Chapter 30 Flashcards
Redistribution of income
What is income inequality?
Differences in income that exist between earners in the economy, the gap between the rich and the poor.
What causes income inequality?
Workers having more talent, Some having better education, people willingly not working, how govs tax
What does the Lorenz curve show?
The distribution of wealth (x-axis = cumulative population, y axis = cumulative income)
What’s the difference between absolute and relative poverty?
Absolute- Where people can’t afford basic needs.
Relative- People make less than what’s needed for the avg living standards.
Why should we reduce income inequality and stop poverty?
To meet basic needs, raise living standards, ethical reasons
Explain what is meant by meeting basic needs?
People struggling to survive as they don’t have enough money for basic needs like water, food, shelter; causing them to live unhealthy lives.
Explain what is meant by raising living standards.
If everyone’s basic needs are met, living standards rise. People access cleaner foods causing better health and higher life expectancy.
Explain what is meant by ethical reasons when wanting to reduce income inequality/poverty.
Better-off families should give charity to improve the lives of the less fortunate. It is a moral duty to help those in need.
How do govs try to regulate reduce poverty and income inequality?
Progressive/regressive tax, benefit payments, investing in education and healthcare.
Explain the difference between progressive and regressive tax?
Pro- The % of income paid rises as income rises.
Reg- Tax system placing more burden of the poor.
Which is tax system is better for reducing the gap between the rich and poor?
Progressive, more money is taken from the rich and invested into the poor
How are benefit payments used to reduce income inequality?
A welfare system set up to benefit the poor by using tax revenues to directly pay the poor, protecting them from absolute poverty.
How is investment in education and healthcare used to reduce income inequality?
If people have more education, they’re likely to get higher paying jobs. They can learn how to prevent disease.
