Inequality, Social Insurance, and Redistribution

Question 1

Difference between income and wealth

Answer 1

Income is a flow of earnings, whilst wealth is a stock of asset.

Question 2

Difference between income and wealth inequality

Answer 2

Income inequality refers to the extent to which income is distributed in an uneven manner. Same thing with wealth

Question 3

What is permanent income?

Answer 3

Permanent income is your average lifetime income.

Question 4

What is intergenerational mobility?

Answer 4

Intergenerational mobility is the extent to which the economic status of children is independent of the economic status of their parents.

Question 5

There is much more inequality of wealth than of

income. True or False

Answer 5

True

Question 6

Permanent income may be a better measure of

living standards. True or False

Answer 6

True

Question 7

There is more inequality of spending than of income. True or False

Answer 7

False

Question 8

What does inequality of income, wealth and spending measure?

Answer 8

Inequality of income, wealth, and spending

measure outcomes

Question 9

What does intergenerational mobility measure?

Answer 9

intergenerational mobility measures inequality of opportunity

Question 10

What is the Lorenz curve?

Answer 10

This shows the cumulative percentage of the population plotted against the cumulative percentage of income that those people have

Question 11

What is the Gini-coefficient?

Answer 11

A/(A+B)- the ratio of the area between the 45-degree line and the Lorenz curve divided by the whole triangle under the 45-degree curve. It is
measured between 1 and 0 and the bigger the coefficient, the more unequal the
country

Question 12

What is the definition of poverty line?

Answer 12

Poverty line: An income level below which a family is

defined to be in poverty.

Question 13

In 2018, what was the poverty line for a family of 4 and 2?

Answer 13

In 2018, the federal poverty line was $25,700 for a family of four and $16,300 for a family of two.

Question 14

What is the poverty rate?

Answer 14

The percentage of people whose family

income is below the poverty line.

Question 15

What was the poverty rate percentage in 2017?

Answer 15

The poverty rate in 2017 was 12.3% of the population.

Question 16

What is absolute poverty?

Answer 16

Absolute poverty judges the adequacy of

resources relative to an absolute standard of living.

Question 17

What is relative poverty?

Answer 17

Relative poverty judges poverty relative to the
material living standards of your contemporary
society.

Question 18

Is the U.S. poverty line an absolute or

relative standard

Answer 18

Both

Question 19

What do the United Nations and the World Bank focus on an absolute poverty line of?

Answer 19

$1.90 a day

Question 20

What is the number of people + percentage in the developing world living below this poverty line

Answer 20

Globally, 896 million people (including 15% of people in

the developing world) are below this poverty line.

Question 21

What is the social safety net?

Answer 21

The cash assistance, goods,
and services provided by the government to better
the lives of those at the bottom of the income
distribution.

Question 22

What is social insurance?

Answer 22

Government-provided insurance
against bad outcomes such as unemployment,
illness, disability, or outliving your savings

Question 23

What is a progressive tax?

Answer 23

A tax where those with more
income tend to pay a higher share of their income
in taxes.

Question 24

In order to ensure that benefits reach only the truly

needy, what happens to social safety net programs .

Answer 24

In order to ensure that benefits reach only the truly
needy, social safety net programs are means-tested. Means-tested: Eligibility is based on income and
sometimes wealth.

Question 25

What are 3 social insurance programs?

Answer 25

Job loss à unemployment
insurance
 Injury at work à workers’
compensation
 Large medical bills à health
insurance

Question 26

What are income taxes?

Answer 26

Taxes collected on all income, regardless of its source

Question 27

What are regressive taxes?

Answer 27

A tax where those with less income tend to pay a higher share of their income
in taxes.

Question 28

What is diminishing marginal utility? (income - dollar)

Answer 28

Each additional dollar yields a smaller boost to your utility — that is, less marginal utility — than the previous dollar

Question 29

What is utilitarianism?

Answer 29

The political philosophy that government

should try to maximise total utility in society

Question 30

What are the 4 costs of redistribution?

Answer 30

1. administrative costs.
2. higher taxes,
3. benefit reductions,
4. tax avoidance, evasion, and
   fraud

Question 31

Greater equality doesn’t always mean less efficiency. True or False

Answer 31

True