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Economic
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Why are job training programs a better tool to combat poverty than cash or in-kind transfer programs?
a. Of the factors that lead to income inequality, training and education is the only one that individuals have any direct control over.
b. They arent; job training does nothing to satisfy individual needs for survival.
c. Cash transfers force individuals to pay income taxes, and taxing the poor only perpetuates poverty.
d. In-kind transfer programs can be abused and may fuel a persons gambling, drug, or drinking habit.
e. Job training leads to greater employability, and as hours worked and pay increases, the Earned Income Tax Credit continues to grow.
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The minimum wage is an ineffective antipoverty measure for all EXCEPT which of the following reasons?
a. The wage ceiling created by minimum wage laws falls below the equilibrium price, producing a shortage of labor.
b. The wage mandated by law often exceeds the value created by low-skill workers, resulting in a move away from labor-intensive processes.
c. The wage floor created by minimum wage laws lies above the equilibrium price, producing a surplus of labor.
d. Increased wages can force small businesses, who are less able to adapt to changes in costs, to close their operations, reducing the total quantity of jobs.
e. An increase in wages may cause employees to lose working hours, resulting in a net change in pay that is negative.
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Which social welfare policy is most likely to produce unemployment?
a. Subsidized Nutritional Assistance Program (SNAP)
b. Earned Income Tax Credit (EITC)
c. minimum wage
d. Medicaid
e. Supplemental Security Income (SSI)
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According to the text, in the time since the passage of the Equal Opportunity Act in 1964, the poverty rate has gone up, while economic output has roughly doubled. What is the most likely reason for this phenomenon?
a. Skills, training, and education among the poorest citizens have been insufficient to capture much of the benefit from economic expansion.
b. Generally, only the wealthy benefit from economic prosperity, and that period was no different than any other.
c. Over a 50-year period, people move up and down the economic ladder, so that level of poverty is just natural and will always exist.
d. The law had unintended consequences and proved to serve as an effective tax on the poor, transferring wealth to the affluent and the middle class.
e. The poverty threshold, as determined by the federal government, has outpaced the rate of economic growth.
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________ is/are often mistakenly viewed as an antipoverty measure.a. Minimum wage b. Medicaid c. In-kind transfersd. Charitye. Regressive income taxes
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The ________ program is the largest poverty-fighting tool in the United States, affecting more than 25 million families.
a. Temporary Assistance for Needy Families (TANF)
b. Subsidized Nutritional Assistance Program (SNAP)
c. Universal Stipend for Equality (USE)
d. Earned Income Tax Credit (EITC)
e. Supplemental Security Income (SSI)
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What makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs?
a. The tax credit is phased out gradually, rather than at a specific income cutoff point.
b. The amount of the credit is not determined by the number of dependent children in the household.
c. The amount of the credit is doubled if the head of household is attending college.
d. The EITC doesnt require the recipient to pay a minimum amount of income tax in order to receive the credit.
e. It creates less of an incentive to work than other programs.
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According to government data, close to ________ percent of all households in the United States are below the poverty threshold.a. 5 b. 19 c. 35d. 30e. 15
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Which of the following best explains why younger individuals have a high level of spending fueled by borrowing?
a. The future seems uncertain, and younger people decide to spend in the present in case later opportunities are limited.
b. Many are college graduates who took out loans to attend school, so younger people are more comfortable with the idea of borrowing for consumption.
c. The life-cycle wage pattern predicts income mobility for younger individuals and makes borrowing feasible for large purchases associated with living independently for the first time.
d. Most younger individuals are irresponsible with money, so the high levels of spending and borrowing are the product of irrational decision making.
e. Since younger individuals have the longest time until retirement, they are the least sensitive to increases in interest rates.
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In the late nineteenth-century United States, sharecropping was a common occupation among newly freed slaves and poor whites. The structure of the system left sharecroppers barely subsisting from their production, and deeply indebted to the landowners. This economic arrangement prevented the concept ofa. income mobility. b. the life-cycle wage pattern. c. compensating differentials.d. human capital.e. income differentials.
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Economic mobility reduces ________ over long periods of time.a. income inequality b. wage discrimination c. in-kind transfersd. wealthe. occupational crowding
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The terms marginal poor and long-term poor categorize differing potentials fora. income inequality b. income equality c. income mobilityd. in-kind transferse. wage discrimination
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Comparing U.S. income inequality in 1980 and 2010 produces a distorted picture for all EXCEPT which of the following reasons?
a. There have been dramatic shifts in the U.S. labor force.
b. It violates the principle of ceteris paribus.
c. A wider gap between years measured produces a more easily perceived trend in income inequality.
d. A surge in in-kind transfers means poorer individuals have greater disposable income.
e. Changes in tax rates alter the wealth composition in the economy.
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Why is income inequality data unreliable in developing countries?
a. The relative lack of computers means that most forms of record keeping are impossible.
b. Less developed countries have larger underground economies than developed ones.
c. Poorly developed infrastructures mean that data systems within developing nations are not connected to outside economic agencies via the Internet.
d. Almost all developing economies have tightly controlled borders, preventing international economic auditors from entering the country.
e. The data maintained by the United Nations reflects only the 20 largest economies, as those are deemed most crucial to international stability.
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________ are composed of markets in which goods or services are traded illegally.
a. Illegitimate operations
b. Underground economies
c. Government-monitored transactions
d. In-cash transfers
e. Under-the-table economies
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Beginning in 2012, Venezuela experienced a surge in prices, despite an official government exchange rate that didnt reflect the economic realities. As a result, many citizens went through illegal channels in order to change the local currency, bolivars, into U.S. dollars. This behavior describes a(n)a. in-kind transfer. b. in-cash transfer. c. result of corruption.d. underground economy.e. repurposed income.
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________ are transfers (mostly to the poor) in the form of goods and services instead of cash.a. In-cash transfers b. Commodity transactions c. Government transactionsd. In-kind transferse. Social aid transfers
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Government programs that subsidize housing or Internet access are an example ofa. underground economies. b. in-kind transfers. c. disposable income.d. in-cash transfers.e. income supplements.
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The Lorenz curve is especially helpful for seeing how income inequality
a. varies in each country.
b. has changed over time.
c. reflects the different causational factors.
d. always decreases in developed economies.
e. can be resolved through public policy.
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SHORT ANSWER1. What are some of the causes of income inequality in the United States?
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The ________ is a visual representation of the Gini index.a. Color-Coded Inequality Map (CCIM) b. Lorenz curve c. Income Quintile Graphd. Laffer curvee. OECD Poverty Diagram
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When an act of charity creates disincentives for recipients to take care of themselves, it is often called a(n)a. cyclical subsistence. b. welfare career. c. social dilemma.d. samaritans dilemma.e. disincentives dilemma.
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The Gini index can be calculated by determining the areas above and below the Lorenz curve and using the expression ________.a. b. c. d. e.
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Norway has a Gini index less than 30, while South Africa has one greater than 60. Both of these countries represent worldwide extremes. What conclusion can be drawn from this information?
a. Widespread corruption in Norway has produced a high level of income inequality.
b. The wealthy in South Africa are generally wealthier than in any other country, while the poor are generally poorer than in any other country.
c. A superior social structure in Norway has produced a more equitable distribution of income than in almost any other nation.
d. There is a significant gap in South Africa between the wealthiest and the poorest individuals.
e. There is a significant gap in Norway between the wealthiest and the poorest individuals.
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A Gini index of ________ represents perfect income equality, while an index of ________ indicates income consolidated among a single individual.a. 0; 100 b. 100; 0 c. 25; 75d. 99; 1e. 1; 99
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The average Gini index is approximatelya. 50. b. 25. c. 75.d. 60.e. 40.
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The ________ is a measurement of the income distribution of a countrys residents.a. Lorenz curve b. pillar coefficient c. Gini indexd. OECD ratioe. income ladder
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The income level below which a person or family is considered impoverished is thea. poverty rate. b. poverty threshold. c. poverty index.d. poverty ratio.e. income inequality line.
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The ________ is an incomplete picture because a single number cannot fully reflect the sources of the underlying differences in income.a. income inequality ratio b. poverty threshold c. income distribution indexd. poverty ratee. Lorenz curve
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An income inequality ratio of 10.0 means that
a. the income in an economy is 10 times that of other comparable economies.
b. individuals in the top fifth of the economy earn 10 times as much as those in the other four income groups.
c. individuals in the top fifth of the economy earn 10 times as much as those in the lowest income group.
d. individuals in the top fifth of the economy earn 10 times as much as those in the second-highest income group.
e. each income quintile in an economy earns 10 percent more than the immediately lower quintile.
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Developed countries tend to have ________ in income inequality when compared to less developed countries.a. greater degrees b. equivalent levels c. indeterminate differencesd. imperceptible levelse. lesser degrees
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The ________ is a comparison of the wealth in the top and bottom quintiles of an economy.a. income inequality ratio b. wealth distribution index c. poverty production percentaged. income parity ratioe. economic freedom index
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How can measurements of income inequality be misleading to politicians and economists?
a. There is no agreement as to what constitutes income inequality.
b. All statistics regarding income inequality give disproportionate weight to factors like corruption and wealth.
c. Since all forms of discrimination can be accurately quantified, policy makers may assume that other factors can be accounted for in the same manner.
d. Most developed economies employ wealth redistribution systems, which skew the effect wealth has on income inequality.
e. Income inequality is difficult to measure and easy to misinterpret.
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Why might a less developed country have a greater degree of income inequality?
a. Greater income mobility in these nations creates large gaps in income, as individuals rapidly increase in their standard of living.
b. Class systems always persist in less developed countries, where wealth is redistributed to the preferred class.
c. Reduced access to advanced technology produces a more equitable distribution of income.
d. Less developed nations often have widespread poverty, with wealth concentrated among only a few individuals.
e. Less developed nations receive large amounts of foreign aid, which isnt taken into account with calculations of income inequality.
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Organizations like 5th Pillar, which report attempted bribery to authorities, are combating the forces of ________ in society.a. corruption b. lawlessness c. wealthd. compliancee. poverty
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In some less developed economies, property rights arent guaranteed and bribing public officials is often necessary to engage in commerce. In this system, economists would point to ________ as an obstacle to greater income equality.a. discrimination b. instability c. anarchyd. wealthe. corruption
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Of the five factors that lead to income inequality, over which one does an individual actually have direct control?a. privileged background b. discrimination c. widespread corruptiond. abilitye. training and education
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Which of the following factors does not lead to income inequality?a. ability b. income mobility c. wealthd. discriminatione. corruption
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Diminishing marginal returns explain the reduction of value in additional exertions of effort. The concept of ________ indicates the oppositethat the ultimate marginal production can result in disproportionate wage increases.a. productivity discrimination b. winner-take-all c. efficiency wagesd. inclining marginal utilitye. maximum human capital
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According to the text, three women for every two men are enrolled in postsecondary education. This might lead to a reduction in the gender gap for all of the following reasons, EXCEPT that
a. sex discrimination still may persist in traditionally male-dominated professions.
b. graduation, not enrollment in college, will make the more appreciable difference.
c. women may choose majors of study that wont result in high-paying jobs.
d. a diminishing quantity supplied of college-educated males will shift the labor demand to the right.
e. increased competition from new females in the workforce will drive down the wages in male-dominated jobs.
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The life-cycle wage pattern is a type of ________ that is facilitated by increases in ________.
a. efficiency wage; compensating differentials
b. efficiency wage; wage discrimination
c. wage discrimination; human capital
d. wage discrimination; occupational crowding
e. human capital; productivity
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Why might occupational crowding persist in certain industries, despite educational parity and an elimination of discrimination?
a. New forms of discrimination always emerge to suppress certain groups of individuals.
b. Wages are not high enough in other industries to attract those in more crowded occupations.
c. Colleges and universities usher gender and minority groups toward certain fields of study, perpetuating the crowding problem.
d. Workers dont view occupational crowding as a problem, preventing any incentive for mobility.
e. Personal preferences for certain types of jobs means that some groups will always have higher representation in those industries.
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When certain groups or classes are relegated to a narrow range of jobs in the economy, it is calleda. occupational hazard. b. occupational formulation. c. occupational narrowing.d. occupational crowding.e. funneling.
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The ________ gives victims of wage discrimination more time to file a complaint with the government.a. Goodyear Compensation Act b. Equal Pay Act of 1963 c. Lilly Ledbetter Fair Pay Actd. Fair Labor Practices Acte. Stop Wage Discrimination Act
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The reversal of occupational crowding has an interesting side effect: the increased supply of female labor in traditionally male-dominated occupations will result in a(n) ________ in wages.a. stagnation b. discrimination c. increased. decreasee. efficiency
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In professions where beauty is considered a necessary element of the job, such as modeling, a high value placed on the attribute is most likelya. occupational crowding. b. efficiency wages. c. a compensating differential.d. overt discrimination.e. winner-take-all.
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For every $1 men make, women make, on average, 82 cents, is used to describe the gender wage gap. Which is the best description for this statement?
a. Women are paid 82 percent of the wages men earn for doing the same work, all other factors being equal.
b. Wages earned by women are the market wage, but men are targeted for efficiency wages because of perceived differences in potential productivity.
c. The increased cost associated with raising a family suppresses a womans effective earning capacity.
d. Based on differences in profession, education, and lifestyleas well as gender bias and other factorswomen earn, on average, 82 percent as much as their male counterparts.
e. There is no relationship between the two pieces of data.
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When workers with the same ability as others are not paid the same because of their race, ethnic origin, sex, age, or religion, it is defined asa. injustice. b. wage discrimination. c. inefficiency wages.d. binding arbitration.e. class incentives.
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Based on research into wage discrimination, economists believe
a. it was a common problem of the past that has since disappeared.
b. broader factors beyond bias play the major roles.
c. women actually earn more over their lifetimes than men.
d. it has intensified since the passage of the Equal Pay Act of 1963.
e. it is only caused by racial and gender bias.
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San Francisco is a beautiful city with great weather. It also has limited real estate, creating a higher cost of living. How do firms account for these two conflicting compensating differentials when determining wages?
a. When in conflict, the cost of living is always the determining factor for wages.
b. The market will reach an equilibrium price that takes both of these factors into consideration while ensuring an adequate supply of necessary labor.
c. Individuals who are attracted to the prospect of living in San Francisco will accept a much lower wage, despite the increased cost of living.
d. In most cases, firms can rely on government-subsidized housing in order to relieve the upward pressure on wages.
e. This conflict produces a wage mismatch, resulting in an economy where certain jobs cannot be staffed.
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All of the following contribute to wage discrimination, EXCEPTa. race. b. in-kind transfers. c. differences in human capital.d. sex.e. age.
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Firms are concerned with effectiveness of effort. They examine how much output they receive from every unit of input, described simply asa. efficacy. b. productivity. c. proactivity.d. efficiency wages.e. human capital.
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Rachelle graduated from a university with a degree in chemical engineering. During her years of employment, she became proficient in a particular type of process automation software. In addition, she spent countless hours outside of work amassing training certifications that augmented her work experience. Her collection of education, skills, and experience is defined as hera. human capital. b. rsum. c. training.d. work history.e. capital investment.
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At several local supermarkets, employees are dissatisfied with wages and working conditions. Individual negotiations with managers have produced no changes. These workers may decideto form a(n)a. collateral. b. support group. c. think tank.d. union.e. underground economy.