Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 23, Problem 2RQ
To determine
Whether the statements about the human skills and wages are true or false.
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A household with income that is two-thirds of the poverty threshold has ratio of income to poverty of
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O 1.50.
O 3.20.
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As income transfer programs accompanying the War on Poverty increased beginning in the latter half of the 1960s, what happened to poverty in the
United States? Check all that apply.
O The adjusted poverty rate has declined rapidly and is now less than half of the official poverty rate.
O The poverty rate declined substantially in the period before the War on Poverty, but not in the period after the start of the War on
Poverty.
O In 2018, the adjusted poverty rate was only 4 percentage points lower than the official rate in 1970.
O The War on Poverty has been largely ineffective in reducing the rate of poverty in the United States.
10. Consider the following distribution of income in a 12-person economy, with the modern
urban wage
3, the traditional rural income = 1, and the informal urban wage = 2:
(1,1,1,1,2,2,2,2,3,.3,3,3). The poverty line
through expanded agricultural exports. What happens to relative inequality? Absolute
poverty? Calculate the Ahluwalia-Chenery welfare index for terciles (3 fractiles) under
GNP weights and equal weights. Why is the equal-weighted index higher?
1.25. Suppose rural incomes are raised to 1.5
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- The government announces programs designed to reduce the share of income going to the top quintile from 60% to 20%. You predict that the most likely result is that: O mean household income will fall, because the highest income earners will earn less and work less. median household income will rise, because some of the 40% of redistributed income will be transferred to the third quintile. after redistribution, each quintile will receive 20% of total wealth. O the lowest quintile will receive the 40% taken from the top quintile and switch places.arrow_forwardWealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in transfers from the state. Which of the following is its market income and its disposable income? O $83,000; $71,000. O $83,000 $78,000. O $80,000; $68,000. O $80,000; $75,000. Jarrow_forwardQuestions: what are some of the dimensions of economic inequality and what is considered income? As in the case of income distribution, calculation of wealth distribution is done by different entities using different measurements, resulting in a disparity in outcomes. In fact, commonly, wealthis narrowly defined as financial wealth—namely, cash on handand the money value of tangible and nonliquid assets. Even justthe market valuation of financial portfolios is commonly used todefine financial wealth. However, some may extend the definitionto include the value of income streams and insurance rights that,for the most part, cannot be transacted or encumbered. Theseinclude Medicare, Medicaid, and Social Security. When suchtransfers and public assistance are included, the poor and manyelderly could benefit, reducing the wealth disparity (Galbraith2016). To obtain net wealth, the value of the debts are subtractedsubtracted from the value of the assets. Galbraith stated thatfinancial wealth…arrow_forward
- (a) unemployment in the originating nation, (b) remittances * How might the output and income gains from immigration shown by the simple immigration model be affected by themployment in the originating nation, (b) remittances inmigrants to the home country, and (c) backflows of migrants to the home country? LO23.3 migrants to the home country? LO23.3 shown by the simple immigration model be affected byarrow_forwardThe figure below is the Lorenz curve of a population. Based on this figure, which of the following statements are correct? Cumulative share of land (%) Landowners' share of land 100- 30 ר 0 Perfect equality line 50 80 100 Cumulative share of the population from least to most land owned (%) O 50% of the population owns 20% of the land. 30% of the population owns 1% of the land each. O 20% of the population owns 2% of the land each. The bottom 80% own 70% of the landarrow_forwardWhich would be evidence of an increase in income inequality over time in the United States? O a decrease in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the four lowest quintiles O an increase in the percentage of total personal income received by the lowest quintilearrow_forward
- 2. Andy's market wage rate is w=$10 per hour, and Andy has T=4,000 hours to divide between market work (h) and leisure L per year. Andy receives a lump-sum subsidy (that is, non-labor income) of V=$2,000 for the purposes of purchasing health insurance provided that he earns less than $20,000 per year. If Andy earns $20,000 or more, his subsidy is zero. a. Draw Andy's budget constraint, assuming he has no other non-labor income.arrow_forward7. LO 2, 4 Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours the consumer works, he or she receives a real wage rate of w, and for hours worked more than q he or she receives w, where W2>W1. Suppose that the consumer pays no taxes and receives no nonwage income, and he or she is free to choose hours of work. (a) Draw the consumer's budget constraint, and show his or her optimal choice of consump- tion and leisure (b) Show that the consumer would never work hours, or anything very close to q Explain the intuition behind this. (c) Determine what hours. happens if the overtime wage rate w2 increases. Explain your results in terms of income and substitution effects. You must consider the case of a worker who initially works overtime, and a worker who initially does not work overtime.arrow_forward2) Choose the economic indicators below that do not cause higher income inequality but do correlate with higher income inequality; they may be caused by it. Options indicate how the indicator changes when income inequality increases. - GDP growth rate falls - Economic mobility rises - Educational access falls (not the same thing as "education") - Educational access rises (not the same thing as "education") - Access to health care falls - Rate of homeownership rises - Rate of homeownership falls - Economic mobility falls - Access to health care rises - GDP growth rate rises - All of the above - None of the abovearrow_forward
- Why is the wage distribution positively skewed? (ii) Describe how to calculate the Gini coefficient. Discuss advantages and drawbacks with the Gini for describing the wage (or income) distribution. (iii) To overcome drawbacks with the Gini, what other complementary inequality measures would you suggest? (iv) Income inequality has increased substantially in Sweden, albeit from a low level, since the turn of the millennium. Discuss what sources of income that have - and have not - contributed to this development during the period mentioned.arrow_forwardA5. Suppose that the initial rural distribution of income is (1, 2, 3, 4) while the initial urban distribution is (3, 4). The poverty line is 2, so the overall poverty rate (headcount index) is 1/3. Now imagine that all of the rural poor move to urban areas and each of them gains 20% in real income. Verify that the overall poverty rate falls to 1/6, yet the urban poverty rate rises from zero to 1/4.arrow_forward20.7 Essay: How Economic Inequality Arises 1) What is "human capital" and why is it considered an investment? 2) What is "human capital"? How is it important in the determination of a worker's wage rate? 3) How is human capital acquired? 4) How does the demand for high-skilled workers compare to the demand for low-skilled workers? Why does this difference exist? 5) How does an increase in the cost to acquire a skill affect the vertical distance between the supply curves of high-skilled and low-skilled workers?arrow_forward
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