Question

Every year, the U.S. Census Bureau conducts an income survey of about 60,000 American families carefully selected to represent the whole population. The data collected help to measure income inequality in the economy. Which of the following causes the census data to inaccurately measure income inequality?

a) Very few people move from one income quintile to another over the years.
b) Higher-income families tend to have more persons to support.
c) In-kind transfers do not add to people's incomes but are counted as income.

Answer 1

c) In-kind transfers do not add to people's incomes but are counted as income.

Step-by-step explanation:

In the given scenario the aim of the census is to measure income inequality in the population selected.

If however the amount of income earned by individuals is not estimated accurately the results of the study will be inaccurate.

In kind transfers are usually goods and services that a person gets for free of at a reduced rate. They are not considered to be income.

When in kind transfers are counted as income and do not actually add up to income, we cannot get a true picture of income of participants of the income survey.

People who have low income but high in kind transfers will be considered high income earners which is not true.