Income Distribution

Question 1

Define the concept of income distribution

Answer 1

Income is redistributed to the public. Can be direct (e.g. governments paying financial support) or indirect (tax money used on infrastructure)

Question 2

How is it measured?

Answer 2

Gini Coefficient (ranges from 0 to 1, closer to 0 is more equal. Australia sits around 0.32)

Question 3

Causes of inequality

Answer 3

Difference in employment status, lower levels of education, disability, living in remote communities, family size

Question 4

Benefits of equality

Answer 4

Increases economic growth, reduces cost of welfare, reduces poverty and social issues, less crime and mental health issues

Question 5

Disadvantages of equality

Answer 5

Less encouragement to increase skills, less mobile labour force

Question 6

How does the government redistribute wealth to target certain groups?

Answer 6

Progressive tax system, payments/services for people who meet a criterion

Question 7

Describe some government economic policy tools

Answer 7

Fiscal policy: Government spending and legislation to influence wealth distribution (e.g. government spends more money on a disadvantaged group).

Monetary policy: Reserve Bank changes the cash rate to influence independent banks’ interest rates