Chapter 15 Microeconomics

_ allows the government to collect wealth for redistribution based on the amount of stored wealth that is being passed on in the form of an inheritance.

An estate tax

A Lorenz curve refers to a graphic illustration of the share of population on the _ and the cumulative percentage of total income received on the _

horizontal axis; vertical axis

In the U.S., poverty rates are relatively low

for the elderly. And. for the well-educated. And. for the male-headed households. And. for whites

If the 2014 poverty line is based on the amount of money an individual has earned as income, then

government programs that provide non-cash assistance to the poor are not considered.

If incomes rise for low-income workers but don't change for high-income workers,

then poverty will fall and inequality will fall.

A method often used by economists to look at distribution of income in a society's economy involves

quintiles, or dividing a whole group into fifths.

In the framework of a Lorenz curve, the final entry in the cumulative income column needs to be_

100%

Lesley is a single mother with 2 children. She can earn $10 per hour and can work up to 1,800 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $18,000 per year. For every $1 of income she earns, her level of government support is reduced by $1. Lesley

has no monetary incentive to work, though she may still choose to work

A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the third quintile of this income distribution is

14.1%

Lance is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Lance works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. When Lance works 1,200 hours, he receives _ in government support and his total income (any stipend + wages) is _

$10,700, $17,900

A Lorenz curve graphs the _ received by everyone up to a certain quintile.

cumulative shares of income

One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then

to divide all households into quintiles.

The food stamp benefit

has time limits and is not a complete disincentive to work.

A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the bottom quintile of this income distribution is

5.5%

The greater inequality of wages can be viewed as a sign that

demand for skilled labor is increasing faster than supply.

Medicaid is a federal-state joint program enacted in 1965 that provides medical insurance for

the near-poor and the low-income elderly.

Suppose that the government implements a new policy that provides free skills training to all low-skilled workers, which makes them more productive and turns them into high-skilled workers. This will _ the supply of low-skilled workers and _ the supply of high-skilled workers.

decrease, increase

Why did inequality of household income increase in the United States in recent decades?

higher-earner couples near the top end of the income distribution. And. increase in earnings received by high-skilled labor relative to low-skilled labor. And. demand for high-skilled labor at higher wages increased

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will _ employment and _ wages for high-income workers.

increase, increase

In circumstances dealing with poverty, the term _ means taking income from those with higher incomes and providing income to those with lower incomes.

redistribution

Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create _

a poverty trap

Bruce is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Bruce works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. With this policy in place, if Bruce works 600 hours, his income will be

$16,440

An individual whose income level is just above the poverty line would most likely be classified as being a member of the _

near-poor

In the United States, the official definition of the poverty line traces back to a single person: , whose idea was to

Mollie Orshansky; define a poverty line based on the cost of a healthy diet

If the poverty trap were made even more difficult to overcome because a working mother will have extra expenses like transportation and child care that a nonworking mother will not face, then

her economic gains from working will be even smaller.

The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following?

safety net

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will _ wages in for low-income workers and _ income inequality.

decrease, increase

In the U.S., government support programs that are focused specifically on the poor include which of the following?

welfare

When reference is made to the _ , it means the specific amount of income needed for a basic standard of living.

poverty line

In the U.S., comparisons of high and low incomes raise issues of economic _

inequality and poverty

Tim is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Tim works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. This government policy provides a monetary incentive to work, because

Tim's income level increases the more he works

If Congress voted every few years to redefine completely what poverty means,

then it would be difficult to compare poverty rates over time.

The concept of a poverty line raises a number of complex questions. Which of the following represents such a question?

Should the national poverty line be applied in all states?

If a society decides to reduce the level of economic inequality, which of the following sets of tools can it use?

a tax imposed on the value of inheritances. And. redistribution from those with high incomes to those with low incomes. And. trying to assure that a ladder of opportunity is widely available. And. the three mains sets of tools it can use include all of the above

A situation of _ arises when one group receives a higher share of total income or wealth than others.

inequality

One reason that the welfare reform bill TANF worked as well as it did is that

the EIC was greatly expanded in the early 1990s. And. the EIC was greatly expanded in the late 1980s. And. it was able to generate an increase in the returns to work for the poor. And. it's worth about $2,500 per family with children

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high- income workers such as farm technicians and farm owners. This new technology will shift the demand curve for low-income workers to the _ while shifting the demand curve for high-income workers to the _

left, right

If incomes for both low-income and high-income workers rise by the same proportion,

then poverty will fall and inequality will remain unchanged.

If a rise in incomes for both low-income and high-income workers is higher for the high- income workers,

then poverty will fall and inequality will rise.

The trick in graphing a Lorenz curve is that you must transform the shares of income, which are shown in the first column of numbers in the table, into, shown in the_ column of numbers.

for each specific quintile; cumulative income; second

Under which of the following antipoverty programs does the federal government give a fixed amount of money to each state?

TANF