent of the total income. C. 8.5 percent of the total income. D. 10 percent of the total income. 11. The highest quintile of households in the income distribution: A. receives about 50 percent of the total income. B. is comprised of 10 percent of all households. C. is comprised of 5 percent of all households. D. receives about 35 percent of the total income. 12. Housing subsidies for low-income households: A. represent a cash transfer. B. are a part of the U.S. social insurance programs. C. represent a noncash transfer. D. conflict with the leaky-bucket analogy.

13. Standard Census data on the distribution of income: A. take all taxes and transfer payments into account. B. are before taxes in that they do not account for personal income and payroll taxes. C. include noncash transfers. D. exclude cash transfers. 14. Which of the following demographic groups does not bear a disproportionate burden of poverty? A. households headed by women B. persons 65 or over C. Hispanics D. African-Americans 15. The U.S. poverty rate for: A. Hispanics is higher than that for African-Americans. B. children under 18 years of age is higher than for the overall population. C. African-Americans has increased since 1993. D. foreign-born individuals who are not citizens is below the poverty rate for the general population. 16. Which of the following statements is true concerning income inequality? A. Income is distributed equally in poor countries. B. Rich countries have greater income inequality than poor countries. C. The government has no mechanism for altering income inequality. D. A free market economy produces an unequal distribution of income. 17. By definition, a progressive tax: A. Generates greater tax revenues from the poor. B. Imposes a higher tax rate as income increases. C. Imposes a lower tax rate as income increases. D. Implies that the same tax rate is paid at all income levels. 18. Which of the following is the best description of the U.S. tax system? A. The federal income tax is regressive but sales, property, and other taxes tend to be progressive. B. The U.S. tax system is completely progressive. C. The federal income tax is progressive but sales, property, and other taxes tend to be regressive. D. The U.S. tax system is completely regressive. 19. The nature of state and local property and sales taxes is such that they act as: A. A regressive tax. B. A proportional tax. C. A progressive tax. D. Both a progressive and a regressive tax.

practice assessment income distribution/poverty Key

1. B 2. A 3. B 4. A 5. D 6. B 7. A 8. B 9. A 10. B 11. A 12. C 13. B 14. B 15. B 16. D 17. B 18. C 19. A

practice assessment income distribution/poverty Summary

Category AACSB: Analytic AACSB: Reflective AACSB: Reflective Thinking Blooms: Analyze Blooms: Application Blooms: Knowledge Blooms: Knowledge Blooms: Knowledge Blooms: Knowledge Blooms: Level 1 Remember Blooms: Level 1 Remember Blooms: Level 1 Remember Blooms: Remember Blooms: Understand Blooms: Understand Brue - Chapter 11 Difficulty: 1 Easy Difficulty: Easy Difficulty: Medium FrankBernanke - Chapter 013 Learning Objective: 02-05 Learning Objective: 11-1 Learning Objective: 11-2 Learning Objective: 11-5 Learning Objective: 13.1 Recent Trends in Income Inequality Learning Objective: 34-02 Discuss the extent and sources of income inequality. Learning Objective: 34-05 Relate how poverty is measured and its incidence by age; gender; ethnicity; and other characteristics. Level of Difficulty: Easy Level of Learning: Comprehension Level of Learning: Knowledge Level: Easy McConnell - Chapter 34 Schiller - Chapter 02 Topic: Causes of income inequality Topic: Economics of poverty Topic: Facts about income inequality Topic: For Whom America Produces Topic: Income inequality; Lorenz curve Topic: Income mobility; government redistribution Topic: Poverty Type: Word Problem # of Questions 11 1 5 1 2 1 2 1 1 3 2 1 1 1 1 8 6 1 3 2 4 5 1 1 2 4 2 2 1 1 7 6 4 1 2 4 4 2 3 1 2