All Flashcards
How does inheritance contribute to wealth inequality?
Inheritance allows wealth to be passed down through generations, concentrating assets among certain families and exacerbating existing inequalities.
How does discrimination affect income inequality?
Discrimination limits opportunities for certain groups, leading to lower wages and reduced access to education and jobs, thus increasing income inequality.
How does limited access to financial markets affect wealth inequality?
It prevents lower-income individuals from growing their wealth through investments, savings, and loans, widening the gap between the rich and the poor.
How does a progressive tax system affect income distribution?
By taxing higher incomes at a higher rate and redistributing that revenue, progressive taxes can reduce income inequality and provide resources for social programs.
How does a sales tax act as a regressive tax?
Sales tax takes a larger percentage of income from lower-income groups because they spend a larger portion of their income on taxable goods.
How can government transfer payments reduce income inequality?
Transfer payments like welfare provide income support to low-income individuals and families, increasing their disposable income and reducing the income gap.
Explain how differences in human capital contribute to income inequality.
Individuals with higher levels of education, skills, and experience (human capital) tend to be more productive and earn higher wages, leading to income disparities.
How does bargaining power affect income inequality?
Workers with strong bargaining power (e.g., through unions) can negotiate for higher wages and better benefits, while those with less power may face lower pay and poorer working conditions, contributing to income inequality.
How can unequal access to education contribute to income inequality?
Limited access to quality education restricts opportunities for skill development and upward mobility, perpetuating income disparities between those with and without educational advantages.
How does social capital affect income inequality?
Those with strong social networks have better access to jobs and opportunities, increasing their income potential, while those lacking such networks may face barriers to advancement, exacerbating income inequality.
What is the impact of progressive taxation on income inequality?
Progressive taxation tends to reduce income inequality by redistributing income from higher earners to lower earners.
What is the impact of regressive taxation on income inequality?
Regressive taxation tends to increase income inequality by disproportionately burdening lower-income earners.
How do government subsidies for education affect income inequality?
They can reduce income inequality by providing opportunities for low-income individuals to acquire skills and increase their earning potential.
What is the impact of minimum wage laws on income inequality?
Minimum wage laws can reduce income inequality by increasing the earnings of low-wage workers, but may also lead to job losses.
What is the impact of rent control policies on income inequality?
Rent control can benefit existing tenants, but may reduce the supply of affordable housing and potentially worsen income inequality in the long run.
How does investment in early childhood education affect income inequality?
It can reduce income inequality by providing disadvantaged children with a strong foundation for future success, improving their educational and economic outcomes.
What effect do unemployment benefits have on income inequality?
Unemployment benefits provide a safety net for those who lose their jobs, reducing the severity of income shocks and lessening income inequality during economic downturns.
How do policies promoting access to healthcare affect income inequality?
They can reduce income inequality by ensuring that low-income individuals have access to necessary medical care, improving their health and productivity.
What is the impact of deregulation on income inequality?
Deregulation can lead to increased competition and economic growth, but may also exacerbate income inequality if it results in lower wages and reduced worker protections.
How do policies that encourage entrepreneurship affect income inequality?
They can create opportunities for individuals to start their own businesses and increase their income, but may also lead to greater income disparities if some entrepreneurs are more successful than others.
On a Lorenz curve, what does a curve closer to the line of perfect equality indicate?
A more equal distribution of income.
On a Lorenz curve, what does a curve further away from the line of perfect equality indicate?
A less equal distribution of income.
How does a progressive tax system shift the Lorenz Curve?
It shifts the Lorenz Curve closer to the line of perfect equality.
How does a regressive tax system shift the Lorenz Curve?
It shifts the Lorenz Curve further away from the line of perfect equality.
If Area A (area between the line of perfect equality and the Lorenz curve) increases, what happens to the Gini coefficient?
The Gini Coefficient increases, indicating greater income inequality.
If the Lorenz curve perfectly overlaps the line of perfect equality, what is the Gini coefficient?
The Gini coefficient is 0.
What does the x-axis of the Lorenz Curve represent?
Cumulative percentage of the population.
What does the y-axis of the Lorenz Curve represent?
Cumulative percentage of income.
How would a significant increase in inheritance taxes affect the Lorenz curve?
The Lorenz curve would likely shift closer to the line of perfect equality, as wealth is redistributed.
How would a decrease in social mobility affect the Lorenz curve?
The Lorenz curve would likely shift further away from the line of perfect equality, as income becomes more concentrated.