Evaluating the Government Policies to Reduce Income Inequality

1. Government tax and transfer payments generally

a. shift the Lorenz curve away from the line of equality.

b. shift the Lorenz curve toward the line of equality.

c. have no effect on the Lorenz curve.

d. shift the Lorenz curve away from the line of equality at low incomes and toward it at high incomes.

2. No society should expect or desire complete equality of income at a given point in time, for a number of reasons. These include:

a. Most workers receive relatively low earnings in their first few jobs, higher earnings as they reach middle age, and then lower earnings after retirement.

b. People’s preferences and desires differ. Some are willing to work long hours to have higher incomes.

c. both a and b

3. In the United States, the wealth distribution is more unequal than the income distribution, because differences in income can accumulate overtime to make even larger differences in wealth. True or False. 

a. True

b. False

4. If a society decides to reduce the level of economic inequality, the main sets of tools at its disposal include:

a.redistribution from those with high incomes to those with low incomes;

b. trying to assure that a ladder of opportunity is widely available;

c. tax on inheritance.

d. all of the above

5. _____________________ means taking income from those with higher incomes and providing income to those with lower incomes.

a. Reorganization of income

b. Redistribution

c. Progressive legislation

6. The programs for the welfare of the poor people are paid for through the federal income tax, which is a ____________________ designed in such a way that the rich pay a higher percentage in income taxes than the poor.

a. regressive  tax system

b. progressive tax system

c. proportionate tax system

d. ad Valorem tax system

7. Government redistribution makes the income distribution more equal. True or False.

a. True

b. False

8. The fact that some degree of redistribution occurs now through the federal income tax and government antipoverty programs does not settle the questions of how much redistribution is appropriate. True or False.

a. False

b. True

9. Because the measured distribution of wealth does not consider the role of human capital, the measured wealth distribution

a. is less equal than measured income distributions.

b. is more equal than measured income distributions.

c. is more equal than actual wealth distributions.

d. cannot be compared to the actual wealth distribution.

10. Over the last decade, revolutionary changes in technology, especially the growth of information and communication technology, have ____ the demand for high-skilled workers and ____ the demand for low-skilled workers.

a. increased; increased

b. increased; decreased

c. decreased; increased

d. decreased; decreased

11. The United States does have a/an _________________,that is, a tax imposed on the value of an inheritance.

a. estate tax

b. wealth tax

c. property tax

d. inherited wealth tax

12. Government policies to reduce poverty or to encourage economic equality, if carried to extremes, can injure incentives for economic output. True or False.

a. True

b. False

13. Government policies to reduce poverty or to encourage economic equality, if carried to extremes, can injure incentives for economic output. But, there can be cases too where equality and economic growth may complement each other. True or False. 

a. False

b. True

14. 'Occupy Wall Street' was a movement by the protesters to decry what they perceived as increasing social and economic inequality in the United States as they argued that the concentration of wealth among the richest 1% in the United States was both economically unsustainable and inequitable, and needed to be changed.  True or False.

a. false

b. True

15. The system of taxation where the average tax rate does not change when income increases is called

a. progressive tax system

b. regressive tax system

c. proportional tax system