Wages: Income distribution - Question Bank

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Question Bank - Economics

Wages: Income distribution

Q1. Because people's incomes vary over the life cycle and because there are transitory shocks to people's incomes, the standard measures of income distribution (Select one answer) (a) exaggerate the inequality of living standards. (b) could exaggerate or understate the inequality of living standards depending on whether the transitory shocks are positive or negative. (c) understate the inequality of living standards. (d) accurately represent the true inequality of living standards.

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Q2. The poverty trap refers to (Select one answer) (a) a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more income for themselves and their families because doing so will mean they have to pay back the benefits they have previously received. (b) a situation in which workers are unable to find jobs. (c) a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more income for themselves and their families because doing so will reduce the amount of benefit income to which they are entitled and increase the amount of tax they must pay. (d) a situation in which those receiving state benefits are discriminated against by employers and so find it more difficult to find jobs.

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