Poverty And Inequality

Question 1

Causes of wealth and income inequality

Answer 1

-wages
-wealth level
-chance
-age

Question 2

How does wages increase income and wealth inequality

Answer 2

-those who have higher incomes due to better education (compared to those on low incomes) are able to purchase assets to build up wealth that acts as income

Question 3

How does wealth levels increase income and wealth inequality

Answer 3

-those who have wealth are able to make risky investments that have a higher rate of return and earn rent and interest on their assets

Question 4

Kuznet hypothesis :

Answer 4

-as society moves from agriculture to industry, inequality rises as industrial wages rise faster than agricultural.
-then wealth is redistributed through taxation and government spending and so inequality falls

Question 5

Argument against kuznet hypothesis

Answer 5

-as the economy grows, the rate of return on capital increases. Increasing wealth inequality

Question 6

Why is inequality important for capitalism

Answer 6

-encourage hard wage (wage differential) so people are more willing to take risk due to incentive