True/False
Indicate whether the
statement is true or false.
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1.
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Adjusting for inflation, the real minimum wage has fallen over the last 30
years.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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2.
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Which of the following is NOT a reason for increasing income inequality?
a. | A shift to "superstar" markets, in which firms with larger markets seek the
very best talent to work for their companies. | b. | Rapid technological improvements, which favor
educated workers more than lower-skilled workers. | c. | Growth of foreign trade, which helps
higher-skilled workers whose talents are in higher demand worldwide. | d. | A decline in the
dollar value of the minimum wage over several decades. |
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3.
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The 80/20 ratio is found by dividing the
a. | number of households making less than 80 percent of the poverty line by the number of
households making more than 20 times the poverty line. | b. | income at the 80th percentile by the income at
the 20th percentile. | c. | average income of those below the 80th
percentile by the average income of those above the 80th percentile (top 20
percent). | d. | average income of the top 80 percent of income earners by the average income of the
top 20 percent of income earners. |
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4.
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An economy where there is a wide gap between the compensation of the top people
in certain fields and the merely competent people is called a(n)
a. | inequality economy. | b. | superstar economy. | c. | hyperinflation
economy. | d. | competitive economy. |
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5.
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An income tax is regressive if
a. | lower-income households pay a larger share of their income in taxes than
higher-income households. | b. | most of the tax revenue is used to benefit
lower-income households. | c. | higher-income households pay a larger share of
their income in taxes than lower-income households. | d. | most of the tax revenue is used to benefit
higher-income households. |
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6.
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The federal income tax in the United States fits the description of which of the
following tax structures?
a. | regressive. | b. | proportional. | c. | progressive. | d. | it depends on the income of the individual
being taxed. |
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7.
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Suppose an income tax is imposed that takes $2,000 from someone with an income
of $20,000, $2,500 from someone with an income of $30,000, and $4,000 from someone with an income of
$80,000. This tax would be classified as
a. | proportional. | b. | regressive. | c. | progressive. | d. | a flat tax. |
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8.
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Discrimination in the workplace results when
a. | people who are less productive are paid less than those who are more
productive. | b. | employers pay people a higher wage if they are better educated. | c. | one person is paid
less or treated worse on the job than an equally qualified person because of his or her race, gender,
or some other characteristics. | d. | employers refuse to hire someone who is an
illegal immigrant. |
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9.
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The top quintile of income earners would be those whose income is
a. | in the highest 5 percent. | b. | in the lowest 20 percent. | c. | in the highest 20
percent. | d. | higher than the lowest 20 percent of households. |
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10.
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Which of the following statements is FALSE?
a. | Worldwide, no countries are catching up to the United States with respect to GDP per
capita. | b. | Income distributions have become less equal in the United States in the past 30
years. | c. | Higher taxes tend to reduce the incentive to work productively and
innovate. | d. | The poverty rate measures the percentage of people living in households with incomes
below the poverty line. |
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