Inequality and Poverty

Question 1

Income Inequality

Answer 1

The issue of income being unequally distributed in an economy.

Question 2

Wealth Inequality

Answer 2

The issue of assets being unequally distributed in an economy.

Question 3

Effects of inequality

Answer 3

Economic growth:
* Can incentivise hard work, increasing aggregate supply.
* However, can discentivize entrepreneurship, as small firms will be unable to compete with larger multinational firms.
* More transfer payments on the poor.
Standards of living:
* Standards of living will improve for the rich and less for the poor. The rich will be able to afford better goods and services, increasing the inequality gap.
Social Stability:
* Equal countries: lower crime rates and higher rates of trust + respect.
* Unequal countries: unrest + violence

Question 4

Causes of poverty

Answer 4

• Inequality of opportunity
• Different levels of resource ownership
• Different levels of human capital
• Discrimination
• Unequal status and power
• Government tax and benefits policies
• Globalization and technological change

Question 5

Policies to reduce poverty

Answer 5

• Progressive taxes
• Transfer payments: Such as unemployment and disability payments.
• Targeted spending on goods and services: Aim at greatest needs in society.
• Investment in Human Capital: Ensure everyone has access to education.
• Policies to reduce gender and other discrimination
• Increased minimum wages
• Give Universal Basic Income: Give everyone a guaranteed monthly income.