DISTRIBUTION OF INCOME/WEALTH AND POVERTY - Reasons for Income & Wealth Inequality

Question 1

Define Income

Answer 1

a flow concept measured over a given period of time

Question 2

Define Wealth

Answer 2

a stock concept, measured at a given point in time

Question 3

what statemtn can anyone make about their wealth

Answer 3

at this point in time i have x amount of wealth

Question 4

what does assets constitute

Answer 4

wealth

Question 5

what are assets

Answer 5

anything with a market value that can also generate income

Question 6

assets can be

Answer 6

bought and sold

Question 7

give examples of assets

Answer 7

pensions , stocks , shares , houses , gov bonds , gold

Question 8

when you buy assets you are adding to your

Answer 8

wealth

Question 9

what is the term used to describe the relationship between wealth and income

Answer 9

mutually reinforcing

Question 10

wealth and income being mutually reinforicng means they are

Answer 10

linked to each other

Question 11

explain how wealth and income and mutually reinforcing
3 marks

Answer 11

With high incomes any surplus income you have can be used to purchase assets

Assets generate more income and then surplus income can be used to purchase assets

and generate a cycle of further income and assets

Question 12

if youre wealthy the chances are you have a

Answer 12

relativley high income

Question 13

if you have a high income the chances are you are

Answer 13

relativley wealthy

Question 14

explian the relationship betwen wealth and income simply

Answer 14

High income - assets - incomes - assets

Question 15

State the 5 REASONS FOR DIFFERENTIALS IN INCOME AND WEALTH (and unequal distribution)

Answer 15

AGE

EDUCATION

OWNERSHIP OF (FINANCIAL) ASSETS
OWNERSHIP OF PROPERTY (to rent or for yourself)

WAGE DIFFERENTIALS

Question 16

Explain why age can cause differentials in income and wealth

4 marks

Answer 16

The older someone is the greater their earning potential

as got more skills, their more productive and xp is greater

so can demand high wages

therefore their wealth accumulation can be greater as well

Question 17

true or false education can be a key driver of changes in the distribution of income

Answer 17

true

Question 18

explain why educaiton can casue diffrentials in income

2 marks + a stat

Answer 18

The more qualifications someone has e.g GCSES A LEVELS, DEGREES

the greater the earning potential of that individual is likely to be compared to those that dont - leading to diff in income

e.g stats proves those that go to uni earn more than those who dont on avg

Question 19

explain how ownership of financial assets can casue differentials in income - is it not wealth

3 marks

Answer 19

Those able to purchase e.g financial asest suchas s pensions and shares

, more better off as can get income from them leading to unequal distribution of wealth -

as are able to use this income to purchase more asets and generate further income - leading to unequal distribution of income

Question 20

explain the role of the employer in how ownerrship of financial assets can cause differentuals in income - i think wealth

Answer 20

the stronger the employer the more likely the employer is going to give access to really good pensions schemes and make distribution of wealth worse

as pay less tax

Question 21

what are the two reasons of ownership of property

Answer 21

for individuasl living purposes

an investment to fenrate income from

Question 22

explaijn how ownerrship of property can cause differentials in wealth

Answer 22

Get wealthy over time as prices go up and up leading to a big divide in DOW compared to those who cant afford property

Question 23

why is distribution of wealth worse overtime with ownership of property and financial assets

Answer 23

these are inherited as people pass away they give these 2 their kids so kids inherit massive wealth so

OT DOW gets worse and cause assets gen income so does ditribution of income get worse

Question 24

in terms of wage differentials why are labour mkts not considered perfect

Answer 24

there are differences between wages in different professions

Question 25

the greater the wage differentials …

Answer 25

teh greater the inequality of DOI

Question 26

the greater the wage differntials the greater the inequality so thats why the state gets involved by

providing what 2 thinfs

Answer 26

provides benefits and min wages to help close this gap

Question 27

the levle of income /wage diffs are crucial in determining

Answer 27

the level of wealth

Question 28

with high income earners how can surplus income be used wisely and what does this result in

Answer 28

used wisley by putting surplus income into assets such as buying shares which can generate more income

Question 29

true or false hihg earenrs end up with the lowest tax burden

Answer 29

trur

Question 30

why do hihgh earners end up wth the lowest tax burden

Answer 30

as often put money into pensions
And if high earners own bs can oay themselves minimum wage and declare the rest as profit and only pay 20% tax

Question 31

why do low tax earenrs not have a great tax burden

Answer 31

Low earners benefit form tax free allowance as well as welfare payments

Question 32

who has the greates tax burden and why

4 MARKS

Answer 32

middle income earners

as tax free allownace is not beenficial to them

dont have enougbh money to put a SIGNIFICANT amount in pensions to get taxed lower

so taxed on the majority of income earned above TFA

Question 33

most of the wage differtials reasns start with … and tehn …

Answer 33

makin distirbbutin of income worse the n distribution of wealth ad vice versa “!

Question 34

diffrences in levels of wealth are also caused by

Answer 34

taxation of wealth - capital gains tax , tax on (profits) is around 20%

Question 35

why is income easy to tax

Answer 35

because its a flow