Chapter 8 Flashcards
Define Wealth, Assets and Income
Wealth: Accumulated physical and financial assets
Assets: all property, machinery, savings, equities and investments
Income: money or revenue earned for the work of the production factors
Give three ways in which wealth helps to generate income
- Rental income on properties
- Interest from Savings
- Dividend paymentsfrom shares
What can the government do if there is a lack of wealth in the country (3 things) ?
- Invest in education/training
- Invest in infrastructure
- Attract investments
What factors lead to inequality of income?
- Level of education
- Location (urban vs rural)
- Sector of employment
- Employment Equity (fairness/discrimination)
- Power of trade unions to negotiate wages
What are the three major factors that contribute to wealth inequality?
- Inequality of income
- Inheritance
- The market system
Explain income inequality in terms of wealth distribution in SA.
- Education System: Income inequality is heavily influenced by disparities in access to quality education, especially for black people during apartheid
- Urban-Rural divide: Unequal access to jobs and resources (urban areas being more prosperous)
- Youth Unemployment: Extremely high especially amongst black communities, which exacerbates income inequality.
List and explain the four international methods of redistribution:
- Taxes: High income earners taxed to provide benefits for the poor through progressive income tax, wealth taxes and estate duties
- Cash Grants: Grants provided by government eg disability, old age pension etc
- Natura Benefits: Poor households have access to free healthcare, education, municipal services, infrastructure etc.
- Labour market policies: Minimum wages, anti discrimination acts, and training subsidies create a more level playing field for workers
Name and explain the redistribution methods (Affirmitave action in SA)
- BBBEE: Encourages black ownership etc
2: Land restitution and redistribution: Focuses on returning land to those who lost it as a result of discriminatory laws and practices
- Property Subsidies: Subsidies help beneficiaries acquire fixed residential property, while the government housing scheme provides funding options to eligible low income earners.
- EPWP: Creates (labour intensive) work opportunities
- Regional Development Policies: Policies like Spatial Development Initiatives (SDI) aim to reduce geographical inequalities of income and wealth.
Name and explain the main points in the free market approach to redistribution
- Deregulation: Allowing new entrants/ limiting restrictions or barriers to entry
- Inward investment: Local investment to encourage Foreign Direct Investment (FDI)
- The ‘trickle down’ efffect. Businesses start to expand and produce more goods hopefully providing more jobs, more jobs=more income=more businesses start
- Access to finance:Banks can finance small and medium sized businesses
Name and explain the main government approaches to redistribution
- Education and training
- Legislation: eg. Minimum wages, trade union powers
- Taxation: Progressive system to charge rich people more
- Expansionary fiscal policy: government spending on job creation and welfare
- New technolgies and infrastructure: Easier for businesses to operate
Explain the National Development Plan (NDP)
Aim
The NDP sets out to expand economic opportunities through investment in infrastructure, innovation, private investment and entrepreneurship. It aims to reduce inequality and elimate poverty by 2030 (reduce to 6% unemployment rate)
Financing
Primarily financed by government taxes and involves expanding infrastructure with investing in five main areas including
-energy
-transport
-communication
-water
-housing
Positive elements
- infrastructure expansion
- promoting processing and export marketing
- expanding construction and production of tech eg solar panels
- reducing input costs
Differentiate between economic growth and economic development
Economic growth refers to the changes in level of economic activity over a period of time. Economic growth is the increase in the production capacity of a country whereas economic development refers to the improvement in the standard of living of people in a country.
What is the 5 methods of economic growth?
1.Increasing productivity
2.Availabilty and utilization of production factors
3.Technological change
4.Effective government policies and administration
5.Investment
Define
1. Capital widening
2. Capital deepening
3. Maximising capital utilisation
- Increasing the total number of equipment available
- Improving the efficiency of existing equipment
- Optimizing the usage of existing equipment
Name and explain the 3 constraints on economic growth
- Low savings and investments in South Africa
-SA’s current saving rate is 15% of GDP, which is low
-Must increase to at least 25% - The insufficient labour force
- School labour force and lack of skilled candidates (literacy and numarcy rates are low and too little qualify of bachelor’s degree in uni)
- High demand for skilled workers and too little people meet the qualifications for learnerships. - SA’s challenge with HIV/AIDS
- Financial impacts and cant work when sick etc.
