ACE 100: Practice Final Exam - Fall 2024 PDF

ACE 100: Practice Final Exam - Fall 2024 Indicate the choice that best answers the question or completes the statement. 1. To promote class unity and cooperation, your professor's policy is to add everyone's points in the class together, divide by the number of students, and assign everyone the sa...

ACE 100: Practice Final Exam - Fall 2024 Indicate the choice that best answers the question or completes the statement. 1. To promote class unity and cooperation, your professor's policy is to add everyone's points in the class together, divide by the number of students, and assign everyone the same grade based on the result. Your response to this grading system is that you put much less effort into this class than your other classes, which illustrates the tradeoff between: a. efficiency and equality. b. absolute poverty and relative poverty. c. wealth and a stock of assets. d. permanent income and average lifetime income. 2. Your twin cousins Frances and Francis grew up in a middle-class household, scored about the same on the aptitude tests they took growing up, and both majored in computer science at the same college. Frances went on to have a successful career and rose into the top-income quintile, but Francis was less successful and fell into the bottom quintile. You don't think anything unfair happened because you focus on the fairness of: a. process. b. outcomes. c. opportunities. d. redistribution. 3. "The parable of the vineyard workers" (Matthew 20: 1–16) tells the story of workers hired throughout the day, but in the end, they all receive the same payment. The first workers hired protest that they deserve more than the workers who worked only part of the day, but you think the vineyard owner was fair because you focus on the fairness of: a. opportunities. b. outcomes. c. what people deserve. d. redistribution. 4. Your school's economics club enters the Fiscal Challenge, an annual competition for teams of college students to develop fiscal policy plans for the United States. The rules for the competition forbid the use of school colors, slogans, or mascots in a team's entry materials to ensure each entry is judged impartially. Any college or university may enter, and each gets the same problem to solve. You think the competition will be fair because you focus on: a. opportunities. b. outcomes. c. process. d. redistribution. 5. Your cousin Pat has an accident at work and is unable to continue working. Pat is not left destitute because of disability insurance. This is a situation in which: a. Pat benefited from a social insurance program. b. Pat worked less because of higher taxes. c. there is no leaky bucket. d. there are no administrative costs. 6. You inherit a beach house on the Gulf Coast from a distant relative, which you plan to rent out for most of the year. This increases: a. your wealth and income. b. your wealth only. c. your income only. d. neither your wealth nor income since the house is an existing asset. 7. You inherit a house from a distant relative, and you decide to live in it. As a result: a. your income increases. b. neither your wealth nor your income increase. c. your wealth and income both increase. d. your wealth increases. 8. When you were between jobs, you qualified for programs such as the Supplemental Nutrition Assistance Program and housing assistance. When you started a new job, these types of assistance were no longer available to you because they are: a. means tested. b. part of the leaky bucket. c. social insurance programs. d. not part of the social safety net. 9. Your friend chooses a lower-paying job because it is closer to home, rationalizing that declining the higher- paying job won't matter in the future, because retirement benefits like Social Security won't be affected. You say to your friend: a. "That's true, but your utility will be higher while you're working if you have a higher income." b. "No, Social Security is tied to your earnings while you were working, so you'll get more in retirement if you earn more now." c. "No, Social Security is a regressive tax, so you'll actually get higher benefits in retirement if you earn less now." d. "That's true, because Social Security is designed to give everyone sufficient income to have a decent lifestyle in retirement." 10. How would you explain the difference between Medicaid and Medicare to a friend? Medicaid is _____, whereas Medicare is _____. a. a means-tested program; available to anyone over 65 years old b. available to anyone over 65 years old; a means-tested program c. a privately funded program; taxpayer-funded. d. taxpayer-funded; a privately funded program 11. Myrda designs light shows for rock band tours, and frequently experiences short-term unemployment. Because she understands what permanent income means, her _____ is less volatile than her _____. a. consumption; utility b. income; utility c. utility; consumption d. consumption; income 12. Which is NOT a reason permanent income is a better measure of living standards than annual income? a. Incomes for people in different professions vary wildly. b. Over time, increases and decreases in annual income cancel each other out to some degree. c. Annual income typically changes as a person gets older. d. Permanent income is your average lifetime income, so the good years and the bad years are all included. 13. Everything else equal, compared to other developed countries, your chances of falling into poverty is _____ in the United States. a. about the same b. lower c. higher d. almost non-existent 14. You are a struggling artist with an income that puts you below the poverty line in the United States. You decide to move to an island in the Caribbean, and your income now puts you in the fourth income quintile. This outcome reflects a change in: a. relative poverty. b. absolute poverty. c. both relative and absolute poverty. d. neither absolute nor relative poverty. 15. For some statistics on inequality, the population is divided into _____ groups based on income, and each group is called _____ when data on the distribution of income in a country are presented. a. four; a quarter b. five; a quintile c. six; a section d. three; an income bracket Assume that a country with total income of $160,000 has a population of 10 households whose incomes are listed in the table. Use this information to answer questions 16 & 17. Household Income Percentage of total income 1 $2,000 1.3% 2 $2,000 1.3% 3 $2,000 1.3% 4 $4,000 2.5% 5 $5,000 3.1% 6 $5,000 3.1% 7 $10,000 6.3% 8 $20,000 12.5% 9 $40,000 25% 10 $70,000 43.8% 16. What percentage of income is earned by the top quintile of the population? a. 110.4% b. 90.6% c. 68.8% d. 2.6% 17. What percentage of income is earned by the bottom quintile of the population? a. 68.75% b. 1.3% c. 20% d. 2.6% 18. Data on the distribution of income for the United States show that from 1970 through 2014, the share of income earned by the top quintile _____, and the share earned by the bottom quintile _____. a. rose; rose b. rose; fell c. fell; rose d. fell; fell 19. Economists believe that average lifetime income is a better predictor of a person's current living standard than current income because: a. wealth from assets allows increasing consumption as a person gets older. b. the distribution of income is fixed over a person's lifetime. c. income levels in a person's childhood home are a strong predictor of adult income. d. people can save and borrow to average out consumption over their lifetimes. 20. How do people's beliefs about the distribution of wealth in the United States compare to the actual distribution of wealth in the country? a. People have an accurate view of the distribution of wealth. b. People believe the distribution of wealth is more equal than it actually is. c. People believe the distribution of wealth is more unequal than it actually is. d. People believe the distribution of wealth is changing rapidly and becoming more equal. 21. Differences in consumer spending tend to vary _____ differences in income. a. in proportion to b. more than c. less than d. not at all compared to 22. How has the U.S. poverty rate varied over the past 40 years? a. The rate has had a markedly upward trend. b. The rate has had a markedly downward trend. c. The rate has been relatively stable. d. The rate rose for 20 years and then fell for next 20 years. 23. The poverty line is: a. a measure that is used to define relative poverty and is based on housing and food costs. b. an estimate of the minimum income needed to provide a comfortable standard of living. c. an income level determined by the government, below which a family is defined to be in poverty. d. an income level set by the poor to identify the income needed to cover their basic needs. 24. The percentage of the population whose household income falls below the poverty line is known as the: a. poverty rate. b. needs rate. c. poverty prevalence. d. poverty line proportion. 25. What is the basis for the income level that the U.S. government uses as the poverty line? a. the value of low-cost rent, food, transportation, and medical care annually for the family size b. the income line that separates the bottom quintile from the second quintile of earners c. the average household income of the lowest-paid 15% of households d. the value of a low-cost food plan multiplied by three, updated annually for inflation 26. Which poverty standard uses a measure of relative poverty? a. annual income below $8,000 per person in the household b. the minimum income level that covers basic food, shelter, transportation, and medical care c. the bottom 10% of household incomes d. income of $3.10 or less per day 27. Which statement is NOT correct for the United States? a. Most people who are in poverty will spend much of their lives in poverty. b. Most people will spend some time in poverty in their lifetime. c. Children and single moms are the most likely to be in poverty. d. People of color are less likely than others to experience poverty. 28. Data for the United States show that poverty is not evenly distributed across groups in the population. Which group has the LOWEST poverty rate? a. single fathers b. married couples c. children d. single mothers 29. Which statement is NOT correct regarding the incidence of poverty in the United States? a. People in long-term poverty are both a small proportion of those who enter poverty and a large share of the poor at a point in time. b. Poverty is often recurrent, with over half of all people who escape poverty returning within five years. c. Over half of all spells of poverty last no more than three months. d. Long-term poverty is an important problem. 30. How common is it for Americans to have a spell of poverty during their lifetime? a. Less than 10% will experience poverty. b. Approximately 25% will have a spell of poverty. c. No more than 35% will have a spell of poverty. d. Over 50% will have a spell of poverty. 31. What is social insurance? a. It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. b. It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings. c. It is the government assignment of jobs to individuals based on household need and employee education and skills. d. It is a system where those with more income tend to pay a higher share of their income in taxes than those with lower incomes. 32. Government programs that are "means-tested" require: a. all citizens to be eligible for benefits regardless of income. b. the program to verify that it accomplishes its purposes through its activities. c. recipients to be examined to verify health status. d. eligibility to be based on income and sometimes on wealth. 33. Which program is NOT a means-tested social safety net program in the United States? a. Medicaid b. housing assistance c. Social Security d. earned income tax credit 34. A government program provides needed medical care to households whose income falls below the poverty line. The program is funded through the general tax revenues in the country. This program would be classified as: a. an income redistribution program in the social safety net. b. an income maintenance program as a type of social insurance. c. a progressive tax inversion in the social safety net. d. a social insurance program to enhance poverty levels. 35. Which example is an in-kind transfer? a. Junko receives an old-age pension from her former employer. b. Tomasi is eligible for an income supplement because he lost his job. c. Ellen is eligible for income because she had a type of accident that qualifies. d. Martin receives housing from the government due to his low income. 36. What is a progressive tax system? a. It is the cash assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. b. It is government-provided financial funding to people to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings. c. It is the government assignment of jobs to individuals based on household need and employee education and skills. d. It is a system where those with more income pay a higher share of their income in taxes than those with lower incomes. 37. Which tax system is progressive? Corinne pays a 10% tax on the first $10,000 she earns plus _____ tax on any additional income. a. no b. a 5% c. a 10% d. a 25% 38. Which tax is regressive? Raj pays a 10% tax on the first $10,000 he earns plus a _____ tax on any additional income. a. 15% b. 5% c. 10% d. 25% 39. Given that the definition of poverty has not been adjusted to reflect the long-term rise in average incomes, one would expect _____ in the percentage of the population living below the poverty line. a. a decrease b. an increase c. no change d. it is impossible to determine how the percentage of the population living in poverty might change 40. All of these are leading causes of poverty in the United States EXCEPT: a. a lack of adequate employment. b. a lack of education. c. the social safety net. d. discrimination. 41. The poverty line is adjusted each year to reflect: a. changes in the cost of living. b. changes in the size of the average family. c. the long-term rise in the average standard of living. d. changes in the cost of living and changes in the size of the average family. 42. In 2023, the poverty line for a household with two people was approximately: a. $18,700. b. $20,404. c. $27,500. d. $38,000. 43. In 2023, _____ of the U.S. population lived in poverty. a. approximately 11% b. 20% to 24% c. 25% to 29% d. more than 30% 44. Over the past four decades, the share of income going to the richest Americans has _____ than the share going to the poorest Americans. a. risen faster b. risen more slowly c. fallen faster d. fallen more slowly 45. Since World War II, in the United States, the distribution of income has: a. become more nearly equal. b. become more unequal. c. stayed about the same. d. changed first toward greater equality and then, after the 1970s, toward greater inequality. 46. Which U.S. welfare program is an in-kind benefit that is NOT means-tested? a. Medicaid b. Medicare c. food stamps d. TANF (Temporary Assistance for Needy Families) program 47. Of the programs offered by the federal government, the largest _____ program in the United States is _____. a. social insurance; Medicaid b. social insurance; Social Security c. means-tested; farmers' aid d. means-tested; Social Security 48. Of the programs offered by the government, which U.S. redistribution program offers a means-tested, in- kind transfer? a. Social Security b. Temporary Assistance for Needy Families c. food stamps d. unemployment insurance 49. Barbara works at her local Costco, which provides a health insurance program for all its workers. This is an example of: a. Medicaid. b. employment-based health insurance. c. government health insurance. d. a single-payer health care system. 50. Compared with many other developed nations, the United States has: a. an unusually high poverty rate. b. similar levels of poverty. c. relatively little poverty. d. low levels of poverty only when relative measures of poverty are used.