1. The bottom 20% of the income distribution are called the

a. lowest decile.
b. lowest quartile.
c. median.
d. lowest quintile.

2. The Lorenz curve shows

a. the total income earned by each quintile.
b. the percentage of total income that earned by each quintile.
c. the level of income below which families are considered to be poor.
d. the Gini coefficient at each level of income.

3. If Freedonia achieves complete income equality, its Lorenz curve

a. will be along the horizontal axis.
b. will be along the vertical axis.
c. will be horizontal.
d. will be along the diagonal.

4. If a country's Lorenz curve has shifted over time from below the diagonal to above the diagonal, its income distribution

a. has improved.
b. has gotten worse.
c. has not changed.
d. none of the above. Such a shift is impossible.

5. In Figure 1, we can see that

a. France's distribution of income is more equal than Sweden's.
b. France's distribution of income is more equal than Brazil's.
c. The U.S. income distribution is more equal than that of Sweden.
d. Brazil has the most equal income distribution.

        Figure 1

6. The Gini coefficient is

a. the percentage of the population that is below the poverty threshold.
b. a numerical measure of how the income distribution has changed over time.
c. a numerical measure of the degree of income inequality.
d. the percentage of the population earning the minimum wage.

7. Based on Figure 2, how do we calculate the Gini coefficient?

a. A / B
b. A / (A - B)
c. A / (A + B)
d. A / (1 - B)

        Figure 2

8. If Freedonia's income distribution is more equal than that of the neighboring country of Ecotopia, then Freedonia's Gini coefficient

a. is less than Ecotopia's.
b. Freedonia's Gini coefficient is positive and Ecotopia's is negative.
c. Freedonia's Gini coefficient is greater than one and Ecotopia's is less than one.
d. Freedonia's Gini coefficient is greater than Ecotopia's.

9. Between 1970 and 1999, the U.S. income distribution has

a. become more equal.
b. become less equal.
c. has not changed.

10. The U.S. distribution of wealth is

a. more equal than the distribution of income.
b. less equal than the distribution of income.
c. equal to the distribution of income.

11. On the average, the Gini coefficient in less developed countries is

a. lower than that in developed countries.
b. higher than that of developed countries.
c. equal to that of developed countries.

12. The percentage of persons below the poverty line in 1997 is _____ than it was in 1960 and _______ than it was in 1980.

a. lower; lower
b. lower; higher
c. higher; lower
d. higher; higher

13. Some people believe that we should not try to reduce income inequality because

a. inequality in income distribution will maximize social utility.
b. access to income is distributed by chance.
c. people will not have incentives to work as hard if they are not allowed to keep all the rewards.
d. the Gini coefficient is so inaccurate that we do not know the degree of income inequality.

14. Other people argue that we should try to reduce income inequality. Which of the following is NOT an argument that they would use?

a. Economic opportunities are distributed in a random manner.
b. Economic opportunities are distributed in a manner that is not random, but is still unfair.
c. If we allow income inequality, then wealthy people will have a higher marginal utility.
d. Retaining income inequality will maximize social utility.

15. Food stamps are a form of

a. cash assistance.
b. in-kind assistance.
c. negative income tax.
d. minimum wage.