Economics 1021A/B Chapter Notes - Chapter 19: Skill, Progressive Tax, Gini Coefficient
ECON 1021A/B Full Course Notes
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|
Person |
Judy |
Sandy |
Dee |
Shawntae |
Martha |
|
Income |
$40,000 |
$75,000 |
$85,000 |
$35,000 |
$110,000 |
The above table lists the incomes for the 5 people who live on the remote island nation of Richland.
1. Refer to Table 21.1. If Martha's income doubled to $220,000 while the incomes of the other four residents did not change, what would happen to the original median income onâ Richlandia?
A.It would increase by $22,000.
B.It would increase by $44,000.
C.It would not change.
D.It would double.
2.When we compare shares of income earned by U.S. households over the past 40 years, which of the following statements about the distribution of income isâ true?
A.The percentage of total income represented by each quintile has decreased.
B.Lower income households gained at the expense of higher-income households.
C.The largest gain in income percentage is in the top 5% of households.
D.The percentage of total income represented by each quintile has increased.
3.From 1970 to 2012, the Gini coefficient in the United States has
A.dramatically decreased.
B.remained is relatively unchanged.
C.steadily increased.
D.more than doubled.
4.Income distribution in the United States over the past 40 years has become more equal.
True
False
5.Income inequality in the United States has increased in part due to technological change. How does technological change contribute to incomeâ inequality?
A.It is responsible for a majority of new products on the market, and these products are only affordable to higher-income households.
B.It reduces the cost of producing goods and therefore lowers the value of labor services.
C.It allows manufacturers to produce products with lessâ labor, and this reduction in the demand for labor lowers wages at all skill levels.
D.It has created many higher-income jobs for skilled and trainedâ workers, leaving the income of less-skilled workers relatively unchanged by comparison.
6.Income inequality in the United States has increased in part due to globalization. How does globalization contribute to incomeâinequality?
A.It allows domestic firms to hire low skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of low skilled workers to fall relative to the wages of other workers.
B.It increases the demand for a wide variety of products which in turn increases prices beyond the reach of average income
households.
C.It allows producers to exploit workers and reduce the wages they are willing to pay those workers.
D.It reduces the cost of producing goods and therefore lowers the value of labor services.
7.Rachel, a large pineapple producer in Hawaii, lobbies Congress to limit imports of pineapples to be able to sell her pineapples at a higher price and greatly increase her income. This possible source of income inequality is due to
A.technology changes.
B.rent seeking.
C.globalization.
D.productivity differences.
8.If growing income inequality results from changes in technology that, as a whole, make society better off, this will
A.decrease the size of the economic pie because of income inequality.
B.increase the size of the economic pie.
C.not change the size of the economic pie because the positive technology changes will be offset by the increases in income inequality.
D.result incomplete income inequality as technology continues to change in the future.
9.The belief that having more of something makes you happier but in successively smaller increments is called
A.utilitarianism.
B.diminishing marginal utility.
C.the benefits received principle.
D.transcendentalism.
10.The results of a survey conducted by Dan Ariely and Michael Norton found that Americans
A.show absolutely no preference for the amount of equality in wealth distribution in the nation.
B.have a preference for much less equality in wealth distribution than currently exists.
C.have a preference for roughly the amount of equality in wealth distribution that currently exists.
D.have a preference for much greater equality in wealth distribution than currently exists.
11.In the United States, the highest quintile of income earners contribute ________ of all federal tax dollars received, and the lowest quintile of income earners contribute ________ of all federal tax dollars received
A. 24%; 1.5%
B. 20%; 20%
C. 68.8%; 0.4%
D. 29.4%; 11.5%
12.The question "Is the U.S tax system disproportionate enough?" is a ________ question, and the question "How would higher taxes make the rich behave?" is a ________ question.
A. normative; positive
B. positive; normative
C. positive; positive
D. normative; normative
Question 3
According to Joseph Schumpeter, the theory of creative destruction describes a process by which
| A | some new products unleash a gale of destruction that drive other new products out of the market. | |
| B | new products unleash a gale of destruction that drives old products out of the market. | |
| C | new products are created by the destruction of capital. | |
| D | the creation of new products never involves the destruction of old products. |
Question 4
Which of the following countries had the highest GDP per capita in 2012?
| A Qatar | ||
| B | United States | |
| C | Japan | |
| D | Norway |
Question 5
________ save a ________ of their income. This ________ capital in their economy and raises economic growth.
| A | Developing countries; large proportion; decreases | |
| B | Developing countries; small proportion; increases | |
| C | High-income countries; large proportion; increases | |
| D | High-income countries; small proportion; increases |
Question 6
The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.
A
| A | government | |
| B | households | |
| C | banks | |
| D | firms |
Question 7
The U.S. economy has been more stable since 1950.
True
False
Question 8
When the economy reaches a trough in a business cycle, which of the following will occur?
| A | Income, production, and employment will continue to fall. | |
| B | Income, production, and employment will begin to rise. | |
| C | Income and production will rise, but employment will continue to fall. | |
| D | Employment rises, but income and production will continue to fall. |
Question 9
In a closed economy, what is the relationship between saving and investment?
| A | Saving is greater than investment. | |
| B | Investment is greater than saving. | |
| C | Investment is equal to saving. | |
| D | Investment may be greater or smaller than saving. |
Question 10
The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.
| A | labor; real GDP; technology | |
| B | capital; real GDP; technology | |
| C | labor; capital; real GDP | |
| D | capital; labor; real GDP |
Question 11
New growth theory states that increases in ________ capital will result in ________ at the ________ level.
| A | knowledge; increasing returns to scale; firm | |
| B | physical; decreasing returns to scale; firm | |
| C | knowledge; decreasing returns to scale; economy | |
| D | knowledge; increasing returns to scale; economy |
Question 12
Which of the following is not a reason why the Industrial Revolution occurred when and where it did?
| A | The British government was committed to upholding private property rights. | |
| B | The British government was able to eliminate arbitrary increases in taxes. | |
| C | The British government was able to more easily seize wealth. | |
| D | Institutional changes by the British government helped protect wealth. |
Question 13
Growth in real GDP per capita for the world economy was greatest during
| A | the seventeenth century. | |
| B | the eighteenth century. | |
| C | the nineteenth century. | |
| D | the twentieth century. |
Question 14
Which of the following is a normative statement about economic growth?
| A | Economic growth is associated with higher labor productivity growth. | |
| B | Economic growth increases GDP per capita. | |
| C | Economic growth hurts developing countries. | |
| D | Foreign direct investment stimulates economic growth. |
Question 15
The effect of a recession on a company like Whirlpool Corporation is such that
| A | sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods. | |
| B | profits fall less sharply as compared to firms that do not produce durable goods. | |
| C | the decline in sales is more short-lived as compared to firms that do not produce durable goods. | |
| D | there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods. |
Question 16
For the recessions in the United States since the 1950s,
| A | cyclical unemployment has been non-existent. | |
| B | unemployment rises on average by about 1.2 percentage points 12 months after a recession begins. | |
| C | unemployment falls on average by 2 percentage points 12 months after a recession begins. | |
| D | unemployment rises on average about 5 percentage points 12 months after a recession begins. |
Question 17
You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?
| A | a reduction in sales taxes | |
| B | an investment tax credit | |
| C | a reduction in taxes on luxury yachts | |
| D | All of these |
Question 18
In comparison to a government that runs a balanced budget, when the government runs a budget deficit,
| A | the equilibrium interest rate will fall. | |
| B | business investment will fall. | |
| C | household savings will fall. | |
| D | None of these |
Question 19
If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.
| A | labor force participation | |
| B | the quantity of goods or services that can be produced by one hour of work | |
| C | the working-age population | |
| D | nominal GDP |
Question 20
Policies to promote growth by increasing saving and investment work through
| A | decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. | |
| B | increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital. | |
| C | increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital. | |
| D | increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital. |
