Section 10- Government Economic Policy Objectives

Question 1

What is an individual’s income ?

Answer 1

-An individual’s income is the amount of money they receive over a set period of time .

Question 2

What is wealth ?

Answer 2

-Wealth is the value in money of assets held

Assets can include property ,land, money and shares

Question 3

In the UK, and most other counties income and wealth are not equally distributed .
There are a number of factors affecting the distribution of income:

Answer 3

• People earn different wages , certain skills are more in demand than others so people with those skills are likely to receive higher wages
• Unwaged people ( e.g. unemployed or pensioners ) often rely on state benefits , so their incomes tend to be lower
• Compared to the private sector , workers in the public sector earn more per week.
• Average full-time earning also differ considerably between different regions

Question 4

Wealth is more unevenly distributed than income :

Answer 4

• Wealth often earns income
• Assets tend to increase in value more quickly than income rises
• Wealth is not taxed , income is

Question 5

What is the difference between equality and equity in relation to the distribution of income and wealth ?

Answer 5

• Equality means that everyone is treated completely equally .
• Equity is more about fairness-people have different circumstances , so it is more about people getting what they need

Question 6

What are the different types of equity ?

Answer 6

• Horizontal equity , people with same circumstances are treated fairly
• Vertical equity , people with different circumstances are treated fairly but differently.

Question 7

Describe the Lorenz curve ?

Answer 7

• Used to represent the distribution of income graphically
• Along the horizontal axis is the cumulative percentage of the population and along the vertical axis is the cumulative percentage of income .
• The diagonal line represents complete equality
• The further the Lorenz curve is away from the diagonal . the greater the inequality in the country

Question 8

Describe Gini coefficients ?

Answer 8

• Gini coefficient is a measure of inequality

- Look at the revision guide

Question 9

The difference between relative and absolute poverty ?

Answer 9

• Relative poverty is when someone has a low income relative to other incomes in their country.
• Absolute poverty is when someone can not afford the very basics

Question 10

The causes of poverty ?

Answer 10

• Unemployment, even in a country where the state gives unemployment benefits , the unemployed are likely to be at the bottom level of income in that country
• Low wages , workers most likely to receive low wages are those with few skills or qualifications.