
The share of the total US income to the poorest 20 percent of all the US families.

Answer to Problem 1KC
Option 'e' is correct.
Explanation of Solution
The
Option (e):
The US economy is known as the capitalist economy and the country with the highest inequality. It is said that the poorest 20 percent of the population in the US earns only 5 percent of the national income of the US economy and that means option 'e' is correct.
Option (a):
The US economy depicts the highest level of income inequality where the highest share of income is earned by a smallest share of population and the highest share of population earns only a smallest share of national income. Thus, the excessive resources are not devoted to producing a product and hence, option 'a' is incorrect.
Option (b):
When 50 percent of income is earned by the poorest 20 percent of the population in the US economy, it indicates that there is a very low level of income inequality in the economy. Since the actual case is against it, option 'b' is incorrect.
Option (c):
When the poorest 25 percent of population has the share of 25 percent of the total income of the economy, it indicates that the level of income inequality is lower. However, the actual case in the US economy is such that the poorest 20 percent only earns the 5 percent of the US income and hence, option 'c' is incorrect.
Option (d):
The income distribution in the US economy is in such a way that only the 5 percent of the total US income is generated by the poorest 20 percent of the population. Thus, the given share of 10 percentage is higher than the actual share and thus, option 'd' is also incorrect.
Income inequality: Income inequality is the situation in the economy where a largest share of population earns only a smallest share of national income and vice versa.
Want to see more full solutions like this?
Chapter P4 Solutions
Microeconomics For Today (MindTap Course List)
- 19. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. How does the Federal Reserve currently get the federal funds rate where they want it to be?arrow_forward18. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Carefully compare and contrast fiscal policy and monetary policy.arrow_forward15. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. What are the common arguments for and against high levels of federal debt?arrow_forward
- 17. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Explain the difference between present value and future value. Be sure to use and explain the mathematical formulas for both. How does one interpret these formulas?arrow_forward12. Give the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Show and carefully explain the Taylor rule and all of its components, used as a monetary policy guide.arrow_forward20. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. What is meant by the Federal Reserve’s new term “ample reserves”? What may be hidden in this new formulation by the Fed?arrow_forward
- 14. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. What is the Keynesian view of fiscal policy and why are some economists skeptical?arrow_forward16. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Describe a bond or Treasury security. What are its components and what do they mean?arrow_forward13. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Where does the government get its funds that it spends? What is the difference between federal debt and federal deficit?arrow_forward
- 11. In a paragraph, no bullet, points please answer the question and follow the instructions. Give only the solution: Use the Feynman technique throughout. Assume that you’re explaining the answer to someone who doesn’t know the topic at all. Why is determining the precise interest rate target so difficult for the Fed?arrow_forwardProblem 1 Regression Discontinuity In the beginning of covid, the US government distributed covid stimulus payments. Suppose you are interested in the effect of receiving the full amount of the first stimulus payment on the total spending in dollars by single individuals in the month after receiving the payment. Single individuals with annual income below $75,00 received the full amount of the stimulus payment. You decide to use Regression Discontinuity to answer this question. The graph below shows the RD model. 3150 3100 3050 Total Spending in the month after receiving the stimulus payment 2950 3000 74000 74500 75000 75500 76000 Annual income a. What is the outcome? (5 points) b. What is the treatment? (5 points) C. What is the running variable? (5 points) d. What is the cutoff? (5 points) e. Who is in the treatment group and who is in the control group? (10 points) f. What is the discontinuity in the graph and how do you interpret it? (10 points) g. Explain a scenario which can…arrow_forwardProblem 2 Difference-in-Difference In the beginning of 2005, Minnesota increased the sales tax on alcohol. Suppose you are interested in studying the effect of the increase in sale taxes on alcohol on the number of car accidents due to drinking in Minnesota. Unlike Minnesota, Wisconsin did not change the sales tax on alcohol. You decide to use a Difference-in-difference (DID) Model. The numbers of car accidents in each state at the end of 2004 and 2005 are as follows: Year Number of car accidents in Minnesota Number of car accidents in Wisconsin 2004 2000 2500 2005 2500 3500 a. Which state is the treatment state and which state is the control state? (10 points) b. What is the change in the outcome for the treatment group between 2004 and 2005? (5 points) C. Can we interpret the change in the outcome for the treatment group between 2004 and 2005 as the causal effect of the policy on car accidents? Explain your answer. (10 points) d. What is the change in the outcome for the control…arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax





