Income and Wealth Inequality

Question 1

Income

Answer 1

The reward for services of a factor of production. It is a flow concept since it can be measured over a period of time.

Question 2

Wealth

Answer 2

Wealth is the stock asset that someone had built over time such as: businesses, gold, antiques & property. It can be used to provide security & a future income stream.

Question 3

Gini Coeffecient

Answer 3

The numerical measure of income inequality in a economy. If gini coefficient is 0 then income is equal, if gini coefficient is 1 then income is unequal.

Question 4

Economic reasons for inequality

Answer 4

• Little investment in education & health sectors which holds back human capital needed to promote economic growth.
• Inability of many people to obtain credit or fund for small businesses and improved personal education.
• Lack of formal employment opportunities.

Question 5

Informal Economy

Answer 5

Part of the economy in which is not regulated, protected or taxed by the government.

Question 6

Minimum wage

Answer 6

Minimum amount of wages a employer is legally allowed to pay to their employees. It is the rate before tax & any other social security deductions.

Question 7

Progressive tax

Answer 7

When tax increases more than proportionately to a rise in income. It can be used to reduce income inequality for example: People with higher incomes are taxed a higher percentage compared to those with lower incomes.

Question 8

Inheritance Tax

Answer 8

Progressive tax on an inheritance or gift. For example if an individual inherited more than a certain value of wealth have to pay some of the value in tax to the government.