Suppose that the following data for a two-person family: [15 points] 1995 1996

| November 24, 2016

6. Suppose that the following data for a two-person family: [15 points]

1995 1996

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1. Official poverty rate 15.0% 16.0%

2. Official poverty line $10,000

3. Relative poverty line $10,000

4. Subjective poverty line $10,000

5. Median family income $20,000 $21,000

(current dollars)

6. Consumer Price Index (CPI) 100 110

Compute the following:

A. The official poverty line for a family of 2 in 1996

B. The relative poverty line for a family of 2 in 1996

C. The subjective poverty line in 1996 if elasticity of the subjective poverty line with respect to median family income is 0.6.

7. Suppose that the following data characterize the United States: [10 points]

(1) The official poverty line for a family of 4 in 1997 is $16,000.

(2) Median income for 4-person families is $40,000 in 1997.

(3) The average income of 4-person families below the poverty line in

1997 is $10,000.

(4) The CPI increases by 3 percent between 1997 and 1998.

(5) Median income for 4-person families grows by 5 percent between 1997

and 1998.

Compute the following:

A. The poverty gap ratio for a family of 4 in 1997.

B. The official poverty line for a family of 4 in 1998.

C. The relative poverty line for a family of 4 in 1997 and 1998 if the relative poverty line is set at 40 percent of median family income.

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