Inequitable Distribution

Question 1

What is inequitable distribution?

Answer 1

When income and wealth are not distributed fairly, which leads to market failure

Question 2

What does equitable and inequitable mean?

Answer 2

Equitable means fair and inequitable means unfair

Question 3

What is income

Answer 3

Income measures the flow of money a person receives each year

Question 4

What is wealth

Answer 4

Wealth is the sum or stock of all your assets added up

Question 5

How can the government intervene to make inequitable distribution more equitable?

Answer 5

1)progressive income tax
2) government spending by giving out benefits such as free school meals, free healthcare and free education

These reduce crime rates and improve health which prevent market failure

Question 6

What is progressive income tax

Answer 6

When the tax rate increases as you earn more

Question 7

Cons of progressive income tax policies (macro)

Answer 7

1)progressive tax policies need high tax rates which leads to lower incomes for higher earners. This means that those earners will consume less in the economy, which will lead to deflationary pressures and have negative multiplier effects, leading to an inward shift in AD, which leads to a decrease in RGDP, which leads to a decrease in derived demand for labour, which leads to higher unemployment.

2)overly generous benefits systems can create dependency in the long run. This can lead to an incentive to claiming benefits instead of finding a job, meaning people wont learn new skills, remain unemployed or only be able to receive a low income