1) The supply of labor generally is considered to be downward-sloping because th

Question

1) The supply of labor generally is considered to be downward-sloping because the opportunity cost of leisure decreases as wages increase.
True    False

2) The marginal income tax rate is a person's tax burden as a percentage of total income.
True    False

3) The recession that began with a housing market crash in 2009 had the effect of reducing income inequality.
True    False

4) . Poverty is defined by the U.S. government as having an income equal to or less than three times an average family's minimum food expenditure as calculated by the U.S. Department of Agriculture.
True    False

Explanation / Answer

(1) False.

A labor supply curve is initially upward sloping - as wage increases, supply of labor increases. But after a threshold wage, if income effect is stronger than substitution effect, labor supply bends backwards. But it is not downward sloping.

(2) False

Tax burden as percentage of total income is the average tax rate.

(3) True

This is because, higher-income groups suffered higher incomes losses due to recession, than lower-income groups lost. This lowered the income inequality.

(4) True.

The poverty threshold is set at 3 times the inflation-adjusted cost of a minimum food basket in 1963.

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