Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 20, Problem 1QR
To determine
The percentage of income earned by poor and rich in the US.
Expert Solution & Answer
Explanation of Solution
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. The income inequality represents the unequal distribution of income across various economic participants of the economy. When there is income inequality, the poor people of the economy will earn very less income, whereas the rich will earn very high level of income from the economy. When the income inequality is lower, the difference between the income earned by the poorest fifth and the richest fifth will be the minimum.
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. This means that the richest fifth of the US economy earns more than 12 times higher than the poorest fifth of the economy.
Economics Concept Introduction
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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Principles of Economics, 7th Edition (MindTap Course List)
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