Microeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859484
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Chapter 19, Problem 17E
To determine
To explain:
The two possible causes of the changes that can be the reason for an unequal income distribution in the United States.
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Microeconomics (MindTap Course List)
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- Which of the following is most likely to make a country’s income distribution more equal? a. Establishing a national sales tax on food and clothing b. Establishing a progressive income tax system c. Eliminating excise taxes on luxury goods d. Proportionally decreasing the tax rate for all income groups e. Reducing the subsidy to educationarrow_forwardThe table shows the distribution of market income. Suppose the government redistributes income by taxing the 60 percent of households with the highest market incomes 10 percent, then distributing the tax collected as an equal benefit to the 40 percent with the lowest market income. What percentage of total market income is redistributed to the second 20 percent of households? What is the income share of the third 20 percent of households after tax and redistribution? >>> Answer to 1 decimal place. earch The second 20 percent of households receives benefits equal to percent of total market income. The third 20 percent of households earns percent of total income after tax and benefits. I point(s) Households Lowest 20 percent Second 20 percent Third 20 percent Fourth 20 percent Highest 20 percent Market income (percentage of total market income) 5 9 20 30 36 Nextarrow_forwardThe table shows the distribution of market income. Suppose that the government redistributes income by taxing the 60 percent of households with the highest market incomes 10 percent, then distributing the tax collected as an equal benefit to the 40 percent with the lowest market income. If the people whose market incomes are taxed cut their work hours and their market incomes fall by 10 percent, what is the distribution of income after taxes and benefits? Complete the table to show the new distribution of income. (Ignore any cost of administrating the redistribution scheme.) >>> Answer to 1 decimal place. Search Households Lowest 20 percent Second 20 percent Third 20 percent Fourth 20 percent Highest 20 percent Market income (millions of dollars) 5 9 20 30 36 Income after tax and benef (percentage of tc income after ta and benefits) Nextarrow_forward
- What happens to poverty and inequality if income rises for both low-income and high-income workers, but it rises less for the high-income workers?arrow_forwardplease label the two questions with the correct answers thank youarrow_forwardTRUE or FALSE 64. Public policy is essential in solving poverty at the local and national levels. 65. Solving poverty has to be done from macroeconomic and microeconomic levels. 66. The Kuznets Curve is a graphical presentation of the relationship between the Gini coefficient and GNI per capitaarrow_forward
- Many economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income.arrow_forwardFor the last ten years, how the Philippine government is executing policies to reduce poverty and income inequality for the last decade? Expand your answer.arrow_forwardHello! I would like to ask some help regarding the question in the photo below. As for me, I think there is both an inequality in the bottom and top portion. Thank you in advance!arrow_forward
- Policy Perspectives Refer to the table to answer one question. Income Transfers: The market mechanism might leave some people with too little income and others with too much. The government uses taxes and transfers to redistribute income more fairly. Program Recipient Group Number of Recipients Value of Transfers Social Security Retired and disabled 67 million $1,002 billion workers Medicare Individuals over age 65 59 million $620 billion Medicaid Medically needy 75 million $400 billion individuals Unemployment compensation Unemployed workers 6 million $30 billion Food stamps Low-income 42 million households $63 billion Eamed Income Tax Credit Low-wage workers 30 million $70 billion Temporary Aid to Needy Families Poor families 3 million $17 billionarrow_forwardThe following diagram shows the Lorenz curves for the factor (the market) income and the disposable income of the Netherlands in 2010. The disposable income is the factor income plus any taxes and government transfers. A' is the area between the perfect equality line and the disposable income Lorenz curve, while B' is the area under the disposable income Lorenz curve. Based on this information, which of the following statements are correct? 0 Cumulative share of income (%) 100 70 60 50 RRA 0 0 Disposable Gini coefficient 0.25 60 70 80 90 100 10 20 30 40 Cumulative share of the population from lowest to highest income (%) A. The Gini coefficient is the ratio A/B'. B. The Gini coefficient for the factor income is higher than that for the disposable income. C. The taxes and the transfers reduce income inequality in the Netherlands. D. After the taxes and the transfers, the poorest 50% of the population receive about 20% of the total income.arrow_forwardImagine someone living close to the poverty line in a developing country. This person runs a small business filtering and selling water. Her daughter gets sick, and she has to sell her filtering machine to pay for treatment. Now she makes very little money cleaning fish for a local fishing cooperative. Graph her income today versus her income tomorrow before her daughter got sick. Explain your assumptions with labels on the graph. Then graph what happens to the equilibrium after her daughter gets sick. Hint: this is an example of a trap.arrow_forward
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