One Study of the Distribution of Wealth Indicates That the Bottom

question 24

Multiple Choice

One study of the distribution of wealth indicates that the bottom 40 percent of households hold 1 percent or less of total marketable wealth in the United States and the top 1 percent owns close to 40 percent of it. An economist might observe that these data do not include the value of human capital: the value of labor and skills embodied in a person. If we were to include human capital, which of the following people's net worth would change the most?

• A) Debra, who recently received a $25,000 bonus from her job that she has spent on an around-the-world trip
• B) Carol, who has just bought an apartment for $500,000 using savings and bank loans
• C) Betty, who has just retired but expects to live well because her retirement account is worth $1,000,000
• D) Alice, who has just completed her education as a medical doctor and now has student loans of $100,000

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Definitions:

Expected Value

The average outcome or mean of a random variable, calculated as the sum of all possible values each multiplied by its probability of occurrence.

Confidence Interval

A gamut of statistical values, extrapolated from sample data, predicted to likely retain the value of an undisclosed population parameter.

Gross Revenue

The total income generated by a business before any deductions are made for expenses.

Big-Name Stars

Prominent and well-recognized celebrities or personalities, particularly in entertainment, who can significantly influence projects.