Chapter 13: Inequality, Poverty, and Social Insurance

Question 1

Wealth Inequality

Answer 1

a much more unequal distribution than income, calculated by measuring permanent income, consumption and spending, and intergenerational mobility

Question 2

Absolute Poverty

Answer 2

the inability to access basic needs to maintain a standard of living (shelter, food, clothing)

Question 3

Relative Poverty

Answer 3

the adequacy of resources and opportunity you have (such as luxury or casual brand items)

Question 4

Social Insurance Plans

Answer 4

they protect you from financial risks, everyone contributes so everyone can reap the benefits

Question 5

Federal Income Taxes

Answer 5

collected on all income, progressive (higher income = higher taxes) and acts to reduce inequality

Question 6

Utility

Answer 6

a measure of well being

Question 7

Marginal Utility

Answer 7

a measure of how valuable an extra dollar of income is to you

Question 8

Diminishing Marginal Utility

Answer 8

the idea that each dollar added to your income is less important than the last, like how every dollar counts when you are poor and you have more freedom and room for careless spending when you are rich

Question 9

Utilitarianism

Answer 9

the philosophy that governments should try to maximize total utility in society by redistribution of money from the rich to the poor