Distribution of income and wealth

Question 1

What is absolute poverty?

Answer 1

when a household does not have sufficient income to sustain even a basic acceptable standard of living / meet basic needs

Question 2

What is relative poverty>

Answer 2

a level of household income that is considerable lower than the median level of income within a country

Question 3

What is the official poverty line?

Answer 3

an income level that is considered minimally sufficient to sustain a family in terms of food, housing, clothing. medical needs

Question 4

What is income?

Answer 4

flow of money to a factor of production

Question 5

What is wealth?

Answer 5

a stock of valuable assets

Question 6

What is the distribution of income?

Answer 6

defined as how income is shared out between the population

Question 7

What factors effect the distribution of income?

Answer 7

• differances in skills, qualifications and work experience
• differances in wealth ( more wealth more income)
• impact of state

Question 8

What factors lead to an unequal distribtuion of wealth?

Answer 8

• differances in income
• inheritance
• marriage
• property

Question 9

What is equality?

Answer 9

means income and wealth are shared out equally between all members of society

Question 10

What is equity?

Answer 10

notion of fairness

Question 11

What can be used to measure inequality?

Answer 11

lorenz curve and gini coefficient

Question 12

What is the lorenz curve?

Answer 12

• method of measuring extent of income and wealth inequality

Question 13

What is the gini coefficient?

Answer 13

• statistical measure of the degree of inequality
• ratio of area

A / A + B

• higher the value the more inequality

Question 14

What is thge value for perfect equality?

Answer 14

O

Question 15

What is the value for perfect inequality?

Answer 15

1

Question 16

WHat are the consequences of ineualities in wealth and income?

Answer 16

• social tensions

- creation of an underclass

Question 17

What are the benefits from inequality in income and wealth?

Answer 17

• creates an incentive to work
• ## greates trickle down effect

Question 18

What is the trickle down effect?

Answer 18

• free market view that poorer members of society will benefit from high earners and the relatively wealthy

Question 19

What are some causes of poverty?

Answer 19

• relatively low wages
• unemployment
• regressive taxation
• old age
• imperfect information

Question 20

What are some effects of poverty?

Answer 20

• greater demands of welfare system
• poor educational attainment
• poor health

Question 21

What are some government policies to influence distribution of income and wealth?

Answer 21

• progressive taxes
• national minimum wage
• welfare benefits
• education and training
• reducing unemployment
• promoting trickle down effect

Question 22

What are the consequences of policies to alleviate poverty?

Answer 22

• progressive taxes ( could create disincentives to work)
• if NMW is too high could lead to increased unemployment
• increasing welfare benefits reduces incentive to work
• may take a long time to get trained
• expansionary monetary and fiscal policy have time lags
• tickle down may not actually work