The percentage of income earned by poor and rich in the US.
Answer to Problem 1CQQ
Option 'b' is correct.
Explanation of Solution
Option (b):
Poverty line is the line that determines the minimum income required to meet the basic requirements of a quality life by the people. The household with family income less than the poverty line is said to be poor and those who earn very much above the poverty line are considered to be rich by the government. According to the available data about the US economy, the income distribution is very unequal. About the poorest, one-fifth of the total population earns about 4 percent of the income of the economy, whereas the top one-fifth of the rich population earns about 50 percent of the US total economy income today according to the sources.
From the reliable sources, it is obtained that about 4 percent of the total income is earned by the poorest fifth of the population and about 50 percent of the total income is earned by the richest fifth of the population. Since option 'b' gives the values equal to the obtained value, option 'b' is correct.
Option (a):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. Since the option explains that the richest fifth of the economy earns 70 percent and the poorest fifth earns 2 percent which are incorrect to the obtained values, option 'a' incorrect.
Option (c):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. Since the option explains that the richest fifth of the economy earns 35 percent and the poorest fifth earns 6 percent which are incorrect to the obtained values, option 'c' is incorrect.
Option (d):
The data sources reveal that about 4 percent of the income of the US economy is earned by the poorest fifth of the economy, while 50 percent by the richest fifth. This means that there is a high level of inequality in the distribution of income that exists in the economy. Since the option explains that the richest fifth of the economy earns 25 percent and the poorest fifth earns 8 percent which denotes lower levels of inequality in income distribution, they are incorrect to the obtained values, and thus option 'd' is incorrect.
Concept introduction:
Income inequality: Income inequality represents the unequal distribution of household or individual income among various economic participants of the society.
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Chapter 20 Solutions
Principles of Economics (MindTap Course List)
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