CH30 Redistribution of Income Flashcards
What is income inequality?
The unequal distribution of income between individuals in society
What is the lorenz curve?
A graph that represents the degree of income or wealth inequality in a country
What is absolute poverty?
Where people do not have enough resources to meet all of their basic human needs
What is relative poverty?
Poverty that is defined as relative to existing living standards for the average person
What are the main reasons to reduce poverty and inequality?
To meet basic needs: Some people are starving, dying of disease
Raise living standards: If poverty is eliminated, the basic needs of people would be met, therefore living standards rise
Ethical reasons: Its the moral duty of the government and people to end suffering and poverty
How do the government intervene to reduce poverty and income inequality?
Progressive tax: A person who has high income will pay more tax compared to one with a lower income will pay less
Redistribution through benefit payments: Government welfare systems that provide monetary aid to people in poverty, Most use tax revenues to support direct payments to the poor
Investment in education and health care: If the government offer free education then more people can break out of the poverty cycle.
WHat is progressive tax?
Where the proportion of income paid in tax rises as the income of the taxpayer rises
What is regressive tax?
Tax system that places the burden of the tax heavily on the poor
