Chapter 19, Problem 1SPA

To determine

Money income and the distribution of money income in Country U for the year 2002.

Explanation of Solution

There are mainly four factors of production which are required to make the production possible. They are land, labor, capital, and entrepreneurship. These factors receive the returns for their services and they are the rent for land, wages for the labor, interest for capital, and profit for the entrepreneur. Thus, these contribute the incomes received by the factors of production in the economy in the form of money. Therefore, the money income can be summarized as the market income, which is the summation of the rent, wages, interest, and the profit of the economy along with the cash payments that are made by the government to the people.

While looking at the income distribution status of Country U, it can be identified that Country U’s income distribution is unequal. This means that some smaller proportion of the country earns higher income, whereas the others earn only a small proportion of the money income of the economy. The median income of the Country U’s household is around $51,017. Only four percent of the total money income is earned by 20 percent of the Country U’s households, whereas the 20 percent households earn more than 50 percent of Country U’s monetary income.

Economics Concept Introduction

Money income: The money income is the sum total of all the income received by different factors of productions such as land, labor, capital, and entrepreneurship.