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Chapter 15: Q. 22 (page 378)
Who is included in the top income quintile?
The top income quintile is the fifth quintile (the last quintile) consisting of all higher incomes that comes just after the fourth quintile.
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Jonathon is a single father with one child. He can work as a server for \(6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \)10,000 per year. He can work and still receive government benefits, but for every \(1 of income, his welfare stipend is \)1 less. Create a table similar to Table 15.4 that shows Jonathan鈥檚 options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan鈥檚 opportunity set with and without government support.
What is the difference between poverty and income inequality?
How does the poverty trap discourage people from working?
Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic
output. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.
Think about the business cycle: during a recession,
unemployment increases; it decreases in an
expansionary phase. Explain what happens to TANF, SNAP, and Medicaid programs at each phase of the business cycle (recession, trough, expansion, and peak).
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