EBK PRINCIPLES OF ECONOMICS
8th Edition
ISBN: 8220103600453
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 20, Problem 1CQQ
To determine
The percentage of income earned by poor and rich in the US.
Expert Solution & Answer
Answer to Problem 1CQQ
Option 'b' is correct.
Explanation of Solution
Option (b):
Poverty line is the line that determines the minimum income required to meet the basic requirements of a quality life by the people. The household with family income less than the poverty line is said to be poor and those who earn very much above the poverty line are considered to be rich by the government. According to the available data about the US economy, the income distribution is very unequal. About the poorest, one-fifth of the total population earns about 4 percent of the income of the economy, whereas the top one-fifth of the rich population earns about 50 percent of the US total economy income today according to the sources.
From the reliable sources, it is obtained that about 4 percent of the total income is earned by the poorest fifth of the population and about 50 percent of the total income is earned by the richest fifth of the population. Since option 'b' gives the values equal to the obtained value, option 'b' is correct.
Option (a):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. Since the option explains that the richest fifth of the economy earns 70 percent and the poorest fifth earns 2 percent which are incorrect to the obtained values, option 'a' incorrect.
Option (c):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. Since the option explains that the richest fifth of the economy earns 35 percent and the poorest fifth earns 6 percent which are incorrect to the obtained values, option 'c' is incorrect.
Option (d):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. This means that there is a high level of inequality in the distribution of income that exists in the economy. Since the option explains that the richest fifth of the economy earns 25 percent and the poorest fifth earns 8 percent which denotes lower levels of inequality in income distribution, they are incorrect to the obtained values, and thus option 'd' is incorrect.
Economics Concept Introduction
Concept introduction:
Income inequality: Income inequality represents the unequal distribution of household or individual income among various economic participants of the society.
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Students have asked these similar questions
Using the diagram above, which of the following is true?
a. In country S the poorest 30 percent of the population receive 13 percent of the available income in country S.
b. In country T the richest 10 percent of the population receive 23 percent of the available income in country T.
c. In country S the richest 10 percent of the population receive 55 percent of the available income in country S.
d. Country S has a more equal distribution of income than does country T.
e. None of the above is true.
Question 15
Which of the below statements is INCORRECT with regard to poverty in the U.S.?
The poverty threshold was created my Mollie Orshansky of the Social Security Administration, in the 1960s.
The "poverty threshold," "poverty guidelines" and "poverty line" are identical numbers and are all used for exactly the same purpose.
For the year 2021, a single individual making less than $12,880 in any of the 48 contiguous states, falls below the poverty line.
For the year 2021, a four person family making less that $29,200 a year in any of the 48 contiguous states, falls below the poverty line.
A sobering census report: Americans' meager income gains
The Census Bureau reported that median household income rose 0.7 percent in 2006 to $48,210, but it was still
about $1,000 less than in 2000, before the start of the last recession. Households living in poverty fell to 12.3 percent
from 12.6 percent in 2005. But in 2006, 36.5 million Americans were living in poverty-5 million more than in 2000,
when the poverty rate was 11.3 percent.
Source: The New York Times, August 29, 2007
How did income inequality change during 2000, 2005, and 2006?
***
During 2000, 2005, and 2006,
OA. income inequality increased in all quintiles
OB. income inequality decreased at the upper end of the income distribution
OC. at the lower end of the income distribution, income inequality increased between 2000 and 2005 and then
decreased slightly during 2006
OD. income inequality decreased in all quintiles
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