Question_Doc13_15Dec_3rd

81)Since 1929, the distribution of money income in the United States has A) become slightly more unequal.

B) not dramatically changed. C) become more equal.

D) shifted toward the poorer 20 percent away from the richer 20 percent. Answer: C

82)In the United States, the distribution of wealth

A)is the same as the distribution of income.

B)is more unequal than the distribution of income.

C)is more equal than the distribution of income.

D)is equal for all families.

83) The wealthiest 10 percent of the population owns about

A)30 percent of all the wealth in the United States.

B)50 percent of all the wealth in the United States.

C)70 percent of all the wealth in the United States.

D)90 percent of all the wealth in the United States

84)A geometric representation of the distribution of income is referred to as A) the labor supply curve.

B) the Lorenz curve. C) the Phillips curve. D) the Keynesian cross

85)The 45° line on a Lorenz curve represents

A)complete income equality.

B)complete income inequality.

C)complete wealth equality.

D)complete wealth inequality.

86)Recent income distribution figures in the United States show A) slightly more inequality.

B) less inequality. C) greater equity. D) less equity.

87)Regarding income distribution and the distribution of wealth, A) wealth is a stock concept and income a flow concept.

B) a stock is evaluated at a given moment in time; a flow is evaluated during a period of time. C) income, a flow, can be viewed as a return on wealth.

D) All of the above are correct.

88) Wealth

A)is the same as income.

B)includes assets such as houses, stocks, and bonds.

C)does not include tangible objects.

D)is a flow and not a stock.

89) With respect to wealth in the United States, we presently find that the richest one percent of Americans own approximately how much of the nation's wealth?

A)10 percent

B)40 percent

C)70 percent

D)85 percent

90) Draw and explain a Lorenz curve. Answer:

91)How does the distribution of wealth differ from the distribution of income in the United States?

92)What are the major criticisms of the Lorenz curve?

93) Suppose there is a high inequality in household income between the highest and the lowest income groups in one country. In response, the government raises the income tax for the highest income group and provides subsidies to the lowest-income group. What would happen to the Lorenz curve as a result of the government programs? Explain.

30.2 Determinants of Income Differences

1) Age is a determinant of income because

A)with age typically come experience, education, and training that can increase income.

B)age contributes to costs as medical expenses increase.

C)older workers have accumulated more wealth.

D)older workers have accumulated less wealth.

2)Which of the following are determinants of differences in income? A) age

B) marginal productivity C) discrimination

D) all of the above

3)Which factor listed below does NOT help account for the age-earning cycle? A) productivity

B) number of hours worked each week C) effects of aging

D) racial discrimination

4) The age-earning cycle shows an individual typically earning

A)a constant income (adjusted for inflation) over the entire working life of the worker.

B)an income that cycles upward and downward as an individual ages.

C)an income that increases with age, peaks, and then falls as retirement approaches.

D)an income that declines until age 30-35 and then increases rapidly.

5)The age-earnings profile predicts that earnings will peak at A) the 35-40 age level.

B) the 45-50 age level. C) the 60-65 age level. D) retirement.

6)The age-earning cycle

A)is an earnings profile of an individual throughout his or her lifetime.

B)shows the earnings differences by age and by gender.

C)depicts differences in the relationship between age and earnings across countries.

D)shows the average incomes of people broken down by age categories.

7) The age-earning cycle usually begins

A)at relatively high income levels.

B)at relatively low income levels.

C)once a worker reaches 25 years of age.

D)only when a worker is employed full time.

8)The age-earning cycle shows declining income as a person approaches retirement age because A) worker productivity is increasing rapidly.

B) worker and hours worked diminish.

C) companies choose to promote these workers faster.

D) companies add-in Social Security payments as a supplement.

9)The age-earning cycle predicts that a typical person will

A)be earning $50,000 in the year 2010.

B)be earning the lowest income right before retirement.

C)be earning the highest income right before retirement.

D)be earning the highest income at about the age 45-50.

10)The learning curve suggests that an individual will A) receive the same income throughout a career.

B) gain experience and increase productivity over time. C) be subject to frequent spells of unemployment.

D) have an income that falls over time.

11)Which of the following does NOT affect a worker's marginal productivity? A) Education

B) Training C) Talent

D) Inheritance of money

12)Which of the following is NOT considered to be a factor in the determination of a person's marginal productivity?

A) Innate abilities such as high intelligence

B) Investment in human capital such as education C)On-the-job training

D) The elasticity of supply of labor

13)Much of a person's increased productivity can be linked to

A)on-the-job training.

B)the prevalent marginal tax rate.

C)the price elasticity of demand for the product.

D)the income elasticity of demand for the product.

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14)Marginal productivity theory would suggest that A) all workers should be paid the same wage.

B) higher productivity will increase the market wage of an individual. C) labor demand will have no impact on the wage paid.

D) workers cannot do anything to improve their wage prospects for the future.

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15)Which of the following determinants of marginal productivity cannot be acquired by someone who wants to increase future productivity?

A) Education B) Training C) Talent

D) Experience

16)With a human capital investment (such as the investment in going to college), the most important cost tends to be

A) foregone leisure.

B) books and equipment.

C) the opportunity cost of not working. D) taxes.

17)In general, as individuals undertake additional years of schooling,

A)their stock of human capital increases.

B)the marginal productivity of individuals as workers declines.

C)the marginal benefit to society of the extra years of education increases.

D)the marginal productivity of individuals as workers becomes negative.

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18)The most common type of investment in human capital is A) having more children per family.

B) the migration of labor in search of better jobs. C) expanded years of schooling.

D) improved health care and maintenance.

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19)What is typically the main cost of pursuing a college education? A) Tuition

B) Room and board C) Books and supplies

D) Income forgone by not working

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20)In the absence of discrimination, as human capital investments increase, wages will generally A) decrease.

B) increase. C) not change.

D) increase or decrease.

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21)Investment in human capital

A)is quite different from and has a much lower return than investment in physical capital.

B)is just like investment in physical capital and has a return similar to that earned from other investments.

C)is just like investment in physical capital but has a much greater return than do other investments.

D)is not comparable to other investments in any way since human capital is embodied in the person.

22)In the United States, inheritance accounts for roughly ________ of income inequality. A) 50 percent

B) 30 percent C) 20 percent D) 10 percent

23)The following are all determinants of income differences examined in the text EXCEPT A) age.

B) marginal productivity. C) inheritance.

D) height.

24)Most individual's income peaks when they are about A) 30.

B) 40. C) 50. D) 60.

25)The age-earnings cycle is

A)the distribution of money income by age.

B)the distribution of wealth by age.

C)the relationship between earnings while working and retirement benefits for an individual.

D)the regular earnings profile of an individual throughout his or her lifetime.