Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that, if considered, would reduce the amount of poverty.
Which of the following is an example of these benefits?
A) The federal minimum wage forces employers to pay workers with low skills an efficiency wage.
B) Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps.
C) Individuals can use tax credits and the personal exemption to reduce their taxable incomes. This reduces what they owe the government and increases their disposable incomes.
D) The federal income tax system is progressive. As a result, the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive.
Question 2
Which of the following characterizes the Fed's ability to prevent recessions?
A) The Fed is incapable of changing aggregate demand through its monetary policy tools.
B) The Fed is able to fine tune the economy and entirely eliminate recessions.
C) The Fed is able to eliminate the business cycle and achieve absolute price stability.
D) The Fed is able to keep a recession shorter and milder than it would otherwise be.
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