For those questions, you get zero points if you do not answer the question, 5 points if you answer the question but do not clearly explain your answer, and 10 points if you answer the question and explain your answer. Other questions require you to provide correct answers and are also graded zero, 5 or 10 points: zero points if you do not answer the question, 5 points if you answer the question incorrectly, and 10 points if you answer the question correctly.

1. (0, 5, or 10) a) Should income in the U.S. be distributed equally?

b) If not, should there be at least a greater degree of equality than we presently have?

c) What are the advantages of greater income equality?

d) What are the disadvantages of greater income equality?

2. (0, 5, or 10) When the capital gains tax rate was reduced from 28 to 20 percent in 1997, and especially when it was cut again to 15 percent in 2003, many people thought these reductions would be temporary.

a) How did this belief affect the incentive to sell assets?

b) How would the belief that the cuts were temporary alter the choice between selling assets that had experienced large capital gains versus those that had experienced only small capital gains?

3. (0, 5, or 10) In 1984, balances in individual retirement plans were $865 billion. Twenty-five years later, they rose to almost $13 trillion. In general, balances in private retirement accounts are not included in the statistics that show rising income or wealth inequality. How might such an oversight affect our conclusions about inequality?